For businesses focused on service such as the legal profession, contingency cost models have proven to be an effective pricing approach over many years. Because these cost models were created to incent sales where budget doesn’t exist, shared savings presents a decreased risk with no upfront fee for the buyer. By requiring no payment until a profitable event materializes, when the cost-saving service is delivered, the ‘winnings’ are shared based on an agreed upon split. Initially one might conclude that everyone wins in this scenario.
Generally, because the service provider has agreed to work based on a variable reward and the buyer is guaranteed his share, or will pay nothing if the work is not fruitful; the contingency model presents itself as a no or low-risk alternative, or so it seems. However, if the savings are minimal, it could result in a disappointing outcome for the consultant – who put the work in with little or no reward. However, that is the risk they take in agreeing to do the work on a contingency basis. More importantly, if the results are great and the consultants share is collected over time, the buyer often feels like magnitude of the overall cost is more than the perceived effort; especially if the associated work was for a onetime analysis paid over a lengthy period of time. In this case, it can result in buyer’s remorse if the consultant’s total payout is unrealistically large. Additionally, a buyer may begin to feel disadvantaged, even when the arrangement was intended to protect the buyer. If this happens, the trust in the consultant could be broken. Once the trust is broken, the buyer may now see the relationship as unsatisfactory and come to believe they have been taken advantage of by the consultant. Services rendered under a contingency model with these kinds of issue can quickly become a ‘one and done’ experience. These deals often look far more attractive on the front end and frequently discouraging on the back end when the cumulative expenses are known.
The Spectrum of Audit Examples in Telecom Management
The return to an auditor in a contingency deal varies based on the state of the client’s telecom spend prior to the engagement by the consultant. The less attention paid by the client to the health of their telecom activities, the more disarray and revenue potential for the consultant. Interestingly most wireless telecom audits show little variance in work effort whether the client environment is well-managed or poorly maintained. In the case of telecom spending that has been neglected, in a sense, the auditor has just hit the jackpot for a relatively low work effort. A company feeling a need for an expert likely doesn’t have a clear picture of their situation ahead of time which could result in the company writing a large check for the auditor.
Telecom Expense Management Solutions
The alternative to the contingency model in the telecom world is hiring an ongoing service from a managed service provider who reduces management tasks and provides oversight to insure accurate billing charges from the carrier on a monthly basis. This model involves implementing automation and/or oversight by those with telecom expertise exceeding what a company has with internal resources. Managed services in the wireline space is typically charged at a small percentage of the overall wireline monthly carrier cost. In the world of wireless there is typically a cost per device fee for the service. There is a wide range of fees offered in the industry but in most cases a client expects that engaging an expense management company will bring economies of scale or better yet, a reduction in carrier invoices that equals or exceeds the vendor’s fees. Not all service providers deliver equal quality of service and the selection of a vendor poses a risk to the buyer when choosing between vendor alternatives.
The Contingency Trade-Off
Rarely is a contingency model the best financial deal for a client and its continuing popularity is driven by vendors realizing a disproportionately large return for limited work and effort particularly for those that have a knack for finding poorly managed wireless opportunities. For some, the lack of an upfront commitment and assumed risk is worth paying more over time. The analogy here is like buying a car with no money down, choosing instead to pay a larger sum for the vehicle through higher interest rates over time.
Challenges for Mid-Market SMB Organizations
In the SMB or Mid-Market world, hiring a managed service provider to perform an audit on an ongoing basis at a competitive rate requires a thorough analysis which might typically be accomplished through an RFP process. While in most cases the cost of the service is eclipsed by the generated savings, service providers are not always able to provide in advance an accurate prediction of the expected near-term savings or buyers are suspect of the vendor’s claims. Because of the uncertainty of the return on investment, in many cases, companies stick with the status quo or feel more comfortable with a contingency model proposition which purports to have less risk and less need of a thorough vetting of the vendor.
New Model for Mobile Expense Management
Now, what if that service provider would provide not just an estimate or guess but a very accurate determination of the immediate savings? If the estimate can be substantiated and validated, this significantly reduces the risk and streamlines the solution provider selection process. In this case the ROI would be easily quantified and the decision maker could calculate the expected cost versus savings ratio. In addition, continuous analysis on a monthly basis, typically not included in a contingency deployment, also produces ongoing savings in excess of a one-time savings audit. In this instance, the buyer’s risk could end up being as low as the contingency model at a fixed fee thereby minimizing cost while enjoying the highest possible savings. Continuous analysis on a monthly basis produces ongoing savings which increases annual savings values. Now, doesn’t this sound like a less risky, more sensible way to insure a healthy telecom spend?
MobilSense’s Revolutionary Contingency Busting Mobile Cost Management Solution
MobilSense Technologies has just announced MobilSentryDIY™ (Do-it-Yourself), an alternative to the contingency model. In addition, since it is Do-it-Yourself, it eliminates the need for the overhead cost of consultants, which raises the cost of the telecom cost management service. Because it is truly self-service, the costs are significantly reduced from full service models because automation is far more cost-effective than purchasing a labor-intensive alternative. MobilSentryDIY™ not only provides an exact cost before buying, but is priced to maximize and guarantee a positive ROI. When a buyer is presented with a five or ten-times return on investment, it now looks like the contingency model with a much lower aggregate vendor cost.
When buyers are informed, and see the ongoing benefit of MobilSentryDIY™, purchasing experiences can significantly improve for companies who are averse to signing contracts and using consultants on a regular monthly fee schedule.
Check out MobilSentryDIY™. You will find it is more than just too good to be true, it works!