What an OSS/BSS Procurement Really Costs: The Numbers Might Surprise You

An OSS/BSS transformation often begins with excitement and urgency due to a desperate need for change. It also creates trepidation because the wrong decision could shape the business for years to come.

There’s no doubt that there’s a long list of things to work through, but that tension can lead to procurement events that could blow out past 18-24 months. Meanwhile, benefits are deferred and existing inefficiencies continue to compound.

Most organisations expect procurement to be time-consuming. They know there will be advisers, internal workshops (lots of discussions!!), vendor demonstrations, legal reviews and months of evaluation, then negotiations.

But some of the largest costs are rarely included in the business case – and one or two may be costs you’ve never even considered.

This article attempts to highlight:

1. All of the cost elements of a procurement event (and introduces a high-level calculation model for testing your own cost assumptions)
2. High-level estimates of the combined buyer and seller effort
3. An examination of the opportunity costs resulting from a delayed implementation
4. An outline of a more pragmatic approach for running OSS/BSS procurement

There’s even one big, controllable, incentive-based indicator that suggests how short (or long) the process is likely to take you.

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The Cost Clock Starts Before the RFP Is Released

When organisations calculate procurement effort, they often begin from the date the RFP is issued. However, the clock usually started many months earlier, including:

• Many teams discussing their requirements (and wish lists)
• Operations teams documenting pain points
• Architects exploring target states
• Tech and Finance helping estimate a high-level budget (although this is one of the hardest steps for an OSS / BSS buyer to determine, but we’ll talk more about how to overcome this later)
• Executives debating priorities
• Procurement defining what needs to happen during the sourcing process
• In some cases, external advisers may have assisted with requirement gathering, market scans or preparing tender documentation

Then comes the RFI, RFP, clarification rounds, response evaluation, demonstrations, proofs of concept, reference checks, commercial negotiations, approvals and contracting. This can be an arduous journey and we haven’t even got to the implementation steps yet.

Mobilisation follows before implementation can finally commence.

Traditional OSS/BSS RFP processes can take 12-18 months in their own right. Add the internal preparation, and the full journey from initial requirement gathering to implementation commencement can stretch to 18-24 months or more.

The problem is not simply that this takes time. It is what happens during that time.

The organisation continues carrying the operational limitations that justified transformation in the first place. Manual processes remain manual. Fragmented data remains fragmented. Customer and employee frustrations persist. Transformation enthusiasm fades into procurement fatigue.

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Add the Internal and External Costs – Including Sellers

Internal staff time is often treated as free because it doesn’t appear on  the project invoices.

However, it’s clearly not free. It’s simply distributed across departmental salary budgets where the procurement programme can’t easily see it.

Consider this illustrative scenario below for a substantial OSS/BSS procurement with 6 short-listed vendors:  The economic cost of an RFP is not limited to what the buyer pays directly. It includes the effort expended by every participating seller.

You might be wondering, “why are we including the seller costs here?”

Suppliers don’t have unlimited pools of free resources. In the example above with six bidders, the five losing bids still cost money. Those costs must eventually be recovered through the supplier’s portfolio of winning work, so those costs eventually become amortised into their winning bids.

In other words, buyers ultimately fund much of the industry’s unsuccessful bidding effort.

In short, we desperately need to strip those costs out of the industry for the betterment of all players (except perhaps pre-sales engineers).

The traditional procurement process also suffers from what we call the three forevers:

1. Forever to write the RFP
2. Forever for vendors to respond
3. Forever to evaluate all of the responses

Only after these three forevers do buyers begin the deepest and most valuable work with preferred candidates – demonstrations, discovery, proofs of concept and commercial validation.

There is an alternative approach that removes almost all of the costs of the three forevers though.

The inverted-pyramid approach uses the following steps instead:

1. The alternative is an inverted-pyramid approach, which starts with broad market awareness (our vendor directory has well over 500 listed vendors, where most can be almost instantaneously ruled in or out based on client requirements)
2. Applies lightweight filters based on the small number of criteria that genuinely differentiate candidates down to a very select list
3. Then progressively concentrate deeper effort on a much smaller number of suppliers. PAOSS describes this as using staged

This rapid filtering reserves time-consuming detailed demonstrations and proofs of concept (POCs) for only the strongest candidates rather than expending maximum evaluation effort on the entire field.

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The Biggest Number is Often Overlooked

From the table above, a procurement costing US$2.65 million is significant. Yet it’s likely not even close to being the largest number.

Suppose the transformation business case expects US$6 million in annual benefits from reduced operating costs, improved automation, revenue protection, faster fulfilment and/or better customer outcomes.

If a traditional 18-month selection process could instead reache a sound decision nine months sooner. then those nine months represent US$4.5 million of potential value brought forward.

It works out at $500k of value brought forward for every month that the process can be expedited.

Opportunity cost also appears in less visible forms.

The people best qualified to evaluate a new OSS/BSS solution are often the same people keeping current operations stable.

Network operations specialists, assurance leads, fulfilment experts, architects, data specialists and product owners are pulled into workshops instead of their business as usual (BAU) activities. Instead of solving everyday challenges in the network, they’re dragged into OSS/BSS requirements workshops, clarification responses, demonstrations and scoring meetings.

We want their coal-face experience included in the process, but also want to avoid being a drain on their valuable time.

Their salaries already appeared in the buyer-cost calculation. But counting their wages alone misses what they were unable to do while supporting procurement:

• BAU improvements are postponed
• Operational risks receive less attention or take longer to address with less expert resolvers on duty
• Operational risks receive less attention. Existing projects and activities slow down. Scarce

Perhaps one of the most overlooked challenges is the inefficiency of task switching when scarce experts divide their focus between running today’s environment and evaluating tomorrow’s.

This may be one of the large costs you had not considered: Procurement doesn’t merely consume hours. It consumes the attention of the people with the greatest ability to improve the business today.

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Follow the Incentives Behind a Long Procurement

I’d like to ask you a really important question – “Are your evaluators incentivised by speed and effectiveness?”

Long procurements are not caused by poor intent. They could possibly be the predictable output of the incentives surrounding them.

Salaried employees are paid regardless of how long the process continues. Contractors and advisers are paid by the hour or/ day. More complexity, workshops, meetings, requirements discussed, clarification rounds and evaluation activity creates more billable effort.

This doesn’t mean individuals deliberately create delays. It means few participants are rewarded for simplifying the process or reaching a high-quality decision earlierd.

A fixed fee is not automatically the answer either. A poorly designed fixed-price engagement can incentivise rushing, minimising analysis or avoiding resolution of difficult issues. Better

The best commercial structures combine clear outcomes, milestone payments, decision-quality measures and agreed timeframes.

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Design the Procurement Around the Decade Ahead

Procurement teams can face another misalignment: Success in procurement teams are often judged by the percentage negotiated below a vendor’s list price.

But list price may be an artificial anchor, especially in large product + services projects like OSS/BSS transformations. Most suppliers have great flexibility over their pricing models.

Therefore list price may be an artificial anchor. A large discount does not prove that the final price is sustainable. A large discount is often only a short term outcome.

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Design the Procurement Around the Decade Ahead

As discussed in “OSS/BSS Procurement Is Flawed From the Outset,” conventional procurement expectations from Buyers often emphasise the lowest price and greatest transference of risk to their vendors. That seems to make sense right?

But from the seller’s perspective, those incentives can encourage loss-leading bids, with an intent to seek variations later and attempts to transfer risk back to the buyer. As soon as the contract is signed, the relationship is on a war footing.

An OSS/BSS procurement is not merely buying a product. It’s akin to comparing a marriage to a big wedding – you need to focus on choosing a partner that will help solve difficult, unexpected problems with you for the next 5-10 years, not just the buying event. Both partners need to win from the relationship in the long term.

A better process does not doesn’t mean abandoning rigour. It means concentrating rigour where it most heavily influences the decision.

Begin by identifying the small number of criteria that genuinely differentiate suitable options. Use broad market awareness and lightweight qualification before requesting detailed responses.

Drastically reduce the field before asking for time-consuming and expensive demonstrations, solution designs or proofs of concept.

Then use focused discovery to test the uncertainties that matter most:

• Can the solution support the critical operational scenarios?
• Can the vendor demonstrate delivery capability rather than questionnaire compliance?
• Are the commercial assumptions sustainable for both parties?
• Can the combined teams manage uncertainty and risk together?
• Will the platform and partnership adapt as the business changes?

Keep an eye on all aspects of the procurement process:

• Measure the total buyer-and-seller effort, not merely the buyer’s external invoices
• Track the expected value lost per month of delay
• Choose a process that protects key operational staff from unnecessary evaluation activity
• Reward advisers for transparency, decision quality and time-to-outcome rather than document volume or elapsed effort

Most importantly, stop treating the largest discount as the primary evidence of procurement success. The stronger measure is whether the process identifies a capable partner, creates sustainable commercial settings and expedites transformation benefits forward without taking reckless shortcuts.

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Calculate what Your Procurement is Really Costing

The illustrative figures above will not match every organisation. That’s why we’ve created detailed calculator that allows you to enter:

• Your organisation’s roles, participant numbers, hours and loaded labour rates
• External adviser, legal and governance costs
• Number of participating sellers
• Seller roles, effort, demonstrations and proof-of-concept costs
• Procurement duration and implementation mobilisation time
• Expected annual transformation benefits
• BAU impacts and the proportion of key staff capacity diverted
• A comparison between a traditional RFP and anthe inverted-pyramid process</li> </ul>

Leave us a note if you’d like us to send you a copy of the procurement cost calculator.

A successful procurement should not produce

• Produce the most or longest RFP “wish-list” documents, consume
• Consume the most expert hours or claimin search of “completeness” or
• Claim the largest discount from list price.

It should create confidence to make a sound decision, commence transformation sooner and establish the foundations for the decade-long partnership that follows.

If you’re planning an OSS/BSS procurement, market scan, vendor shortlist, RFP, transformation roadmap or business case, we can help you pressure-test the path before the cost clock starts running.

Contact us if you’d like a working session to map your current procurement approach, estimate the hidden cost and compare it with an inverted-pyramid alternative.