Telecom Spending in a Challenging Economy

Because of the ever changing landscape, telecommunication costs are and will always be an area of expense that is difficult to manage. Understanding rate structures, state and federal taxes, access charges and connection fees, not to mention staying on top of new technologies and programs, make the challenge more daunting. Add to this the fact that you are not presented with one bill clearly identifying your charges.

A common practice is to just spread the telecommunication cost across the budgets of different department budgets, or to just lump them all into an IT budget. However, understanding your network design, negotiating agreements with different providers and continually optimizing your voice and data networks will reduce your total telecommunication cost by 20% or more. Waste is the number one reason companies pay more than they should for telecommunication. During economic downturns, many companies have the immediate need to cut spending wherever they can. Plus, companies have to continually change strategies and direction to get more business, or to just sustain their current level of business. In this environment, managers are often asked to do more with less. As an example, shifts in marketing strategy to create a more robust web presence may in fact be more costly than necessary - if the network is not simultaneously optimized to accommodate the increase in network traffic. The net result of failing to understand this relationship between demand and capability can end up being bad for the bottom line. Smart planning and preparation – and longer-term thinking -- can make such a strategy more profitable.

Because most financial managers are not familiar with IT - and most IT managers do not know all of the nuances of most telecom providers pricing structures, and in most cases are more concerned with capacity and not cost – this area is full of needless spending. With today’s technology it is not necessary to sacrifice quality for cost. IT managers just cannot be expected to be efficiency experts in this area of the business.

You can have both. Optimize your current network correctly and you will save money.

Some things you can do to make sure you are not wasting money with an inefficient network:

Understand the components that make up your total telecom cost including local, long distance calling patterns.

Optimize the data networks connecting you to your customers and remote offices.

Analyze the internet bandwidth requirements of all the departments and whether or not the demand is dynamic or constant.

Identify all private lines and dedicated circuits to other locations.

?Evaluate your network every six to eight months.

Dedicating your resources properly will save you money, providing an acceptable ROI.

What is in Telecom Expenses?

There are many components that make up your total telephone and data bills. As many companies do not have all of these components, we will talk about the most common and what your company can look for to control costs.

Local Services – These are normally referred to as T-1 or PRI services. These circuits deliver your company’s incoming and outgoing local and long-distance services. There are two components to these local circuits that result in monthly charges to your company:

1. The monthly charge for the circuit. This charge varies by area, but it is an immediate area of savings for most clients. Your company can minimize these charges while still ensuring that the grade and reliability of service remains high. Aggressive comparison shopping, getting quotes for the lowest priced services available from all vendors/carriers that service your location, can help you find the most economical service.

2. The variable charges for both long-distance and in some cases – local calls. Once again, charges will vary by areas, but the long-distance charges are almost always an area of savings. Eliminating or reducing the minimum and variable charges that many carriers have built into their contracts can help.

Internet and/or Data Bandwidth. This charge is normally a fixed charge that remains constant every month. The monthly price for the data or Internet services is determined by the area where the circuit is installed and the speed or bandwidth capacity of the circuit. Many companies believe that only one carrier or company can provide services to their business location and, as a result of that belief, pay too much for the services they receive. Sourcing from multiple carriers, to cherry-pick the best-priced services, can result in meaningful savings, as pricing varies among carriers.

Remote Office Communications. Not every company has remote offices, but the ones that do are probably spending much more than they need to achieve great service. Having remote offices means that each will have the same set of local services and Internet bandwidth needs as a single office, but with an additional challenge – the need and expense to communicate between offices. Making this efficient, and finding the best ways to handle that communication to get some economies can be very cost-effective.

Data and MPLS Networks. Moving large amounts of data between locations is a major part of working with remote offices. A “data network” can be described as any method used to connect two or more locations for both data and voice. Companies that employ point-to-point data circuits are spending much more money than needed to accomplish tasks that can be done much more efficiently. Data networking is one of the major technological advancements in recent years, and a place where companies with data networks can do more with less expense.

While these challenges might sound like a lot, Future Proof Communications can help you find the savings you need. Ask us for a free, no-obligation consultation.