Telecom costs are notoriously difficult to manage – so difficult that, despite a growing number of telecom expense management solutions in the market, most enterprises don’t have the resources or expertise to adequately manage their spend and instead take an autopilot approach to telecom cost control. Across NPI’s client base of 500+ enterprises, our data indicates the majority of enterprises overspend by 30 percent or more on their existing, negotiated telecom investments.
Complexity equals profitability for carriers and providers. Indecipherable rate plans, various fees and surcharges, confusing business terms, complicated device upgrade policies…it’s intentionally designed to boost carrier revenue per customer. There are 1,001 ways to overspend on wireless and wireline services, but in this blog post we focus on some of the biggest offenders as well as a few not-so-obvious culprits.
Top Telecom Overspending Culprits and How to Avoid Them
Inconsistent wireline pricing across multiple locations and/or regions. For organizations with dozens (or hundreds) of locations, it’s easy to lose sight of wireline spend for basic wireline services like MPLS, broadband, Ethernet, etc. There are often sizeable discrepancies in regional costs, above-market-value pricing and other hidden costs such as the improper allocation of credits. Organizations need to closely inspect spend as well as conduct price benchmark analysis to ensure they are paying a fair price for wireline expenditures. In some instances, it may make sense to negotiate postalized rates to counter regional pricing inconsistencies.
Inability to align wireless usage with carrier/provider options. Aligning actual voice and data usage to carrier/provider plan options is no easy task. Will it be based on individual consumption or pooled? Will the user require features not covered in the primary plan? What about international usage requirements? The only way to match consumption with the correct subscriptions is to know the usage profile of each individual user – and this is not a one-time event. NPI recommends that enterprise customers with more than 5,000 subscribers review consumption and adjust subscriptions monthly.
Low visibility into wireless churn and rogue purchasing. At enterprise scale, visibility into telecom spend – particularly wireless – can be difficult to achieve. Who’s using which devices? Are (and how are) these devices being used? How are growth credits and waivers being tracked and applied? What about device subsidies? Is there rogue purchasing happening outside of corporate protocol? These questions are foundational to enterprise wireless demand management and telecom optimization, but the answers remain elusive to most companies. It’s important for companies to centralize wireless spend and enforce strict purchasing/cost management protocols that ensure usage and service selection are continuously (and accurately) aligned.
Inability to leverage customer value and volume. The most damaging result of low visibility into telecom usage and decentralized spend is the inability to negotiate effectively with carriers and providers. Customers that know the details of their consumption and costs are best positioned for effective contract negotiations – especially those that can demonstrate potential for growth.
Failure to secure best-in-class rates, discounts and incentives for wireless services. The wireless cost management landscape changes day by day. Most companies don’t have the internal resources, deep understanding of wireless carrier plans and street-pricing insight to confirm if they’re paying a fair price. The good news for customers is there is tremendous competition, and resultant downward price pressure. At the same time, it’s becoming more difficult to get carriers to provide device subsidies and discounts. To eliminate overspending, NPI advises companies to benchmark wireless spending as well as make sure they have the negotiation bench strength required to extract competitive incentives from carriers – including early termination fees and credits, device subsidies, minimum annual revenue commitments, etc.
Poor compliance monitoring. Regular auditing of telecom invoices is needed to identify and remediate billing errors – which are surprisingly common. Companies should not only review adherence to contractual pricing, but also adherence to discounts and incentives covered in their carrier/provider agreements. Note that these “telecom audits” should be an ongoing exercise – meaning costs need to be monitored in real time (“Are our invoices correct?”) as well as ad hoc based on customer-specific triggers (“Did we receive new activation credits for last quarter’s account growth?).