Is your business relying too much on procurement to deliver telecoms cost savings?
When IT teams are set the challenge to cut telecoms costs, their first port of call is often to start negotiating better terms with their vendors (in return for contract extensions) or to engage procurement to run a formal RFP. However; by moving straight into negotiations, your business may be leaving significant savings on the table, and worse, may inadvertently be locking in hidden overspending for another contract term.
While procurement savings are clearly extremely important, they are just one of many ways that businesses can dramatically reduce telecoms costs. We explore some of the ways that your business can maximise cost savings, potentially securing a further 10-20% cost reduction. We also believe that looking “inwards” at your own usage, processes and behaviours, before engaging with vendors, will leave you in much stronger position to deliver long term sustainable savings.
Passive Savings vs Proactive Savings
While no two businesses are the same, we regularly see up to 20% in unnecessary overspending in corporate telecoms budgets that could be rapidly converted into cost savings. Cost savings that can often be delivered without the permission or sometimes even the support of your vendors; and critically without needing to enter into new contracts or having to wait for renewal dates to come around.
These savings do however require your business to be inward looking, and challenge current telecoms management processes. These are labelled “Proactive Savings”, and they’re only available if you commit to go after them.
Procurement savings by contrast are, in theory anyway, delivered as soon as your vendor lowers their tariff or the vendor migration project is complete. So, once procurement have done their job, then the “Passive Savings” should roll in. In many businesses, that concludes the cost reduction challenge and the project put to bed until the end of the new contract. The problem is that often the expected savings fail to materialise, by which time the budget year may have already passed.
If that sounds familiar in your organisation, then you may wish to consider the following “inward” looking projects before engaging in vendor negotiations; any one example of which could realistically drive out 5% or more from your annual telecoms budget. Ensuring that when it’s time to start negotiations, you’ll already have an optimised telecoms estate, and you’ll be able to see the genuine additional value that your vendors are offering.
Project 1: Inventory and Wastage Review
It’s natural in large organisations for there to be regular ‘joiners and leavers’ and for business requirements to change over time. Whilst most businesses have good processes in place for new connection and service orders, the same is not always true for decommissioning services. The truth is, many businesses simply don’t maintain an accurate inventory of telecoms services and connections throughout the lifecycle of services.
This regularly leads to significant wastage and excess costs that arise from continuing using to pay for inactive services and connections. There are many different other ways that unnecessary wastage can be incurred; however organisations that don’t analyse invoices down to connection level or scrutinise charges at a cost centre level create an natural “accountability gap” for these charges to fall into.
By completing an exercise to review your current inventory of telecoms services (even at a most basic level), and by comparing this Inventory against usage volumes and appropriate HR employee lists, you’ll rapidly uncover overspending, billing errors and ways to immediately reduce costs.
Some examples that we’ve seen include:
- Mobile estates with over 25% of mobile connections being totally inactive or assigned to employees that have left the organisation
- Large recurring data circuit charges for business locations that were long since sold or where the circuit was decommissioned or upgraded.
- Circuits and telecoms services being billed to the wrong organisation.
- Businesses paying for UK or roaming data bolt on’s for mobile connections that never or rarely use data services or no longer have a frequent roaming requirement
- Legacy telephone lines remaining long after businesses have upgraded to IP Telephony
- Maintenance of decommissioned telephone systems and equipment
- Rental charges for legacy telecoms equipment like ‘magneto bells’ and ‘internal extensions’ on BT Onebills that can date back up to 30 or more years
- Large numbers of mobile phones sitting in drawers rather than being securely wiped and recycled or even traded in for payment
- Agreed tariff changes not being implemented by vendors
- On a plus side, where it can be shown that the vendor was at fault for these ongoing service charges, then your business may also be entitled to claim a refund for these charges.
Project 2: Identify Mobile Usage & Behaviour Management Issues
Mobile usage, especially for UK and Roaming data is one of the most significant causes of unexpected overspending in telecoms budgets. Unlike fixed line services where the costs are mostly based on capacities which are set by IT, mobile services tend to be driven by individual user behaviours which are much harder to control.
While managing mobile usage may at first sight appear to be a significant challenge to overcome, in many businesses there are both short term and longer term relatively low cost actions that can be taken to materially impact costs. Additionally, excessive usage and exceptional costs (also known as “bill shock”) are typically incurred by a relatively small number of users. As a result, impacting the behaviour of the Top 10, or 1% can make a big difference.
Some example ways of managing mobile usage and the associated costs include:
- Creating approved roamers lists – many businesses don’t apply barring or different policy rules or controls based on business requirement. As a result, by default, any user can make international calls or use their mobile when roaming. How much of your mobile roaming charges are for business trips rather than holidays?
- Data Alerts and Capping – in a large mobile estate, it’s easy for exceptional data usage to go unnoticed, however a monthly review of the Top 1% / Top 10 users will typically identify users that don’t have broadband at home and are using their mobile as their home “hotspot”. Alerting and capping policies can help to identify these types of issue, so appropriate services, tariffs and controls can be put in place.
- Mobile Inventory – who has your mobile connections? – at one organisation we identified exceptional usage that was ultimately confirmed to relate to a SIM that had been stolen from the business and had been sold in the black market.
- Creating a relevant Mobile Usage Policy – with the rapid change in mobile technologies and usage, many telecoms policies have become outdated. Developing a relevant policy with clear guidance on “fair usage” allowances and advice on roaming and data consumption will help to provide much needed clarity when managing usage.
- Provide Users with visibility of costs – most businesses fail to provide their users with any visibility of their monthly mobile usage and costs. As the saying goes, “you can’t manage what you don’t measure”. The simple act of providing clear mobile usage statements can help to keep costs and usage under control, and it also provides an ideal opportunity to remind business users of the mobile policies and fair usage allowances.
Project 3: Tactical Technology & Vendor Changes
Whilst most businesses are rightly looking to consolidate suppliers, there’s never one telecoms service or vendor that’s right for every business need. All too often we see businesses that are generating exceptional costs from a very small percentage of their connections or user base. In many cases that’s because the requirements of that minority of users simply doesn’t align with the commercials and services that were negotiated for the majority of users.
Negotiating with existing vendors to create a second set of commercial terms or services, can actually be complex and time consuming, and will often involve significant contract amendments. By contrast however; the tactical use of “second network” services or alternative technology can often dramatically reduce costs for the minority’s different requirements.
In a mobile environment this is especially true. Every mobile network has different international partnerships and capabilities. So, it’s common to find specific locations that business users travel to, that are highly uncompetitive on the current agreement. By contrast these countries may be included in the tariffs of other networks at a fraction of the cost.
For any exceptional usage that can’t be addressed easily through tariff optimisation with your current network, or through usage management, then we highly recommend the use of tactical solutions.
One example is to provide roaming users with a Mi-Fi or portable hotspot device that they can tether all of their devices to when roaming. Not only is this significantly more secure than using unmanaged café and hotel Wi-Fi connections; but, with the right SIM or tariff applied it can almost remove roaming costs. Today, there are solutions that cover nearly all countries globally, including countries like Saudi Arabia, UAE, Morocco and India where businesses often struggle with controlling data costs for business travel or VIP’s that need data whilst on holiday.
Commencing a project to optimise your telecoms costs prior to engaging in vendor negotiations will help in two key ways. First, you’ll be able to rapidly identify and drive out your own business wastage and costs, which for many businesses will deliver a 10-20% cost saving. However, you’ll then also be able to negotiate based around your real business needs and usage, which otherwise would be distorted by unnecessary usage that vendors make vast profits from and will seek to “lock” in with new spend commitments.
At Utelize we have identified hundreds of different ways that businesses can optimise their mobile, fixed line and UC costs. If you’re interested in learning more visit our Resource Centre where you can download our wide range of best practice guides and white papers.