Tips for cutting costs on telecom spending

By Karen Guglielmo, Executive Editor 20 May 2009 | SearchCIO-Midmarket.com

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More IT spending resources Five key best practices for reducing telecom expenses IT spending and budgeting

So say consultants and CIOs with telecom experience, who offer the following tips for cutting telecom spending:

Assess your telecom inventory and audit your bills.

To effectively manage telecom spending, the first step is to find out exactly what you have and use, by analyzing your inventory and contracts. Take inventory on all lines and services; you may find that though your company has shut down offices or lost employees, you continue to be billed for those services.

"You always want to consider utilization," said Michael McCauley, a Project Management Professional at TelPlus Communications Inc., a third-party telecom service provider. "You are paying for all these lines, but are you actually using them all?"

McCauley provides auditing and telecom expense management services to companies that want to outsource these tasks. He said that in working with customers and reviewing their telecom spending and bills, he finds that up to 30% of pricing reflected on bills is incorrect.

"Much of the time the discrepancy is something simple, like a contract pricing code not on the account," McCauley said. Because of this, companies are often eligible for discounts and credits for overcharges.

At Mannatech Inc., a $333 million developer and provider of proprietary nutritional supplements, weight management products and skin-care solutions, CIO W. Jerome Oberlton conducts a quarterly audit on telecom billing and services in-house. "We actually do a match of our telecom inventory to our bills. It helps to manage costs," he said.

Automate the telecom billing process.

Most companies use multiple carriers for their telecommunication services and thus receive multiple invoices. Automating telecom billing and payment can save companies money because most telecom carriers charge additional monthly fees for paper invoices. Automation can also lower the internal costs of processing each invoice and free up staffing resources in IT and accounting.

Who's in charge of telecom expense management? Who manages spending on telecommunication services differs depending on the company's need, size and budget. For instance, a global IT director is responsible for managing telecom spending at Mannatech Inc., a developer and provider of proprietary nutritional supplements, weight management products and skin care solutions. This person works for IT but also coordinates closely with the billing specialists in accounting. David Williams, vice president of product management and marketing at Covad Communications, said he sees the same type of people in charge of telecom spending for his customers. "At smaller companies, it's often the business owner [in charge of telecom spending]," Williams said. "As the size of the company increases, the responsibility shifts to the IT department, starting at the VP level and moving down to the director or manager level, depending on the size of company." Other companies outsource their telecom expense management to service providers like TelPlus Communications, which offers multiple telecom expense management services. --K.G.

Automated billing still gives you the opportunity to review your charges, through either a Web portal where you can access inventory and pricing information or through monthly management reports that break down charges by service/circuit type, location, carrier, etc.

Midmarket companies can either set up their own automated telecom billing process and system, or they can partner with a service provider for it.

Consider hiring a third party to manage your spending and contracts.

Third-party telecom providers like TelPlus Communications can help assess spending, automate billing and negotiate contracts on behalf of the customer. These service providers are especially helpful in contract negotiations because they're already familiar with the telecom carriers, their offerings and where they're most flexible for cutting costs.

Telecom service providers give companies a "one throat to choke" option for billing, according to McCauley. "Whether you're working with 20 or 100 telecom companies, you just have one call to make," he said. "All of your inventory is in one place, and there's one project manager to call. That alone is a huge time and money saver."

Renegotiate contracts.

In this economy, it's a buyer's market. Customers can demand the services they want or move to another vendor. So this is the right time to closely review your telecom contracts and renegotiate if needed.

Telecom carriers want all of your business, not just a piece of it, according to McCauley. And the benefits they offer for getting all of your business are higher discounts.

For instance if you have 50% of your business with AT&T and 50% with Verizon, you can include a clause in a renegotiated contract with AT&T saying that if you give the company 90% of your business, you receive a certain rate and higher discounts. This is a win-win for both you and AT&T. The telecom carrier gets your committed business and you get better service and rates.

"We've even seen some cases where small-to-medium businesses cancel contracts with the Bells and absorb the cancellation penalties because the savings they get with us more than offsets the switching costs," said David Williams, vice president of product management and marketing at Covad Communications Group Inc., a national provider of integrated voice and data communications.

Another consideration in renegotiating your contracts is the addition of a "business downturn" clause. This allows the customer to renegotiate the terms of the contract if there is a downturn in its business -- such as losing a major client or closing multiple offices.

Don't overpay for wireless -- shop around and consider new converged network technologies.

Wireless is a huge area of misuse and a big area for savings.

"Wireless can be a huge money pit," McCauley said. "Customers are often put on incorrect plans and are overpaying for services."

We actually do a match of our telecom inventory to our bills. It helps to manage costs. W. Jerome Oberlton CIO, Mannatech Inc.

There are many ways to save with telecom wireless and data services. One is to move to other types of data networks or new technologies, such as Multiprotocol Label Switching, which can typically carry data and voice traffic at lower costs, or Session Initiation Protocol, which customers can employ to consolidate local voice, long distance and data services onto one network.

Oberlton recently renegotiated his mobile contracts. He switched vendors to gain cost savings.

"By moving from one vendor to another, we got rid of some servers on-site," he said. "This helped get costs down and receive more volume discounts."

Oberlton did caution others, however, to beware of penalty clauses for switching vendors, which some telecom wireless carriers are including in contracts. These clauses come with steep fees and should be addressed early in the contract negotiation process, he said.

Tags: Cost-cutting tips for midmarket CIOs,  IT spending and budgeting for the midmarket,  Outsourcing for the midmarket,  Contract negotiations and legal issues,  Vendor selection and management for the midmarket,  VIEW ALL TAGS

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