Telcos eye 10% cost cut with procurement overhaul, says BCG

Generative AI aids telecoms in reducing procurement expenses.

Telecommunications companies plan to reduce total costs by an average of 10% over three years through procurement transformation, according to a Boston Consulting Group report.

The report added that external spending accounts for half of total revenue in the industry. Success requires joint ownership of costs between procurement and business units, replacing functional silos with cross-functional teams to manage third-party spending.

Generative AI identifies savings in demand management and supplier negotiations, tracking productivity gains in IT and administrative services.

Internal teams use these tools to automate routine tasks and focus on risk management, the report said.

Cost reductions occur across multiple categories, with call centre expenses dropping by 35% through location optimisation and process updates, whilst IT services show savings of between 5% and 20% through supplier consolidation.

Software costs also decrease by 15% through licence portfolio management, whilst legal service costs fall by 20%.

Demand management and technical optimisation drive two-thirds of the total value, with strategies including the simplification of specifications and the pooling of volumes across different regions.

Strategic procurement addresses non-financial goals, whilst diversified supplier bases reduce exposure to geopolitical instability. Contracts include corporate social responsibility targets to create sustainable value chains.

Transformation plans span 12 to 24 months. Organisations use governance structures and oversight teams to ensure savings are reflected in financial statements.

These teams monitor the progress of initiatives and align procurement outcomes with budgets, the report said.