How to Rein in Telecom Expenses Without Hindering Long-Term Growth

 
 
By Albert Subbloie  |  Posted 2010-01-14 Email Print this article Print
 
 
 
 
 
 
 

In periods of economic uncertainty, enterprises often re-evaluate telecom operating expenses in an attempt to streamline processes and expenditures. But to be positioned well for future economic growth, it's important to create a mix of short- and long-term cost-cutting strategies. Here, Knowledge Center contributor Albert Subbloie discusses ways that IT and telecom departments can satisfy current cost-cutting demands while preparing for long-term economic growth.

On average, one to two percent of an enterprise's total revenue is spent on communications. Surprisingly, these costs are among the top corporate expenses (after labor costs). Given today's volatile business environment, corporate IT and telecom departments are under greater scrutiny to ensure that their communications costs for both current and future business requirements are realistic, accurate and, most importantly, well-managed.

There are signs that there may be a light at the end of the economic tunnel. This has pushed businesses to begin thinking beyond the present need to cut communications costs and more towards the future of managing fixed and mobile communications for success in an improved economy. While quickly reducing costs in the short term was a logical and necessary step when the economy was at its worst, today it is important to take those tactics and combine them with a strategy that considers future goals.

In order to be well-positioned for current cost-cutting demands and potential economic growth, a blend of short-term and long-term cost-cutting strategies is important. To that end, there are many considerations that IT and telecom departments should consider now to be fully prepared to address both possibilities.

Negotiate for the long haul

Many carrier contracts (often spanning three years) were negotiated before the economic crisis reached its current intensity and scale. In light of lower enterprise revenues, reductions in corporate staffing and other expense-cutting efforts, companies may fall short of their contracted carrier usage volume commitments. These contract shortfalls may have significant cost implications that require immediate attention and management.

To address a potential shortfall liability, companies must first know whether they are likely to meet existing carrier commitments, as well as understand any payments that might be due the carrier as a result of a shortfall. Consideration should be given to a business downturn clause that a well-negotiated contract will include. This clause may mitigate or eliminate commitment volume and liability of shortfall costs.

Once commitment cost risks are assessed, it may be appropriate to renegotiate the agreement. It's always better to negotiate before the expiration of the current contract and the accumulation of any significant shortfall amount. Negotiating before contract expiration provides the highest probability of arranging a favorable outcome. Early negotiations might include an extension of the contract term or a carry-forward to a subsequent contract. In any case, acting early provides the widest range of acceptable options for your enterprise.

Carrier offerings change constantly, so enterprises should be aware of what options might be available before approaching the carrier for contract discussions necessitated by a business downturn. If not familiar with current trends in carrier negotiations, the enterprise may be well served to seek assistance from a qualified and experienced carrier negotiations service provider.




 
 
 
 
Albert Subbloie is founder, President and CEO of Tangoe. Albert is recognized as a telecommunications technology and Internet pioneer. Prior to Tangoe, Albert was among the first to develop and market voice and data solutions for integrated sales, marketing and customer service activities. Albert founded Information Management Associates (IMA) in 1984 and guided the company's growth to more than $50M in sales and 300 customers in seven offices worldwide. Albert is credited with one of the patents for reverse auction theory, the leading Internet paradigm in most shopping Websites today. Albert received a degree with honors in Economics from Trinity College. He can be reached at albertsubbloie@tangoe.com.
 
 
 
 
 
 
 

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