Overview of the Challenge
Cardinal Health, Inc. (NYSE: CAH) is a global, integrated healthcare services and products company. Cardinal Health has enjoyed tremendous growth over the years, much of it due to its strategic acquisitions of companies and divisions of companies that fit well with its global expansion initiative.
With a growth model based on acquisitions, oversight and control of the technology ecosystem becomes extremely challenging. It is imperative to ensure the costs of the various acquired technologies are understood and expense discipline is maintained otherwise costs begin to spiral without understanding and the CFO asks, “why the cost of telecom services has ballooned?”
Legacy Solutions had successfully implemented its Forensic Telecom Audit process at other Fortune 50 companies in the Columbus, Ohio area, and was brought in by the Principal Architect at Cardinal Health.
The primary objective of this project was to create a comprehensive report of all telecommunications usage and the costs associated with each service.
For the aquired companies, it was critical to identify the services under contract and to confirm rates were at current market prices.
Given the size of Cardinal Health, consolidating services under its master agreements could yield substantial cost savings.
Applying Legacy Solutions’ Process and Knowledge
Following our proven process, we reviewed the invoicing for each of the company’s telecommunications service providers to obtain all relevant data such as all service addresses, service types, cost by product, surcharges, and taxes. We reviewed and captured all contracts and special billing arrangements that had been negotiated by the purchasing department at corporate headquarters. The information discovery was then organized in a side-by-side comparison with federal, state, and local tariffs for compliance and agreement.
As part of this analysis, we evaluated market pricing and benchmarked service agreements to ensure best-in-class pricing with similar size and type companies in the market. We also identified redundant costs and areas for potential savings by comparing the service address listed on the invoices with a record of company sites provided by the client. We identified instances where the client was paying for services at addresses that no longer existed – or were paying for services that they believed were disconnected.
Generally, when company locations are reconfigured or reduced in size, the type and quantities of services are typically reduced proportionately. When companies grow through acquisition, as Cardinal Health has, existing products and services often have been negotiated with a service provider with whom the acquiring company has a master services agreement. In many cases, the acquiring company has the better terms and conditions (but not always). We presented this client with a side-by-side evaluation, and recommendations based on the best-negotiated terms.
This project is currently ongoing. We began our effort with the Forensic Telecom Audit and three years later we continue to uncover additional savings with new projects. Of particular interest is the value of international colocation on network transport costs and the return on investment migrating to SD-WAN.
Legacy Solutions’ process and modeling has resulted in multiple millions of dollars saved, with additional savings identified from a technology transformation that was conducted by a subsidiary, but the disconnect process was misunderstood, leaving thousands of dollars of continued invoicing for services no longer needed.