Perhaps you haven’t negotiated a new contract in say 20 years, or your business has grown by 2000% in the last 24 months, or we found a bunch of stuff that wasn’t on your old contract. Stuff like that. But a company that has been diligent about their services and needs? Not likely.

Consider that these statements are based on surveyed results; not actual data that can be checked with any kind of accuracy. These are self-reported numbers. Furthermore, they’re saying that this is an average, which means there are a sufficient number of cases that exceed 36%. What network provider could sustain such an attack on their already narrowing margins?

Also, contracts are not monolithic. In most cases they’re made up of multiple services with many cost elements that don’t lend themselves to a total 36% drop in overall spend. Take LD Voice: There are access costs, feature charges, multiple jurisdictions across individual states and countries, and of course switched and dedicated rates that carriers love to muddle things with on-net/off-net scenarios.

The issue here is evidence-based decision making, with emphasis on the evidence. The TEM/TLM industry should be moving more toward actual standards and methodology. Conveniently citing numbers without fact-checking what’s behind them is not good for business. Customers are rightfully suspicious of consultants because they’ve been burned so many times. Let’s stop that and restore confidence to the profession by using things like utilization modeling based on actual history so we can benchmark results fairly and accurately. Let’s separate the unusual from the usual to show where clean ups of billing issues is a discrete subset. True impacts using apples-apples comparisons is key to credibility. And finally, let’s make it a practice that a before and after study is part of the process so clients can conclusively validate what they’ve saved. If the bottom line number is closer to 17% for a new contract, with another 12% for clean ups, let’s report that and not hide it under the banner of contract savings. This should also add some longevity to engagements by educating customers on how sustain their savings.

Your comments and more important your results would be welcome to see where you’ve come out on renegotiating your telecom contract.

1)      Renegotiating Contracts – If you are looking for a quick easy way to save costs in the very short term, throw yourself at the mercy of the carriers and tell them you’d like to renegotiate.  If your goal is to save money right away, and don’t care about how you will be limited in the future this can work effectively, especially if you negotiate a huge savings into the signing bonus.  Beware though, you’re obviously not negotiating from a point of strength.

2)      Using WLAN for mobile devices – I was surprised at the report that 18% of responders for a previous study had said that they are using WLANs to reduce telecom costs.  That seems like a pretty vague statement.  It seems as though they are using their own WLAN to save on mobile costs.  First, very few devices even support this, as it reduces revenue for the carriers.  Second, are these people running a secondary WLAN with limited security?  Is anyone concerned about the security of the call/data being transferred?  Who handles the request when a ticket is entered user cannot use mobile phone across WLAN?  And lastly (for now), why are people using their mobile devices to make and receive calls while they are in the office?  This seems like a complete waste of effort if your goal is saving money in the short term.

3)      Hiring a Third-Party for Contract Negotiations – As a provider of this type of service, I really cannot offer an unbiased review.  I will say this though, Procurement Departments are typically underappreciated and underequipped.  Their main goal, as it should be, is to make sure that the procurement process is conducted legally and ethically.  They may be asked to purchase office equipment one week, energy another week, and office supplies another week.  Oh, and they love working with IT and Telecom (sarcasm).  A third-party should have industry specific skills that allow them to provide input into the negotiation process and allow your staff to focus on what they do best.  One thing to watch out for in a negotiator is someone who says their strength is in sticking it to the vendor.  Negotiations are a complex interaction, but anything that can be done should be able to be expressed in words.  There is no magic to it.  Also, they should be excellent written communicators.  You can stick it to the vendor all you want, but what matters in the end is what is agreed to in a contract.  If someone cannot write intelligently, it usually means that they will be unable to spot oversights in a contract.

4)      Process Improvement – Process is essential for long-term expense management and making the most of resources.  But it really isn’t a quick-fix, and seldom yields immediate returns.  The only exception to that is if you have good MACD processes in place you may be able to find disconnects that have not stopped billing.

5)      Optimization Tools – These can provide relatively quick returns, but only in small amounts.  This is more of a long-term, process improvement.

6)      Change the culture (executive visibility/centralized inventory and usage/departmental chargebacks) – This is really the biggest short and long term opportunity for savings.  When everyone in the organization becomes involved in savings, it will happen.  Most importantly, it will happen in more areas than telecom.

Ok. Here is my first issue: Numbers often obscure the greater truth. In Table 3 on page 10 there are some interesting stats, although I interpret their significance a bit differently. Despite the highlighted successes of the Best In Class categories, if you look at the overall numbers, people have been pretty lazy or ignorant or both in managing telecom costs. For example: only 46.5% of all respondents say there is a corporate strategy for long-term cost management. Really?

Only 63% of executives support reduction of enterprise telecom costs; that’s about buy in and focus. Of course telecom is such a small part of the overall budget, so why bother? Just remember this the next time you purchase a million dollar home with no concern about the decimal points on the interest rate. ‘7.5 vs 8.2%? Oh, that doesn’t seem like alot.’

How about the issue of cost cutting as potentially impacting performance? If your mindset is that you’d be trading away reliability while getting better pricing, well, you’re doing it wrong. Of course if you don’t do your homework on potential bidders then you have no one to blame but yourself.  In fact, your objective should be both lower cost and better performance through developing a productive vendor relationship and strong processes to ensure success.

The last issue can be found on page 5 in Figure 1 where companies would attempt to control consumption as a means to cut cost. If you limit your users in their use of technology, unless they are texting their votes into American Idol, you are looking at the wrong things. Here’s where Best In Class really shows it knows how to run things a bit better. The lesser advanced companies were 4 times as likely to look at this as a means to reduce cost. If you’re in this camp I suggest you rethink this. With policies in place for recommended use of company assets, you’d be only reducing productivity.

Again, what I’m taking issue with is not the report, but what’s in it and what people have reported as their behaviors. I welcome any comments on this.

Not to be a wet blanket, but doesn’t it always seem to work out that the savings is taken up by something else? Like, ‘well, we did add services’, or ‘I guess the difference must be in taxes and reg fees’.

Besides, even if you did get the savings this year, by the time next year rolls around, the new low is the new norm. It’s time for people to kick it up a notch and finally start to develop a process. Another little tidbit you’ll see in this report is pretty much how relaxed people are in their processes such as doing comprehensive inventories, audits, and bill reviews. Check out the ratio of respondents who did their homework versus those who didn’t – less than half had any kind of system for controlling costs or went to outside sources. The worst offenders seems to be those in the middle in terms of company size – telecom spenders between $2M-10M annually.

I’ll hold off on any other observations until I see the final report, which by the way was well done. I suggest you check it out on their website. I’ll post an update when it comes out and where to find it.