To Achieve Telecom Cost Reduction, Inspect Usage Charges in These Areas

By Matt West

Director of Telecommunication Services, NPI

February 25, 2021

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Reprioritization of IT spend has many business leaders setting new objectives for telecom cost reduction. That’s understandable given the proliferation of telecom overspend in the enterprise. NPI’s experience indicates a significant majority of business pay too much for wireless, wireline and network spend. For most, the savings opportunity is material – seven figures in some instances.

If telecom cost-cutting is one of your priorities for 2021, there are a number of ways to make fast, meaningful reductions to spend without disrupting your operations (we had enough of that in 2020). One of the quickest paths to savings is reviewing usage charges across your telecom/network ecosystem. Below are three examples.

Review and Rebalance Cellular Data Usage

The easiest way to look for cellular data usage is to download a PDF copy of your AT&T Mobility, Sprint, T-Mobile, or Verizon Wireless bill and review. Don't worry if the bill is 5,000+ pages – you only need to look at the first few summary pages.

Each bill includes the same basic charges, which have varying degrees of cost flexibility and savings potential:

  • Monthly Charges: This the fixed monthly cost of subscribing to a plan (plan and feature costs) and is directly tied to whether or not you’re paying best-in-class rates and receiving competitive discounts. Spoiler alert – most companies are not and need to optimize their carrier agreements. But that’s another blog post. Let’s not worry about this for now.
  • Surcharges and Fees: These are typically set in stone and can't be changed.
  • Government Taxes and Fees: Can't change these either.
  • Usage Charges or Activity Since Last Bill: BINGO! This is where you want to look. This cost comes from one of a few categories. It’s either equipment purchases (buying a new phone), roaming charges (International), or excess usage (voice minutes, messaging or data). All current plans have unlimited voice and messaging, so it’s most likely due to using more data than is in the data pool. This can be remedied by re-balancing the data pool with a different subscription mix.

Evaluate Whether You Need to Renegotiate Web Acceleration Costs Based on Usage

Web acceleration services, like those provided by Akamai, often include a usage-based component. In Akamai’s case, the vendor’s monthly recurring cost (fixed monthly fee) includes a certain amount of usage. If web traffic exceeds the included usage, Akamai will charge for the excess data – and you can expect those charges to be hefty.

For that reason, be sure to examine invoices carefully. If you are being charged for substantial usage, it is time to renegotiate your agreement regardless of where you are in the term timing.

While we’re on the topic of contract term, most vendors offering web acceleration services will pressure you to commit to a longer contract term in exchange for more favorable pricing. Sometimes the tradeoff is worth it – but the decision requires careful evaluation of current- and future-state technical and business requirements.

Web and Video Conferencing – Why a Monthly Invoice Indicates Probable Overspend

The pandemic brought a surge in demand and spend on online meeting technology and services (WebEx, Teams, BlueJeans, etc.) – and the uptick may be here to stay. An estimated 64 percent of businesses surveyed enabled a remote workforce in 2020 and more than half of all companies plan to retain flexible work policies even after the pandemic ends. According to Nemertes Research, 52 percent of companies plan to increase spending on video meeting through 2021.

Typically, a vendor’s web/video conferencing license includes all usage as long as usage is via computer (VoIP). In other cases, the license may include a certain amount of standard PSTN (toll or toll-free voice calls). Again, this is easily differentiated on the invoice between monthly recurring charges (fixed per license) and usage charges. A lot of these services are pre-paid for the year, so if you are getting a monthly invoice, it probably means you are being charged for usage. If so, it is time to review your options to identify telecom cost reduction opportunities that better align with your current demand.

Identifying the Low-Hanging Fruit of Telecom Cost Reduction

Unwieldy usage charges are one of the biggest culprits of telecom overspending yet one of the easiest targets to identify and eliminate. If you’re looking to eliminate toxic spend in the telecom budget, inspecting usage charges and reviewing options for contract or rate/discount optimization should be a top priority. Not only is a fast path to savings, the savings generated can be substantial and either drop back to your bottom line or repurposed to fund business-critical transformation projects.

If you have questions about telecom cost reduction or want to understand the savings potential for your business, NPI can help.