A few thoughts on trimming your telco bill

Are you paying less for telecom than you were in 1994? Probably not. How to cope? If you’re planning a contract negotiation this year, here are four issues to consider.

Are you paying less for telecom than you were in 1994? Probably not – even though throughout the ’90s the cost of voice and data services dropped an average of 20% year over year.

What happened? According to my firm’s most recent research, prices might be down, but the average corporation’s bandwidth consumption is increasing by up to 50% annually. Moreover, that metric just measures basic voice and data services; it doesn’t include the increased number of service types that the average corporation procures.

How to cope? If you’re planning a contract negotiation this year, here are four issues to consider.

1. Cellular consolidation. Five or six years ago, many organizations moved to a stipend-based approach for cellular services. In other words, the company reimbursed each employee a flat-rate amount, and employees selected and paid for their own cellular services.

The reasons were number retention, simplicity and coverage. Employees didn’t like having to change cell phone numbers, companies didn’t want to be in the business of administering multiple cellular contracts, and geographic variations in cellular coverage were great enough that using multiple service providers was the only way to ensure optimum coverage.

The catch is at $80 to $100 per employee per month, cellular services become pretty expensive ($1.2 million for a 1,000-employee company). Moreover, because this cost is buried within a budget’s “travel and entertainment” line, it’s effectively hidden.

Enough factors have changed that corporations should take a closer look at consolidating cellular contracts. With local number portability, employees have the option of maintaining their numbers, even when switching carriers. Coverage has improved, and cellular carriers are offering attractive discounts (20% to 50%) to attract and win corporate business. Cutting $600,000 out of your cellular contract is worth a closer look.

2. PDA/BlackBerry services. Many companies have watched their use of wireless PDAs creep up over the past few years. It’s time to get your arms around the cost and investigate alternative options. Note that devices such as Treos – which combine cellular and data services – might help reduce costs for some users.

3. Converged WAN services. If your frame relay network is more than 3 years old and you use ISDN for video, you might want to look at converging your voice, data and video networks onto Multi-protocol Label Switching (MPLS)-based services. MPLS-based products reduce the cost of pure data services by approximately 10% – not enough to justify a migration from frame to MPLS, for instance.

However, by combining voice and video – and thereby eliminating redundant services – companies have found cost savings of 25% and more.

4. IP telephony. No, it won’t save a lot in WAN costs. But you’re probably spending more than you think administering moves, adds and changes for users (typically $100 per employee, per year, or $50,000 for a 5,000-person company). If IP telephony is on your future agenda, it’s worth planning a test-drive this year. IT executives are telling me they’re hearing toll-quality voice and enjoying management cost savings.

The upshot is, it’s time to think out of the box when it comes to reducing telecom services.