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

By Albert Subbloie  |  Posted 2010-01-14

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

Take Control of Mobile Management

Take control of mobile management

Mobile devices are an invaluable component of any company's long and short-term plan to optimize worker productivity and create an effective and cost-efficient mobile work force. Mobile device usage has grown more significantly than any other communications category within the enterprise and it's predicted to continue to grow at record rates. If not properly managed, however, mobile devices can create excessive costs and increased risks of data and device loss.

To offset these risks, it's imperative that organizations implement mobile management solutions that can manage and track usage, monitor and control applications, enable user self-provisioning, device wipe and kill-just to name a few. Device management solutions also enable rate plan optimization and pooling. They also allow you to monitor usage and enforce mobile policies, which are two areas that can dramatically lower mobile costs.

Often overlooked, device management solutions can greatly reduce help desk calls (and the associated productivity costs) and increase user uptime. Put simply, strong mobile device management solutions optimize cost management, improve operational effectiveness, and mitigate mobile data and application risks in both shrinking and expanding economies.

Understand your inventory

Surprisingly, most organizations do not have an accurate record of their communications assets (that is, ports, trunks, T-1s, handsets, air cards, modem lines and numbers). Without an accurate inventory, the ability to effectively manage the enterprise's communications environment and its associated costs is questionable. With inaccurate inventories, some companies err on the side of caution and incur communications expenses greater than necessary.

Others maintain inventory and service levels well below what is adequate, which negatively impacts communications effectiveness and organizational productivity. In either case, these conditions can have a significant impact on costs. More importantly, inaccurate inventories can have a profound effect upon an organization's ability to manage business downturn and/or growth cycles.

Questions and considerations

While it may seem unnecessary, organizations should routinely ask if they are managing the appropriate level of fixed and mobile communications assets. Consideration should be directed toward carrier agreements. Are they protective of your current business environment and scalable for potential future requirements? Businesses should carefully consider their ability to scale back or ramp up quickly, along with the ability to re-provision and realign voice and data communications resources based on current business activity.

Clearly, the challenges of reining in communication costs are many, and these are only a few of the important considerations regarding an enterprise's communications contracts, inventories, mobile policies and practices. In light of the dynamic business environment, organizations who take a fresh look at these issues will be better prepared for the challenges of today and the uncertainty of tomorrow.

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

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