Case study: How Telkomsel embraced flexibility in software investment

2 August 2017

Procurement and engineering worked together to cut costs at Indonesia's leading telecoms company 

In a highly competitive market, Indonesian telecoms company Telkomsel stands out as one of the main providers, thanks to an extensive programme of building 3G sites some years ago.

Recently however, the company, which has more than 170m subscribers, discovered many of its sites were underutilised. On average, usage was around 34% lower than the 75% optimum figure.

To maintain its rate of expansion and attract subscribers, Telkomsel needed to build new sites – buts is power to negotiate with suppliers was limited as it had just conclude an agreement.

As 3G data sites rely on a mixture of hardware, software and capacity license (a license to unlock and utilize physical hardware), procurement realised it could save money by redirecting underused capacity licenses from other sites to new sites. Thinking flexibly about its software investment would help the company manage its spend.

However management needed to be convinced of the savings and gains that could be achieved by doing so. To confront this challenge, procurement and engineering colleagues collaborated in a multidisciplinary team, enabling them to clearly demonstrate the predicted benefits to management. The results led to them winning a CIPS Supply Management Asia award for Best Cross-functional Teamwork Project.

Once management were convinced, the next step was to reassure suppliers, who were worried the new strategy would cost them sales.

Telkomsel’s team persuaded suppliers that spend reduction by reutilising existing license and software investment would be better for them than price negotiation. They also openly expressed their concerns about the sustainability of their own business if they were not able to conclude these agreements.

As a result, during 2016 the company was able to avoid spending an estimated $29m on licences, around 8.6% of total spending of $341.51m on 3G and 2G sites that year.

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