Over Paying for What You Have?

Despite the decline in the price-per-minute of telecommunications services, most companies face increasing telecom costs due to an increase in the complexity and quantity of communications channels. Multi-Branch locations, Internet access, web conferencing, PDAs and wireless devices, etc., have given businesses more ways to communicate and have also caused an administrative and management problem that shows no signs of subsiding any time soon.

VP’s, Directors and employees order all kinds of services such as 800 numbers, conferencing, calling cards, etc – large companies tend to have distributed IT departments with no real centralized activity or visibility. They also have distributed accounts payable groups that pay for corporate services which are not centralized. Therefore quantifying, reducing and controlling the amount of money the company is overspending is not done effectively, and isn’t really anyone’s responsibility.

Without strategic telecom management in place, the problem expands exponentially in a very short period of time. Employees order their own services or devices at company expense without leveraging existing infrastructure or contracts. Equipment inventories may rise at one location while other locations with lacking inventory continue to order new supply. Telecom or data lines may remain unused or severely under-utilized. Multiply problems like these across a large, extended organization and the overspending can reach into the millions of dollars.

Strategic Communications Management

Here are four key questions that must be answered on an ongoing basis for effective telecommunications management:

1. Do you know what your communications costs really are?
2. Do you know what you have in inventory and what is being purchased?
3. Do you know how those services are being used internally and by whom?
4. Can newer technologies and external services improve your business?

Determining real communications costs isn’t easy. According to IDC research, 40% of IT executives claim that they do not know their annual expenditure on communications. Few companies require expenditure tracking of their communications services the same way they track other expenses because of the large amount of effort required to “figure out” how to do it effectively. As a result, few companies really know if they are getting an adequate return on their communications investment.

Knowing your communications costs

With today’s rapidly changing technologies and expanding methods of communication, the longer a company’s contracts are in place, the more they cost. Most organizations do not manage their telecommunications services like inventory. Instead, companies simply re-negotiate per minute rates for services, regardless of whether or not they are fully utilizing the service or how it affects other contracts and services.

With increasing frequency, recurring expenses are incurred by companies even though all the needs of the business are not being met. In many cases, much of the service the company pays for isn’t even utilized. Without an effective inventory process in place, there are no impediments to the rising costs of provider contracts and services.

Knowing your communications inventory, the beginning of all savings

Most companies have no real insight into their telecommunications spending and usage, thus an initial inventory can quickly identify opportunities for vendor consolidation, spending leverage, and improved asset utilization. The communications inventory process is the key to providing companies with immediate (and frequently substantial) cost savings.

One company realized that roughly 25% of their expenses – $2 million per year across the USA - were unaccounted for. Another company reviewed their wireless utilization patterns and discovered they could pool their minutes – which saved them $100,000/yr. Another continued to purchase expensive PBX cards without realizing that they had enough cards - full of people not working for the company any longer - still inside the system. Yet another company discovered that they could replace a complete Frame network - which reduced their network costs by 50%.

Knowing how much you’re spending, who’s spending it, and what it’s being spent on is the hardest part of strategic communications management. It is also the most enlightening. Simply put, knowing this gives management some very powerful tools to make significant changes that affect the bottom line in the short run.

A communications inventory must also be maintained on a periodic basis or it will grow unchecked. It’s much like mowing the lawn. Mow your lawn once and it looks great the next day, but fail to mow it on a regular basis and it grows out of control in a very short period of time.

Knowing how to better use technology and external services

The advent of the Internet and the commoditization of so many network services and smart routing devices have opened the door for multiple inexpensive, completely reliable options that truly replace outdated expensive services. And with not-so-new and now widely accepted technologies (such as VoIP and IP Video conferencing) companies can truly leverage inventories and services across branches by utilizing the existing services at other locations or between locations without hard coded infrastructure. Technologies are changing so fast that if companies aren’t keeping abreast of the changes, they are likely paying a lot more than they should for the services they continue to purchase.

Knowing your telecommunications finances
An ongoing telecommunications inventory can provide significant cost savings, but it cannot tell companies where assets are underutilized (or unused), or determine their real value to the organization. Most companies continue to focus too many resources on activities such as blindly processing invoices, while ignoring whether usage policies are being followed or that employees are using the services effectively or efficiently.

Building and maintaining a list of contracts for equipment lease and services and proactively negotiating with vendors should be done on a regular basis, not when the bills are overdue and there is no time to react or plan differently. There are lots of options. Companies should know them and make sure they can take advantage of them.

Look into your business ... Ask the right questions.

Most companies concentrate on negotiating general rates and haggling with vendors rather than selecting the correct areas or services that will help them achieve their real goals based on their current needs. Without a comprehensive plan, they try to keep their communications expenses in line without knowing if their needs are being met or if they are spending entirely too much for services that provide them with little or no value.

Cost savings opportunities can be established and prioritized against their own ROI and overall savings contribution, but not before ensuring they are completely aligned with your business needs. Involve your executives in this process to ensure your productivity will go up, while your costs go down.

WHY DO ALL THIS?

Companies that go though these exercises invariably realize that there are many areas where simplifications, replacement, consolidation and better utilization of services will not only save money, but also allow them to extract greater benefit from their existing infrastructure and empower internal business groups to do their jobs more effectively. It’s not an overly complex process, but it does require executive sponsorship, persistence, and the right team of people to “mow the lawn” on a regular basis.