In the telecom industry you hear a lot about cost savings. Everyone out there, whether it be telecom carriers, vendors, consultants, Telecom Expense Management firms, mobility management firms, telecom agents, or other providers are all competing for the decision maker’s time to ‘reduce costs’, ‘lower costs’ and ‘reduce expenses’. While reducing costs is a common term, lowering Telecom Total Cost of Ownership (TCO) can become a more powerful phrase when speaking in terms of Telecom Outsourcing, or Total Cost of Telecom (TCT).
Currently, the telecom industry is full of providers talking about ‘cost savings’; take the following claim for example:
“We will perform an audit and reduce your costs.” Or “You will realize x percentage of cost savings on a monthly or annual basis for your telecom services.”
Considering the financial impact of so many variables of telecom service, maintenance, network administrative, equipment, and network management costs, It can be hard to distinguish what they really mean and what the result will ultimately be in the end.
The term “cost savings” is usually a one time event and for a specific telecom service: doing an audit of your carrier contracts for mobility and wireline services, obtaining service credits from the carriers, optimizing rates to be more market competitive, or issuing credits for services no longer used or needed. Cost savings for mobility includes negotiating better rate plans for mobility, optimization of data plans, security, policies, and applications.
When we talk about outsourcing telecom management, just as you would to outsource any other business function (IT, supply chain, accounting, HR, or payroll, etc), the term “lowering cost of telecom ownership” is a more viable outcome. Outsourcing telecom management involves lowering your total cost of ownership, which relates to lowering the cost of managing your telecom services.
The challenge companies have in managing telecom is that they require the people, processes, technology, and time to manage services. For example, processes and people may include implementing a support desk or help desk to adequately support mobility users, or for order and incident management. Technology includes having a platform and controls in place to manage the financial and inventory aspect of telecom. Reporting and metrics also fit into this category.
What does Total Cost of Telecom mean to you as an executive? Whether you are a CIO, CFO, or other executive, you may have an idea of what you spend per month/annually for telecom services related to:
- Wireline services: local voice, internet, WAN, Long distance, disaster recovery/business continuity, hosting, cloud computing, SIP, VoIP, etc.
- Mobility: individual rate plans, corporate vs individual liability, device management, applications and data plans, security, texting, etc.
AOTMP (www.aotmp.com) research indicates the top reasons why enterprises use an outside supplier for telecom management activities include:
- 73% lack tools and technology
- 41% lack internal resources
- 38% lack efficient processes & procedures
- 36% lack of internal expertise
- 20% more cost effective to outsource
The difference between lowering the “total cost of telecom” and providing “cost savings” is simple: if you manage telecom services in-house, there are costs associated with managing these services. For example, here are a few in-house costs associated with managing telecom:
- FTE labor: Full time employees-salaries, bonuses, benefits, travel expenses.
- PTE labor: Part time employees/consultants-hourly rates, weekly expenses, travel expenses, bonuses, any other benefits.
- Time: How much time per week or per month do you spend managing telecom? What does this mean? How many hours do you spend on the phone providing help desk support for end users (mobility), support desk to manage mobility, help desk to address and issue trouble tickets when a location’s service is down? Mobility continues to be a growing expense with the amount of remote users. How many tickets do you support each month for mobility? How many hours per month do you provide support for mobility users? Applications? Security? Creating policies?
- Resources: How much do you spend per month, or annually, on technology and tools to manage telecom (ie portals, expense management software, help desk software, customer service tracking software)? This also includes upfront costs and time to implement, as well as monthly user licenses
- Downtime: If you have poor service, how much downtime is your business experiencing and how much time does it take to respond to outages and resume service? During these down times, how much is it costing your business per hour, per month when you experience service outages? How many service outages have you had in the past month?
- Equipment & Maintenance: How much are you paying for user fees and license fees for voice services, PBX, and phone system equipment? Other licenses?
- Network monitoring and Maintenance: Monthly fees for monitoring and maintaining the network, staff to maintain it.
- Administrative costs: Software and portals for invoice processing (avg processing cost is $70 per invoice), asset management, expense management technology, etc
These are just a few examples related to some areas to lower the cost of ownership of managing telecom. Whether you manage telecom internally, or use a provider for telecom management, it is critical to your business to fully understand all of the costs involved regarding time, people, processes, and technology.
This may be a matter of terminology or small detail overall, but it is important to understand the concept of total cost of telecom when choosing a supplier of telecom management services.
What is your Total Cost of Telecom and how do you Measure Up?