Rethinking the Need for Charge-Back Policies

End users determine telecom costs Are charge-back policies the best way to control telecom expenses? Richard A. Kuehn, president of RAK Associates, a telecom consulting firm in Cleveland, Ohio, and one of the founders of the Society of Telecommunications Consultants, argues that in order for charge-backs to work well, companies and users must take on a new mindset. I have just completed a long and contentious contract negotiation and implementation. I was partially to blame for how long it took, because I neglected two of my own cardinal rules: First, be clear about whether the goal is lower unit costs or lower total costs. Second, recognize what’s in your control and what isn’t.Here’s the background: my job was to negotiate a new three-year contract for data access and services. The client needed flexibility to meet bandwidth expansion requirements as the organization’s needs changed during the term of the agreement. In one sense, I clearly succeeded: we reduced monthly charges by about 30%. But, given the need for more bandwidth – we piled on a 50% increase – the overall project went over budget. I went into the project focused on reducing the total cost, when I should have been focusing on reducing the unit price. But perhaps more importantly, I ignored the difference between being responsible for something – i.e., the budget – and having the authority to actually enforce the budget. Telecom and network managers are given responsibility for telecommunication service and budget, but true authority is often lacking. This isn’t a new problem, but that doesn’t make it any less vexing. Part of the problem is that everyone takes telecom for granted. The end users know that long distance costs have dropped to pennies or less per minute and so they use (or abuse?) the services accordingly. Most enterprises have station message detail recording (SMDR) systems, but these products generate more paper than meaningful information that can be used for administration or management purposes. Moreover, the "bandwidth is free" mindset affects network and telecom managers as well. Over-provisioning is now perceived as a bandwidth management technique, when in fact, it’s a way to avoid bandwidth management. To be sure, we’re all using more bandwidth-hungry applications. But again, throwing bandwidth at the problem only perpetuates bad habits. I saw a recent study that pointed out how the peak weekday connection times for Internet retail shopping was 9 a.m. and 5 p.m. Once the peak is reached it stays constant, which strongly suggests that during the hours most people are supposedly working, they’re actually spending time doing personal surfing. And too often corporate policy does nothing to attack the problem. I know of one company that decided to increase its bandwidth rather than deny employees access to downloaded music. Another area where cost concerns are ignored is wireless communications – both voice (cell) and data (BlackBerries, et cetera). In many organizations, employees can sign up for whatever cellular service they want and expense the charges back to the company, or select a plan authorized under a master contract negotiated with a carrier. But it’s almost impossible to establish – or enforce – spending limits on anyone. The bottom line is that end users – not telecom management – actually are the ones who dictate what the total costs will be. They impact costs through their choice of devices, their decisions about who to call and when, whether to use company resources for personal Web surfing and through their choice of wireless communications services. Telecom management retains responsibility for meeting budgets, but the reality is that there is little or no authority over the factors that determine whether budgets are actually met. Given these realities, there are only two solutions: go nuts, or rethink how a system of charge-back can work. It would remain telecom management’s job to get the optimum deal from carriers and equipment vendors – price, service, support, quality, et cetera – and to ensure that the organization’s business communications requirements are met. But if a user or department prefers a more expensive option, they – not the telecom budget – take the hit. Charge-back is never popular, but that doesn’t mean it isn’t the right solution. Somebody’s going to have to bite the bullet. This article is reprinted by permission of Business Communications Review (www.bcr.com).

Rethinking the Need for Charge-Back Policies

News | April 1, 2006

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