Six Ways To Reduce Your Corporate Telecom Expenses

As IT budgets come under increased pressure, addressing wasteful telecommunications spending is more important than ever. This two-part article will outline six cost reduction opportunities that an enterprise can quickly explore without compromising network integrity or requiring in-depth negotiation with its telecom providers. Savings achieved by identifying and executing on these types of opportunities can yield a minimum ten percent reduction in telecom expenses. Let's dive into the first fi

December 15, 2009

6 Min Read
Network Computing logo

As IT budgets come under increased pressure, addressing wasteful telecommunications spending is more important than ever.  This two-part article will outline six cost reduction opportunities that an enterprise can quickly explore without compromising network integrity or requiring in-depth negotiation with its telecom providers. Savings achieved by identifying and executing on these types of opportunities can yield a minimum ten percent reduction in telecom expenses. Let's dive into the first five cost-saving opportunities.

1. Identify and eliminate casual billing
Casual Billing occurs when the enterprise, despite having a negotiated long distance (LD) contract, is charged at tariff rates for voice usage. It arises at switched access locations when voice usage is not assigned to the correct Primary Interexchange Carrier (PIC) or, less frequently, the correct billing account at that LD provider. Although identifying casual billing requires local invoice review, it is generally straightforward to quickly find the high and characteristic rate elements (e.g., $1.39/min for domestic LD service, $8.04 for international service). To resolve the issue, contact both the LEC and your LD provider, identify the relevant working telephone number or circuit, and request the PIC be changed to your preferred LD provider and enterprise master account.

2. Watch out for fraudulent voice usage
Routine queries performed on LD provider call detail records often yield unexpected call volumes and source/destination patterns.  We commonly find significant off-hours call volume to destination countries and cities for which there is no apparent business need. Although this can indicate serious voice network security issues, the cause is generally more mundane: out-of-hours staff using your phones for personal calls. The situation can be controlled immediately by limiting out-of-hours international access through blocking country codes on the outbound trunks or requiring user pass codes to access these destinations.  A root cause analysis should also be conducted to ensure that the issue is not symptomatic of a broader security problem.

3. Make sure negotiated rates apply to all your voice usage
Given the sheer number of potential rate elements, particularly for international service, telecom negotiations generally focus on the rates that comprise the majority of spend, with the remainder being covered under a term offering "XX percent off" service guide rates.  The problem is that service guide rates are so far above market rates that even substantial discounts still leave you open to outrageous charges. This isn't a significant issue as long as such service volume remains small, but it can become a problem if and when calling habits change. To address this, periodically review your voice usage and identify calling categories with volume at these "XX percent off" rates.  From there, it should be a quick conversation with your account representative to add these rate elements to your contract. The fact that a home or small business subscriber can obtain rates from the provider at a fraction of the so-called "discount" rates generally smoothes the negotiation process. For example, a client acquired a facility in the Dominican Republic that drove several thousand minutes of new international voice usage. The provider's "discount" rates were an average of $1.60 per minute, whereas the same provider's published small business rate was less than $0.25 per minute.  The situation was quickly resolved by the account team, resulting in savings of over $5,000 per month.

PH_Graphic.jpg4. Be aware of international wireless termination surcharges
A specific example of the above "XX percent off" issue involves international mobile termination. Because of the different termination rates for mobile, there are effectively four outbound rate elements to negotiate for each country: dedicated access egress to landline termination, dedicated-to-wireless, switched-to-landline and switched-to-wireless. When contract rate elements are placed in a "nx4" matrix of countries (rows) and rate elements (columns) (see chart, left), many enterprise contracts resemble Swiss cheese, with the holes principally found in the two wireless termination columns. Dramatic wireless subscriber growth across the globe means that the usage falling into the "XX percent off" category is steadily increasing for most enterprises.  Again, work with your account representative to close these holes.  As a rule of thumb, mobile termination should be no more than $0.15 per minute greater than the equivalent landline rate.5. Consolidate and tackle Plain Old Telephone Service (POTS)
There is no doubt that controlling expenses for the small local service (e.g., Centrex, POTS, 1MB, ISDN BRI) is a tedious challenge. Each office location will likely have a separate multi-page invoice, provided by one of the ILEC or CLEC providers, each with their own arcane service codes and billing practices. Individually, each invoice is small, but in the aggregate these services might total half a million dollars in annual spending. Our experience suggests much of that spending is for unused or unnecessary features, but the challenge has always been consolidating the data into an electronic format that enables bulk analysis, filtering and reporting. Local service aggregators, e.g., Ernest Communications, Granite Telecommunications, that buy wholesale local service from diverse local providers and resell service on a nationwide basis to large enterprises, provide this service. The consolidated offering comes with aggregated billing and reporting that enables you to run queries on the configuration of all POTS lines, find the unnecessary services and contact a single point of contact to cancel them, irrespective of the underlying local facilities provider.

6. Right size your long distance voice access
Long distance (LD) voice service can be delivered via dedicated or switched access. The former provides a reduced rate per minute in exchange for a fixed monthly charge, while the latter has a higher per-minute cost but with little or no fixed monthly fee. The breakeven point is dependent on the negotiated rates, but is generally around 12,000 - 15,000 minutes per month. If you have dedicated access at locations with volumes below this amount, then changing to a switched configuration will likely generate savings, and vice versa.  For dedicated access locations with higher volumes, periodically compare demand with available trunk capacity. E-mail, IM and cell phones continue to erode business call volumes, leading to excess trunking. Most providers have automated reporting tools that directly provide trunking recommendations or enable you to easily conduct Erlang analyses and identify over-trunked sites. As an alternate to such tools, call detail records can be used to calculate the maximum number of simultaneous calls occurring each month.  A recent comparison of actual voice usage versus LD trunk capacity for a 100-site voice network yielded a total of 73 LD PRIs that could be disconnected, driving savings in excess of $200,000 per year.

A targeted review of the telecom environment may not achieve the dramatic savings associated with a wholesale network redesign or a competitive procurement. However, taking the time to perform an end-to-end review of your telecom environment will almost always uncover savings opportunities that can be implemented simply, safely and provide an immediate return on investment. Next week, we will discuss five additional cost-cutting opportunities related to the WAN.

Dr. Jonathan Shaw is a principal at Pace Harmon.  He holds a Ph.D. in microwave spectroscopy and has over 12 years of experience in technology and telecommunications consulting in the U.S., Europe and Asia.  Dr. Shaw's practice areas include voice and data network optimization and sourcing, cellular technologies, and IT operations outsourcing.   He can be reached at [email protected].

SUBSCRIBE TO OUR NEWSLETTER
Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like


More Insights