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Cost Savings Vs Cost Avoidance 2

Cost Savings vs Cost Avoidance

Nine out of Ten new customer engagements involve this common question. “How much money will our organisation save by deploying your Technology Expense Management [TEM] platform and services?”

Now, whilst we can answer that question to within a certain degree of accuracy once we have performed our due diligence, it’s not the only factor that contributes to the overall customer ROI and this is where our discussion around “Cost Avoidance” plays a role.

Cost Savings are directly attributable to actions implemented to reduce direct costs such as fixed recurring, fixed variable and once off provider charges as well as indirect costs that contribute to the total cost of ownership such as time, resource and effort investment. These savings are often linked to the “known” elements within the technology environment and are defined by understanding the following:

  • Who are the stakeholders?
  • What are the financial constraints, limitations, budgets etc…?
  • Where is the customer “bleeding” as a result of inefficient processes that sap valuable time and resource?
  • What visibility and controls [or lack thereof] exist in terms of “I3C” Infrastructure, Costs, Consumption and Contracts?
  • Who are the vendors and what technology do they supply to the enterprise?
  • What is the inventory and commercial framework for all services, technologies and vendors?
  • Are the costs fixed, variable or a combination of both?
  • What does the user base look like?
  • What are the primary business needs as they relate to servicing the core business objectives?

Cost Avoidance is often unquantifiable, yet it is one of the largest cost contributors when looking retrospectively into technology expenditure. Cost avoidance [in our world] is the ability to prevent the occurrence of a future event [in this case a significant and often catastrophic and unforeseen cost fluctuation] as a result of having either the tools and or resources in place which can prevent that event from ever happening.

Here is an example:

A customer using our TEM platform is alerted via email and or SMS of consumption on a particular staff members mobile phone or data card, consumption that met or exceeded a pre-defined threshold of cost or consumption. As a result of the notification, the SIM card can be locked, or the user behaviour can be addressed. Without having the notifications in place, the user’s behaviour / consumption would have continued unchecked until the end of the current billing cycle. The customer then receives an invoice at the end of month from their provider reflecting exorbitant costs for the user, but unfortunately by that time, it’s too late and the enterprise customer is liable to pay the full invoice amount.

Having the appropriate tools in place which are suited to the technology make up of your environment can prevent such occurrences and this is called Cost Avoidance.

Apex Business Intelligence is an innovative, agile, service-orientated, “never say never” Technology Expense Management [TEM] company. We provide powerful TEM solutions to all sectors of the market, including SMEs, medium to large enterprises, as well as telecom carriers and service providers.

Our TEM software is a powerful SaaS solution that delivers incredibly useful insight and accurate information relating to all ICT usage, trends and expenditure. For more information on how Apex BI can help your organisation implement both cost saving and cost avoidance tools, Click here.

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