Spend Matters welcomes this guest post from James Martino, CEO of Avotus Corporation.
Avotus Corporation’s data and analysis indicates that procurement professionals can drive savings for their firms via network migrations, which capitalize on both technological evolution and declining prices for broadband services. Dynamic technological changes are driving migration within the classic telecom network to a more simplified and streamlined packet-based architecture. Integrated voice and data networks are now able to drive corporate savings, while simultaneously advancing a more feature-rich and flexible environment.
The general acceptance that packet-based network or IP-based solutions are as reliable as traditional TDM or POTS services has given rise to a dynamic shift from legacy TDM-based (analogue) voice services to VoIP (digital). The shift is also due to a better cost structure, enhanced flexibility and trunk cost savings of IP-based services. What’s more, as voice and data services converge onto the same network, the demand for robust networking services capable of providing both reliability and Quality of Service (QoS) guarantees has increased significantly. Enter Multi Protocol Label Switching (MPLS).
Avotus data suggests MPLS price declination may be fostering and improving the business case for VoIP migration. Integrated networks require larger broadband access pipes along with guaranteed quality metrics. For example, between 2009 and 2014, as illustrated in Avotus Corporation’s latest access circuit pricing analysis, the median monthly lease prices for 45 Mbps dedicated access circuits declined significantly on major domestic routes. Prices for 45 Mbps access circuits fell 30% during this period in the US, according to Avotus. While this general trend is consistent, price levels and rates of change vary by region, market and term. Moreover, the Avotus data suggests that the spread between the minimum price and the maximum price is widening. The key takeaway here for procurement managers is that it is critical to properly source contracts frequently, to ensure the best price possible. As the data suggests, maximum prices may be the result of infrequent sourcing, while minimum prices are the result of a vibrant e-sourcing strategy.
As VoIP-based communications become an increasingly acceptable, reliable and pervasive solution, we expect this downward pricing trend to continue for the foreseeable future. As such, procurement professionals can drive corporate savings via both technological innovation and bandwidth price declination. Together, these developments indicate that procurement professionals need to be more active and frequent in assessing their network needs and running progressive e-sourcing RFP events, if they are to optimize savings and ensure their firm’s competitiveness.