Taming telecom expenses – where to begin

Where should enterprises look to restrain their runaway telecom expenses? An assortment of telecom experts provides some direction on the best nooks and crannies to sniff out savings. A ferociously competitive telecom sector certainly hasn’t helped to keep telecom costs down for many companies. Customers scramble to make sense of bewildering rates, plans and gizmos as they upgrade their communications networks and equip their increasingly mobile workforces for their own business battles. As a result, enterprises lose 12% to 17% of their telecom spending due to ineffective management, according to the Aberdeen Group. Get yourself organized "The first step is to identify all assets," says Lisa Maerowitz, vice president at ProfitLine Inc., a San Diego-based telecom expense management (TEM) outsourcer. She points out that many clients don't know where to start to tackle the issue or even know what they have. Mobile is a particularly chaotic area. Many companies treat cell phones and other wireless devices as personal items, allowing employees to pick their own cell phones at local dealers and expense the charges. Pooling minutes, validating bills and analyzing telecom spending is very difficult in this scenario. Experts agree mobile devices should be managed as corporate assets. "If you consolidate this area, you can negotiate better contracts and get economies of scale," says Maerowitz. Many companies don't have cellular use policies in place with their human resources departments that specify employee responsibilities or allowable personal use, says Roberta Fox, senior partner at the Mount Albert, Ont.-based Fox Group, a telecom consultancy. This opens the door to potential problems with staff, she says. For example, if someone makes a dubious $800 call to Timbuktu, the finance department can't challenge the bill if there's no policy governing overseas calls or the employee claims the call was work-related. Aggressive questioning The endless plans, rates, tariffs and carriers to evaluate can be overwhelming. There are 1,200 different pricing plans provided by mobile carriers in Canada, according to a study conducted by the Fox Group. "Plans can be radically different across carriers even for the same customer segments," says Fox. "You could be losing big bucks if you're on the wrong plan." Craig Sands, a Toronto-based executive director at global consultancy Accenture, points out there are also regional disparities in eastern and western Canada. "There's a tremendous difference between Bell, Telus, Rogers and so on." But there’s one business practice they all share. Fox says the study found that carriers consistently don't advise customers if they have better plans available – so the only way to find out is to ask many, many questions. Experts are unanimous on this point. “If you don’t ask, you don’t get,” says David O’Kell, Toronto-based managing consultant at telecom consultancy Abilita Inc. "If you're on a three-year plan, ask what kind of better plan the carrier can put you on to keep you as a customer," says Fox. The trouble with contracts Organizations should review all contracts to find out when they end, because many have automatic renewals, warns Henry Dortmans, now president of Datex Management Services, a Mississauga-based telecom management and consulting services firm. "We recommend companies verify that the rates and terms are fair and reasonable, and decide whether to negotiate a new arrangement with the existing supplier or look at other providers before they end," he says. Maerowitz goes further: "We advocate aggressive renegotiation of contracts, even as often as once a year." New fees and hassles are making their way into contracts, says O’Kell. “Cancellation fees have become more significant in the past couple of years.” While organizations are aware of these for cell phone contracts, O’Kell says they should be on the lookout for cancellation fees in new areas. “There are now some attractively priced data plans available on a corporate basis, but these too have cancellation fees – they’re slipping into contract renewals.” O’Kell says most organizations don’t think to negotiate better warranties on hardware in wireless contracts. Cell phones typically come with a three-year contract but only a one-year warranty. “But as devices grow more sophisticated, they’re less likely to last a full three years. Clients are even telling me that many devices die in the 13th month. Organizations can save themselves a lot of problems by negotiating a shorter hardware upgrade period.” While most contracts on standard services and equipment are negotiable to some degree, organizations should be prepared for major regulatory hassles if they want something customized, says Michel Labelle, telecom manager at TSI Terminal Systems Inc., a container port operator in Vancouver. “If you want a special line or circuit and it’s not in their standard contract, carriers have to get a CRTC variance on it which can take three to six months – and which means carriers aren’t likely to budge if it’s something unique. We tried to put in fibre services, and Telus was reluctant.” However, TSI was able to negotiate ‘unlocked’ cell phones with Rogers, he says. “All the major Canadian carriers lock down cell phones so you can’t put another provider’s SIM card for a pay-as-you-go plan. But we negotiated it so we can tell our employees to buy their own SIM cards and plans and they can just put them in for personal calls or when they’re on vacation. Yes, it’s an honour system, but without it, you’re not even giving them the opportunity to pay for their own calls.” In addition, the company is negotiating combined voice and data services into pools, he says. TSI didn’t want voicemail and other features on its cell phones. “Rogers actually has a pool of money they accumulate within the plan for unused features, and we were able to translate that into alternate services that we do use. We’re been able to introduce a whole new class of services for no net increase in cost.” Networks: read those entrails In the rush to upgrade their networks, many companies have unused lines lurking in the background, quietly taking up money. "Just in the passage of time and changes to the way businesses operate – for example, moving from modems to access the Internet – has resulted in unnecessary lines," says Michael Dunne, a consulting manager at Datex. "These are sitting around unused in offices and may just be plugs in the wall, but companies are still being billed 45 bucks a month – ka-ching, ka-ching." Sands recommends a network optimization review, as this problem may go beyond forgotten lines to network switches and backbones. "There's circuitry that's not being used or devices that only turn on for minutes a day," he says, pointing out there may be better ways to handle the network traffic going through devices by consolidating or redeploying workloads to both maximize efficiency and reduce telecom costs. Although networks generate usage reports, few companies have the expertise to review them properly for savings, he says. "The devil is in the details – IT staff may not know how to interpret the reports, or how to go through them with a strategic approach that identifies top-down areas for improvement." Billing errors: Scrutinize with suspicion The sheer complexity of telecom services generates significant numbers of billing errors. “Accurate telecom billing is an oxymoron," says Larry Van Etten, senior telecom manager at IKON Office Solutions, a Malvern, PA-based provider of integrated document management solutions. "Carriers don't fix a bill unless you tell them it's wrong, so you need to be looking." About 10 per cent of invoices contain errors, says Maerowitz: new rates not applied, billing for the wrong service, payments applied incorrectly, wrong quantities, and on and on. "For every page on a bill, there's one error – that's the mentality you need to adopt," says Van Etten. Changes in operations or services are key areas to check. "We found most of our savings in the set-up of new services," he says. At the opposite end, disconnected services often result in billing errors, says Dortmans, pointing out that many don’t have, or take, the time to check to see if the loop has been closed between a cancellation order and its removal from bills. There is a larger disconnect. Finance people rarely understand telecom charges, and IT staff rarely look at the accounting, says Dortmans. "They should know that the invoices, inventory and bills all match. That's a simple tip but few companies do this because it's a lot of tedious work," he says. As a consequence, many companies avoid this headache by simply paying all bills without scrutiny. Even in instances where IT staff make an attempt to contain costs, this disconnect can nevertheless result in losses, says Maerowitz. "IT organizations say, we've done all these things and saved all this money – and then they throw it over to the finance group, who are supposed to sort out what goes where." To TEM or not to TEM Over the course of four years, Van Etten wrestled down telecom expenses by 39 per cent, saving the company millions of dollars. At IKON, where about 4,000 telecom invoices are processed monthly, Van Etten's group implemented software provided by Rivermine, a Fairfax, VA-based TEM software provider, to get a handle on telecom costs. Using business intelligence analytics, the software tracks and compares billings to contracts, rates and inventory, kicking out exception reports for discrepancies. But this was just a tool used as part of a larger effort. "Implementing Rivermine was easy – the hardest part was getting control of the company's processes," says Van Etten. His group instituted a number of rules to centralize telecom: all bills are processed by the IT group, one standard model for staff cell phones and executive BlackBerries, removal of line manager approvals unless billings deviate by 20 per cent, and so on. TEM is more relevant in the US, which has multiple carriers in different regions, and where telecom billing platforms are more complicated and error-prone, says O’Kell. “In Canada, it can help formalize processes to stay on top of telecom assets and expenses. But if you haven’t optimized them, it just becomes a garbage- in-garbage-out exercise. And you still need human intelligence to review the reports TEM systems generate.” Telecom audits: painful but useful With the overwhelming array of telecom services, gadgets and contracts available, most IT departments are unable to keep up with daily management while also staying on top of the best deals. “Some companies use the 80/20 rule – you want to stay on top of 80% of your telecom expenses, and the last 20% is not worth the effort to go after,” says O’Kell. “I agree with that, but realistically, even good companies are pro-active on only about 50% to 60%.” O’Kell recommends organizations go through a telecom audit every two years. External telecom consultants are typically up-to-date on the best plans, and have the time to do the detailed work needed to do a check-up. “Consultants will need to work with departments, but audits flush out inconsistent pricing, discontinued lines and so on – they compare what the company is actually paying for to what it thinks it’s paying for.” End-user Labelle agrees telecom audits are useful: “Just based on difficulties with contract renewals, an audit is definitely worthwhile.” Next-gen cheapware End-users are sneaking many consumer telecom services and devices that aren’t commercial grade into enterprises, says O’Kell. “Much like cell phones, they’re an example of user-driven technology. Companies didn’t plan for cell phones and BlackBerries, but users demanded them, and corporate policies and programs had to catch up.” Although the price is right with freeware such as Skype, quality of service and security are major issues, he says. Organizations have to decide if the trade-offs are acceptable. “IM and Skype are ways to significantly reduce costs. But they’re a nightmare for IT managers as they represent security threats. Just like cell phones, end-users bring them into the enterprise anyways, and then IT managers have to figure out how to deal with security once everyone is using them.” However, one relatively low-risk device is Magic Jack, he says. “It’s a neat device, originally called the Skype-killer, that’s put in a laptop and gives unlimited North American long-distance calls.” According to informal feedback from his customers, the QoS is a bit better than on Skype calls, and uptake of Magic Jack is growing in Canada. “There’s not really a catch, beyond that it leverages overall bandwidth connections.” But he warns about security issues with Apple Corp’s iPhones. “There are many serious flaws that Apple is having to patch after the fact. If I were an IT guy and had to deal with iPhones with VPN connections, it would be a nightmare. Most other services can be handled, but these devices are very new and complicated.” At TSI, managers and power users are encouraged to use Skype, says Labelle. “We deploy it by default to these employees, and we’re looking at Google Inc.’s Google Talk, corporate IM and some alternatives now. The main reason is it allows people to keep in touch with their families when they’re travelling.” Security is a matter of education and trust, he says. “We have a relatively small pool of 200 corporate users out of a pool of 5000 that work for us, and it’s relatively easy for us to do targeted training. But we have particular packages that we’ve selected and encourage them to use – we don’t allow the package of the day. They have to use what’s sanctioned by the IT department.”

Taming telecom expenses – where to begin

News | 10/26/2008 12:02 am EDT

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us