Keep an eye on telecom costs

Communications News, Nov, 2004

The dollars that enterprises spend on telecom services--such as local and long distance, mobile phone plans, calling cards, conferencing and data networks--have long been considered a cost of doing business. In today's cost-conscious market, however, no category of spending is sacred. Meanwhile, telecommunications spending continues growing in complexity and volume.

At the same time, the character of enterprise communications technologies is rapidly changing. The most obvious example is the wireless revolution, with penetration of devices among U.S. professionals topping 75%, according to industry sources. Underlying technologies (e.g., IP telephony, IP virtual private networks and Ethernet wireless area networks) are also forcing an architectural shift in the workplace. Consequently, telecom costs are more difficult to capture and manage with new traffic and usage patterns, fewer end-user controls, and a shift from measuring minutes to megabytes.

To optimize telecom usage, performance and costs, companies need to have at least 70% of their telecommunications spend under centralized management. Gaining this level of spending under management is most effectively supported by a systematic technology platform to gather detailed usage, contract and invoice information together for reconciliation and payment purposes.

For example, those companies that leveraged technology to manage telecom costs realized average savings of 26.1%, whereas those companies that did not leverage technology reported 18.6% in average savings. Not leveraging technology to support telecom cost management is causing the typical large organization to leave $8.7 million on the table; midsize companies are forsaking $1.95 million.

Companies should take the following steps:

* Understand all telecommunications services spending--not only local/long-distance and data network access but also conference calling, toll-free services and mobile devices.

* Analyze telecommunications spending on an enterprise-wide basis. Use spend visibility to identify opportunities to rationalize your carrier base.

* Identify opportunities for vendor consolidation and competition.

* With the consolidation that has taken place in the industry over the last few years, assess whether all divisions or regions are paying the same prices.

* Leverage existing e-sourcing and e-procurement tools where possible--online sourcing tools create competitive bidding markets that return double-digit savings, on average.

* Investigate dedicated solutions for specific service categories.

--From the "Category Spend Management" report by the Aberdeen Group