Case Studies> Reducing Your Telecommunications Costs

Outlined below are some common mistakes, recommendations methods for controlling costs, and then lowering costs. Organizations seeking to reduce Telecommunications costs would do well to consider not only administrative issues, like contracts, but also technical issues, like call routing.

Why are Costs "Out of Control"?

It would be convenient to place blame on Telecom Service Providers, but the customer often plays a significant role as well.

Service Providers

• Face changing regulations
• May be using multiple billing systems
• Are under pressure to compete by offering the best rates possible, rates that they may not be able deliver (unintentionally or not)
• Hire account representatives whose primary role is to sell, not understand billing
• Do a poor job tracking orders to completion
• Make it difficult to clarify problems, by providing different phone numbers for different types of questions, transferring from one department to another. Most customers will just give up

Customers

• Do not have a full understanding of services they are ordering, or of the complete cost of these services
• Do not like dealing with Telecom bills
• Assign Telecom billing to one person or group of people - Information Technology (who usually prefer to concentrate on solving the technical problems they've been trained for), Payment Processing (who don't know the difference between a T1 and a POTS line, and have not been trained to deal with technical aspects of Telecom expenses), or Administrative Assistants (who get work piled on them from every direction, and cannot reasonably be expected to keep things in order)
• Do a poor job of tracking orders to completion
• Pay for services that are outdated and unnecessary
• Do a poor job of keeping bills to a minimum

How to Improve Control

Before lowering costs, it is important to have a significant level of control. Without proper control, you will be unable to verify your savings, and will be unable to maintain favorable pricing on new services.

1. Require periodic conference calls with your account teams - if you have not been assigned an account team, request one. Meet with them often to make sure issues are discussed and resolved quickly. Conference calls once a month are appropriate, depending upon the number of orders placed in a month, face-to-face meeting every six to twelve months is recommended. If you are negotiating a contract, make sure this is included in the contract.
2. Track all orders to completion - require your staff to use a defined method of tracking orders. A software system that automatically generates the order is recommended. Inform carriers that your company will not be responsible for new charges not contained in the ordering system.
3. Minimize bills - ask your carrier to organize invoices into summary accounts. This reduces the likelihood of new bills arriving for unidentified services. This also decreases the total cost of handling the bill, and the confusion that results when a carrier changes the account number.
4. Create a Telecom Billing Team - it will probably be necessary to have IT and accounting fields represented to address the needed skills. This team should not be created just to gain control, it should be used to maintain and monitor control as well.
5. Closely examine all service contracts - one of the largest PBX manufacturers in the world gives away a year of free maintenance when you purchase their systems, and then send an invoice for another year of maintenance, even though it was never ordered . It is also common for vendors to double bill, charging for maintenance twice on the same equipment.
6. Consider outsourcing - there are many vendors who specialize in providing this service. You may find it is less expensive to have them handle these needs on your behalf than to try to tackle them on your own.
7. Endure - dealing with these bills is not fun, and requiring staff to follow a series of steps to complete an order, as opposed to making a phone call or sending an email, will meet with resistance. Remember, the money you save your organization may translate into saved jobs, or even a raise for you!

Lowering Costs

With clearly defined processes in place you can begin to make changes that will save money - and you will be able to identify the savings clearly. It is assumed that

1. Maintain a good rapport with your account teams, and with their competitors - while you may be dissatisfied with your service, it is best to keep away from confrontation. Always discuss problems over the phone or in person. Email may be misinterpreted. If necessary send a letter outlining your issue, the extra effort will impress the importance in resolving the problem. Once or twice a year it is useful to meet with vendors you are not currently using. This will keep you aware of changes in their service, and will keep your account team on their toes (like any other business, Telecom Service Provider salespeople know each other, and may mention their visits to one another). This is especially important when negotiating a contract. Representatives may develop the tendency to become confrontational during negotiating. If you have hired a consultant to represent you, be careful, they may have a poor relationship with carriers which will affect the pricing they are able to
2. If you are in the middle of a contract, do not assume "you're stuck" - closely examine your contract. You may be significantly above your commitment level, or you may have an escape clause. Even if there is no way of escaping your current contract, the incumbent carrier may be willing to lower rates in exchange for a new contract with longer terms.
3. If you are not under contract, don't assume you should be - small and medium businesses may not be presented with the opportunity to contract services. Even enterprises may regret signing a binding contract. The rate your organization spent hours trying to attain may be higher than the rates offered to residential customers a year later. This is especially true when negotiating long distance only, cellular, and PBX maintenance contracts (time and materials may be a more cost effective arrangement).
4. If you are advised to sign a contract because prices are likely to go up, don't (and get a new advisor) - many reason that long distance rates are already so low, they cannot get any lower. Wrong. With VoIP services already being offered, long distance rates will continue to fall. VoIP will challenge the concept of long distance service altogether. Rates will also continue to drop on data services, cellular, and local telephone services.
5. Include pricing for services you currently do not use on any contract - don't make any international calls today? You might have a need to tomorrow. With no established rate, you will probably be charged tariff - which is the maximum amount you can be charged. Please note, this doesn't mean you will be charged the best rate for services you do not currently use, but you will have a clearly established rate.
6. Monitor Service Level Agreements (SLAs) - almost every provider has SLAs which specify uptime and performance. The SLA will usually specify a discount if those service levels are not met. By monitoring and enforcing these, organizations may save money and increase uptime.
7. Identify the need for the services you have - don't assume that because applications are running slow, you need to add bandwidth (and spend money). Have you conducted a traffic study recently to determine the number of talk paths required? Most organizations are wasting at least 10% of their spend on services they don't use - ever . If services are unnecessary, eliminate them.
8. Review your Data Network configuration and equipment - new offerings like MPLS or data compression equipment may allow a reduction to the amount of bandwidth needed.
9. Use Least Cost Routing - Least Cost Routing, which is made easier with IP Telephony, can intelligently route long distance to minimize charges, and can create call hubs, eliminating the need for additional lines.
10. Use dedicated long distance lines for long distance calling where possible, evaluate for local calls - it is possible to obtain high capacity, T1, circuits directly from your long distance provider. Calls made on these circuits are always considered long distance (even if they are a local call). The circuit usually costs much less than a T1 from your local provider, and rates are approximately a third as much as switched long distance. An additional consideration is local calls are not free (there usually is a flat connection fee), and you must pay for the lines as well. It may be less expensive to route a call as a long distance call, especially when dedicated long distance and least cost routing is used, than to route the call as a local call.
11. Consider outsourcing - Least Cost Routing, network configurations, data compression, traffic studies, and other items listed above can be quite complex. Look for a consultant who is capable of reviewing the financial and technical aspects of network management, contract negotiations, and cost control.

Summary

There are many opportunities to lower Telecommunications costs. Do not neglect the residual costs created by a lack of controlled procedures and processes. Using a consultant can be especially attractive, since their charges are usually a percentage of savings achieved. Even when costs are well managed, savings of 10% can usually be easily achieved.