Vendor Managed Services: Why Tread Carefully

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Each year, new vendors enter the telecom managed services market, offering what is called ‘Vendor Managed Services’ contracts. For an organization seeking to refocus on their core business lines and outsource non-core operations, vendor managed services contracts can seem enticing for several reasons:

  1. They free up IT personnel from non-core activities and enables management to reallocate staff to value-generating activities;
  2. They also reduce technology capex; 
  3. They hold the promise of large savings under negotiated rate contracts.

The reality may be far different however, and we advise our clients to tread carefully.

More often than not indeed, contractual promises are left unfulfilled, and it is hard to trace back the issues. Moreover, the large savings to be generated under these Vendor Managed Services contracts can be outweighed by the cost of errors, and the time wasted tracking and correcting them.

This case study discusses a specific instance of one such Vendor Managed Services contract, and what RadiusPoint had to do for the client to reverse the numerous issues created by the vendor.


RadiusPoint manages the telecom expenses of a manufacturing company with 240+ locations nationwide. The company, against our recommendation, entered into a Vendor Managed Services contract covering some 2,700 landlines.

Under the agreement, the vendor charged a monthly fee for managing all moves, adds and changes (MAC), and guaranteed the manufacturer a reduced rate on their line and feature charges. The initial cost savings appeared to generate a positive ROI benefit.

Very soon, however, it became apparent that the purported cost savings were hard to identify, and that the way they were communicated by the vendor was too time-consuming to validate.

The purported benefit of consolidating telecom invoices and vendors became a nightmare as the vendor’s billing required even more time to analyze than separate vendors’ invoices.

To compound the issues, the local service rep assigned to the manufacturer’s account was reassigned in the course of a merger. All knowledge of the billing issues (from the vendor’s perspective) was lost, and the manufacturer was forced to train the new service rep. As time went by, the promises made in the Managed Services contract faded.


RadiusPoint was able to shortpay the invoices and put the overcharged amounts in dispute. However, the vendor complicated their billing further: credits for errors were given erroneous charges and placed into billing, offsetting our progress.

Only when RadiusPoint escalated the issue and threatened to file a complaint with the FCC if corrections were not made in a reasonable timeframe did the vendor’s rep coordinate a billing team to resolve the issues.

All the issues were eventually resolved, and the vendor knows RadiusPoint is watching. The continual errors have since subsided.


RadiusPoint used its proprietary SaaS platform, ExpenseLogic, to flag any charges outside a set of parameters we defined based on the Vendor Managed Services contract. This step uncovered billing errors on managed services accounts, including:

(a) billing for lines that were not ported over to the vendor,
(b) neglecting to give sign-up and anniversary credits,
(c) charging erroneous contract line rates,
(d) charging on features that should have been waived, and
(e) charging long distance accounts that did not belong to the client.

The intent of Vendor Managed Services contracts is honorable. But the devil is in the details, and unfortunately, telecom operators are not known for the conscientiousness of their billing, or their impeccable organization. The frequent mergers & acquisitions which characterizes this industry adds a level of management complexity, which makes these very large scale contracts counter-productive.

It is highly advisable for a company to seek the advice of a telecom expense management specialist like RadiusPoint, to prepare and guide the process of bringing massive telecom assets under one single roof, and monitor the outcomes at all levels.

Contact us to discuss your organization’s needs in terms of Vendor Managed Services.