Rule No.2: Never forget rule No.1.
— Warren Buffett
Telecommunications is the second highest non-operating expense for the average Fortune 1000 firm. Medium and Large businesses alike suffer expense management issue when it comes to monthly recurring cost in the telecom and technology arenas. Most organizations can reduce these expenses by three to fifteen percent on their own; however some can cut costs by 30 to 40 percent utilizing the right expertise. The key to achieving and maintaining lower telecom expenses is to understand billing infrastructure and platforms, industry drivers, technical alternatives, and effective telecom procurement and processing techniques.
Many organizations pay far above-market prices, over-buy capacity, fail to detect billing errors, and use less-than-optimal technologies. Compounding the problem is the extreme conservatism of most internal telecommunications organizations, in other words —there is only modest reward for cost management, but extreme punishment for any service interruptions. Hence, the “if it ain’t broke, don’t fix it” mind set stays in place. Employees expect dial tone , data and video on demand virtually 100 percent of the time… and are intolerant of any changes that risk downtime. That creates poor purchasing and negotiation skills with those in charge of procuring telecom and technology services. But that’s not the only problem. So let’s explore why telecom and technology recurring costs are so difficult to manage:
The following is a general list of cost management issues faced by most organizations:
- Telecom bills are large (delivered in large boxes or multiple CDs), difficult to read, and often not electronic.
- Telecom vendors (local, long distance, etc.) do not have uniform formats for billing information.
- Correlating consumption (number of minutes used, etc.) to the bill is often difficult.
- Forecasting the organization’s future usage is difficult. Trunks and other services must often be ordered in advance, based on an estimate of future need.
- Internal expertise, especially for the newest available telecom offerings, may be lacking.
- Fear of change hampers some initiatives that, if implemented, could reduce expenses.
- Telecom regulations, while simpler than in the past, are still complex (certainly for the United States and increasingly for the rest of the world). For example, some organizations, such as airlines, are exempt from the U.S. Federal Excise Tax for telecommunications.
- Voice, data, and video integration continue. The billing infrastructure for these three media has traditionally been different (fixed months versus per minute, etc.). As some per-minute costs get merged into packet-based, flat- fee services, confusion over billing will undoubtedly surface.
- The telecommunications environment is dynamic. Technologies, carriers, offerings, and pricing changes are almost constant. A study done in 2010 may not apply in 2013.
It would be logical for anyone to become frustrated or lack confidence when it comes to managing the difficulty of the above list of items in any industry. And that is understandable, but does not leave a good taste in the mouths of anyone having to digest the “mismanaged costs and unnecessary expense” appearing to the P&L’s of organizations which suffer these similar issues.
But that does not mean it has to continue…
Telecommunications costs can be significantly reduced in virtually every organization. Although there are frequent changes in technology, markets, carrier issues, demand, and employee requirements seem to rise continually, there are external specialists and standard solution sets that can help. By gaining external assistance or understanding the tools — whether technical, procedural, negotiations, then— the organization can make an informed, best-fit decision.