How To Identify If There Are Savings in Your Telecom Budget

This is a guide for decision makers in charge of telecom budgets. We hope to answer the question:

How can you identify if there are significant savings in your telecom budget? (Or other spending on recurring services, e.g. cloud?)

We find that most companies with annual budgets of $100,000 or more can save around 50% of their telecom spending on landline voice and data and 35% on wireless.

The goal of the article is that you'll be able to identify if your organization is leaving significant savings on the table.

Summary:

The quick summary is - ask the following questions. A detailed explanation is below this summary:

1. Is spending significant?
2. Is spending probably complex - do we have multiple bills, vendors, locations, and services?
3. Do we have not have a current inventory of our services?

If you answered yes to all of the above, significant savings of 20 to 60% must be there. (See explanation below.)

If you do have an inventory ask the following questions of your team in charge of the inventory. If they answer "No" to any of them there are probably significant savings:

1. Is the inventory up to date?
2. Does it show what the current business need is for every single service?
3. Do we know if each service is currently billed correctly and according to the contract?
4. Have we recently optimized each service to make sure we both right sized for utilization and our business needs, and that we're getting the best rate under our current contract or under a new contract?
5. Can we predict the total cost of each our bills by looking at the inventory? Or do the bills diverge significantly?

Below is a detailed explanation of why there are savings and what you can do about it. (Please feel free to reach out to me for help capturing these savings.)

Detailed Explanation:

Is spending significant?

The first question to ask is:

Is my telecom spending significant? What is my total spending on landline voice and data and wireless across all vendors?

Is the spending $10,000, $100,000, $10,000,000?

Would saving 10% to 50% of the spending be a win and be significant? (Especially if someone else is tasked with doing the work.)

If the answer is "No, even 50% savings aren't significant for me and would be low priority," then of course we recommend dropping the matter.

If the answer is "Yes, saving 10 - 50% of our budget would be win, especially if the work is delegated" then we recommend asking if the spending is complex and if you have a current inventory.

Is spending probably complex - do we have multiple bills, vendors, locations, and services?

If your organization has one bill with just a couple telecom services we've found there are often not significant savings. However we've found that multi-location organizations with over 100 employees typically have complex spends with multiple bills, multiple vendors, and multiple of services at each location. In a $100,000 annual telecom budget there is usually so much complexity we find an organization's management can't keep track of everything in their head and some things slip through the cracks. (E.g. lines come off contract and go up in price, unused lines aren't discovered and disconnected, billing errors aren't recognized, etc.)

If there is a lot of complexity with multiple bills, vendors, locations, and services, we recommend looking into whether you have an inventory.

Do we have not have inventory of our services?

If you do not have an inventory of your services, and you have more than a couple services this is a big red flag. We've found that most organizations don't have a current inventory or even an out of date inventory, and they therefore have no way to identify all of the cost savings opportunities. Without an inventory of all services to manage, cost savings slip through the cracks, and all services are not reviewed for cost savings.

For more details on inventories and the importance of visibility see Optimizing Spending on Services especially the section on visibility, and also the section on Building the Inventory in this article.

With a current inventory of your services you can have someone (e.g. your subordinate or the experts at Berlin Pacific) easily review the inventory to determine if there are cost savings opportunities.

There are three types of cost savings:

1. Billing errors. (Services you shouldn't be charged for, or are charged at the wrong rate.)
2. Unused services or underutilized services. (These can be removed or right-sized once identified.)
3. Better rates. (Over market rates can also be identified and negotiated.)

Most of the time 50% of the budget can be saved by identifying these, and even 20-30% can be a significant win.

Without an inventory it's impossible in practice to methodically review every service across every bill, vendor, and location and make sure the costs of each service are aligned with your contracts, business needs, and market rates available to you.

If you don't have an inventory of your complex significant telecom spend you almost certainly have significant cost savings opportunities.

We recommend working with an organization like Berlin Pacific or implementing The 53 Critical Success Factors to Minimize Costs of Vendor Services. (Feel free to contact me. The book Principles of Telecom Expense Management also gives a detailed step by step guide.)

We do have an inventory

If you do have an inventory ask the following questions of your team in charge of the inventory. If they answer "No" to any of them there are probably significant savings:

1. Is the inventory up to date?
2. Does it show what the current business need is for every single service?
3. How do we know each service is currently billed correctly and according to the contract?
4. Have we recently optimized each service to make sure we both right sized for utilization and our business needs and we're getting the best rate under our current contract or under a new contract?
5. Can we predict the total cost of each our bills by looking at the inventory? Or do the bills diverge significantly?

Here is an explanation of why each question is important.

1. Is the inventory up to date?

If your inventory isn't up to date it may not match with reality. Over time there are moves, adds, changes, and disconnects to individual line items on your bills. The inventory needs to reflect an awareness of these changes. If it isn't you'll only be able to manage the costs that existed when the inventory was last updated. Services which aren't in the inventory may be forgotten about.

2. Does it show what the current business need is for every single service?

If your inventory shows that all the services are needed everyone will assume they're needed. In reality some of the services may no longer be utilized or are underutilized, and may even be at locations that your organization vacated recently.

3. How do we know each service is currently billed correctly and according to the contract?

Unfortunately billing errors still creep in to bills. Ports which cost $400 on the contract can cost $2,000 on the bill. The inventory should include the correct and latest contractual rate for the service, and all the services on all the bills should be compared with the inventory to confirm the billed rate is correct.

4. Have we recently optimized each service to make sure we both right sized for utilization and our business needs, and we're getting the best rate under our current contract or under a new contract?

Over time business needs change. Services which experienced a lot of utilization stop being used. Think of all the fax lines companies once had. Lines used for back up and redundancy are disconnected from the network. Locations are shed. Lines are upgraded and the old ones are not removed.

If all lines aren't consistently reviewed to see how they're utilized and how they serve a current business need, unused and underutilized lines won't be detected and your vendors will continue to bill for them. One client was paying for data circuits for an entire data center that they had vacated over a year ago.

5. Can we predict the total cost of each of our bills by looking at the inventory? Or do the bills diverge significantly?

If someone can't easily predict what your costs should look like by looking at your inventory, something isn't being tracked in the inventory. Even if costs are usage based, one should be able to predict based on usage what total costs will look like. What isn't being tracked will be the cause of the discrepancy. What isn't being tracked isn't being managed, and could be a billing error, unused services, or a something off contract that can be re-negotiated for big savings.

What to do about it

If you have identified that there are probably significant savings in your telecom budget or other budgets for recurring services there are a few things you can do about it.

If your team has the time and expertise, you can have your team implement the guidelines in The 53 Critical Success Factors to Minimize Costs of Vendor Services. (The book Principles of Telecom Expense Management also gives a detailed step by step guide that can be applied to things like cloud services and of course telecom costs.) We recommend you bring in outside experts similar to myself to advise on whether you're getting the best pricing. (A telecom industry insider will have the insider knowledge to tell your team about additional ways to get great deals.)

If your team is busy running the business or you want a second set of eyes we recommend working with an organization like Berlin Pacific. Feel free to contact me directly on linkedin. We've helped clients with and without inventories and while they're under contract or off contract. We find most organizations we work with don't have the time to exhaustively detect all the cost savings opportunities that are out there in complex vendor spends like telecom. We look forward to hearing from you with any questions.