When it comes to effectively managing and reducing telecom network expenses, most service providers rely on two different strategies: telecom carrier management and network grooming.
Both strategies can be highly beneficial and have their own advantages (and limitations). In addition, they can also create internal organizational friction when being implemented, especially if an organization wants to pursue both strategies at the same time. In this post, we discuss how to avoid these pitfalls and how to get the most out of both strategies.
But first, let’s review some terms.
The Carrier Management Cost Reduction Approach
Here are examples of “carrier management” approaches to network cost reduction:
- Negotiating better pricing for services or finding alternative, lower-cost carriers
- Finding and correcting billing errors and favorably resolving billing disputes
- Ensuring that you only pay for services you ordered and are using
What these examples have in common is that they can be implemented relatively quickly and (in theory) without making significant changes to the actual telecom services or technology. Furthermore, apart from the time it takes to do the work and the cost of any outside consultants or tools a business may need, there’s no major upfront investment needed.
A firm may be able to negotiate a price reduction on its telecom spend because it went out and got competitive pricing from another carrier. The actual services it is using (e.g.. Gig-Ethernet, IP-VPNs, 800 services, private line circuits, etc) may not change at all. For all these reasons, better carrier management is a highly attractive strategy for service providers and enterprises.
Maximizing the savings from better carrier management is the bread and butter of the Telecom Expense Management (TEM) industry. It is something we think all businesses should try to do, and not incidentally, we built our gpxcloud platform to make it much easier. Furthermore, many businesses have a dedicated “carrier management” group that is responsible for these activities.
Despite its name, the second type of strategy for network cost management has nothing to do with going to the barber regularly.
Grooming is part of telecom network planning. It is a shorthand term for re-designing and optimizing the services your business uses to reduce costs and (often) improve network performance. Unlike carrier management-related strategies for cost reduction, grooming does impact the actual services your business uses, and it requires technical expertise as well as general business savvy. In some cases, implementing a grooming initiative may require upfront investments in new telecom hardware and software, or even changing providers.
Some Classic Grooming Examples
- When a service provider is in the early stages of operation, it likely uses lower-speed circuits to transport traffic over its network. But as traffic grows, it makes sense for the service provider to aggregate these lower-speed transport units into higher-speed optical networking transport, such as a SONET frame.
- A competitive service provider targets a business park and before long, it is serving a large number of fast-growing enterprises that are all located in close proximity to each other. At first, the service provider may rely on local access loops from the incumbent local exchange carrier (ILEC) but eventually, it may make sense to groom these loops to ones provided by a Competitive Local Exchange Carrier (CLEC).
These are just a few examples of how grooming can work. There are more complicated variations. But the general concept is: a skilled network planner takes a “big picture” view of a business’ telecom traffic and figures out ways to more efficiently move that traffic from point A to point B, often by consolidating traffic flows as quickly as possible. Service providers typically have teams of network engineers that work on network grooming projects.
Keeping Carrier Management and Network Grooming in Synch
Both carrier management and network grooming share the same goal – cost reduction. So why is keeping them in synch even an issue? It boils down to the differences in how each approach works and who implements them.
Staff working on network grooming projects tend to be technically oriented. They are focused on solving a technical challenge – optimizing the technical performance and capacity utilization of networks while reducing costs. If they work with a telecom carrier, it’s usually at a technical, not a business relationship level. That’s not to say they don’t care about these business relationships, but they are not on their radar screen every day.
Carrier management teams, on the other hand, are all about business relationships. They often build long-term relationships with telecom carriers. While they want to maximize cost savings, most also value the carrier’s excellent service and support and take those factors into account as they pursue expense reduction targets.
This being the case, it’s easy to see how network grooming and carrier management can sometimes come into conflict with each other.
Network engineers may propose a grooming strategy that can only be implemented by changing network carriers, which may disrupt a long-standing business relationship developed by the carrier relations team. On the other hand, an exclusive focus on business and contractual relationships may result in a business not taking advantage of the cost savings and performance benefits that a network redesign can produce.
These competing approaches can be managed, provided business leaders have the information they need to weigh the pros and cons and get network planners and managers on the same page.
The Right Perspective and Questions to Ask
At a high level, the carrier management vs. grooming decision comes down to a tradeoff. Do you take a cost-saving approach (carrier management) that can be implemented quickly, with the least disruption, but may not result in the greatest possible long-term expense reduction? Or do you take a grooming approach that has more upside but may take more time to realize the savings and introduces other potential risks?
How can a service provider decide? What factors should management consider when evaluating carrier management versus network grooming approaches? Here are some key issues to consider.
- Does the business have the Internal resources and expertise to execute a network grooming cost reduction approach?
- Are there direct and indirect one-time costs such as early termination charges associated with a network grooming initiative?
- Would a network grooming initiative require capital expenditures?
- Would a network grooming initiative require the installation of new hardware or software at a customer’s location? If so, what are the costs associated?
- How long will it take to complete the grooming effort and realize the promised savings compared to using a contractual, carrier management approach?
- Are there any risks of service disruption while a network groom is completed? If so, how will they be mitigated and what are the costs of such mitigation?
- Are there switch-over costs? For example, a circuit groom may involve installing circuits with a new provider before disconnecting circuits with an incumbent network provider. This could result in paying two circuit charges during the groom.
Some Final Thoughts
The bottom line is that service providers need to look at their cost management strategies holistically. Simply looking at current network expenses and setting a cost savings target may create avoidable problems and surprise expenses down the road.
Carrier Management vs. Network Grooming Cost Management Strategies
|Relationship with Carrier||Sales oriented||Technical oriented|
|“Time to Savings”||Quick||Longer|
|Savings Potential||Tends to be capped||Potential to be greater|
|Start-Up Resources||Staff and tools||More staff with broader skillsets|
|Potential for Customer Disruption||Limited||Significant|
|Primary Business Drivers for Strategy||Cost reduction||Cost reduction, improved network performance|
Whether your business decides to reduce costs via grooming or a carrier management-focused approach, or both, Cloud Age can help. Our team not only has decades of network planning and carrier-relations expertise. Keep in mind that any other network cost reduction strategy depends on good data and telecom inventory management. Cloud Age Solution’s gpxcloud is built to support these types of cost-saving initiatives via a scalable, secure, and easy-to-use SaaS platform.
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