Controlling telecom costs

According to a new report from the Aberdeen Group, poorly managed telecom expenses cost the typical large company more than $8 million per year in overcharges and missed rebate and savings opportunities. That’s an astounding amount of money being left on the table.

“Telecom is a large and growing expense at most companies,” says Rick Saia, an Aberdeen analyst and author of the report. “With the constantly changing market for many telecommunications services, such as the growth of wireless devices and VoIP, enterprises need to get this spending under control.”

“The Telecom Cost Management Process Benchmark Report” finds that large companies with formal telecom cost management programs have more than four times as many invoices under proactive management than those without formal programs. And organizations that have a program to control telecom spending take 30% less time to source a contract.

Some businesses may make telecom spending the domain of finance or operations groups, though in many companies, IT has a hand. How good is your department at squeezing the most from telecom spending?

If there’s room for improvement, consider some of the following measures:

* Manage your service contracts: As detailed in a recent Management Strategies story on making the most of your IT budget, Habitat for Humanity saved $100,000 in the last year by improving contract management, particularly for phone services. Jim, the CIO, double checks his phone bills for accuracy and looks for ways to cut costs by collapsing lines and renegotiating rates.

* Look to VoIP: Another money-saving tip from that article is to roll out VoIP to capture savings. The Smithsonian Institute replaced a hodge podge of phone systems with IP PBXs and phones. By migrating, the organization has reduced the annual cost of its voice services by $2.3 million per year, reports CIO Dennis Shaw. And the savings are expected to rise to more than $3 million once the systems are fully rolled out.

* Let vendors fight for extra business: Telecom procurement and contract negotiations firm Telwares advises clients to set your overall contract commitment at 65% or less of your telecom expenses. This gives you flexibility and motivates your carrier to maintain its value to your business in the hopes of winning more of your traffic.