Purchasing Power

Digitisation and auction design for purchasing telecommunications services

REFERENCES

Beiersdorf AG Heidelberger Druckmaschinen AG SCHOTT AG tesa SE Carl Zeiss AG

Top-Referece: International corporate group, 37.000 Mobile Contracts, 3 Countries, >50% Savings

 

The Challenges

Complexity, lack of transparency, oligopoly and market failure

1. The identification of the most efficient tariffs

Due to the considerable complexity of the utilisation structures and their cost effects in connection with the large number of possible tariff variants, it is practically impossible to determine the most efficient tariffs by conventional means.

For each user, the individual and complex telephony behaviour (call duration and data volume per target network, country, etc.) would first have to be recorded. In the case of large companies, this information alone can comprise millions of parameters for a required representative period. In addition, the costs of up to several hundred combinations of tariffs and tariff options with partly intransparent performance characteristics for the telephony behaviour of each user would have to be calculated for each provider.

Possible flat-rate pricing models can reduce complexity to some extent, but are commercially disadvantageous because of the correspondingly higher flat rates.

2. The achievement of the lowest possible prices

In the telecommunications market there is a pronounced supplier oligopoly for business customers. Often, due to technological requirements, only one competitor can even be considered as an alternative to the existing provider. The strongly restricted competition makes effective market pricing to the detriment of purchasing more difficult.

Moreover, as the cost structures of the suppliers are very similar and the marginal costs of the services are close to zero euros, the existing supplier could 'go with' any offer from a competitor. As a result, the competitor has little chance of winning the customer, with the result that in many cases the competitor does not submit any offer at all or at least not an attractive price. The purchasing department then often only has the option of accepting the non-competitive offer of the existing supplier to extend the contract.

 

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