New Zealand Engineering 1998 November

New Zealand Engineering

The cost of telecommunications is second only to salaries in the operating budget of many companies, yet this expenditure often doesn't receive the level of management attention it deserves. In fact now is a time of unprecedented change in telecommunications development providing business opportunities to reduce costs, exploit new technologies, and do things differently and better.It is a time when business needs to focus on telecommunications systems, and to act for today and plan for tomorrow.

Efficient use of the telecommunications operating budget, or capital expenditure on new equipment and systems, can have significant effects on a company's profitability. Poorly managed telecommunications systems can waste time, incur unnecessary carrier charges, and tie up staff unproductively.

Significant cost savings of typically 10 percent and 40 percent are likely to be possible in most New Zealand companies - especially if they have not reviewed their telecommunications supplier contracts and systems over the past 12 to 18 months.

The competitive telecommunications environment in New Zealand has some way to go - to reach local services and associated enhanced services especially - but it has caused many service costs to rapidly change as new providers have entered the market. The deal you obtained just six months ago may not be very attractive today.

There are several steps in managing your costs but the first step is planning.

Planning is the key to getting the best value from any investment, and particularly telecommunications, which touches most parts of business life.

Strategic telecommunications planning

A strategic telecommunications plan will identify and provide:
. The business strategy relating to telecommunications, ie. decisions are business driven not technology driven.
. Consistent decision base, eg. it supports supplier relationships giving them a clear understanding of an organisation's requirements and direction, and supports supplier input. A plan can be used internally where decisions are made away from head office.
. Tactical "hits" based on a long-term strategy, eg. cost reduction process is in line with long-term supplier relationships, it is a win-win situation and not a gouging exercise.
. Quantifies telecommunications usage, ie. a profile/benchmark is created for ongoing projects and measurement. This is also used as a base for cost distribution and management.
A typical plan will address voice data and mobile communications and their underlying network architectures, rationalising where appropriate and integrating telecommunications more closely with the organisation's infrastructure.

In practical terms what savings can be expected from this process? A number of factors contribute to the overall savings that can be expected from a cost management exercise, including:
. Quality of the telco's account management
. When the supply contract was last reviewed and size and term of the contract
. Age of the existing technology, ie. can it take advantage of new services such as CLI, voice over IP, etc?
. Level of internal exposure of telecommunications and related expenditure.

Typically savings can be in the range of 10 to 20 percent, but this varies for every case. The figures from a mid-sized importer/distributor/manufacturer operating in Australia and New Zealand:
. Total telecommunications spend (Aus and N.Z.) - $1M
. Percentage saving N.Z. - 28 percent:
- 10 percent mobile
- 40 percent tolls
- 20 percent access
. Percentage saving Australia - 25 percent
. Savings derived from:
- Network optimisations
- Negotiation of additional discount
- Calling/usage pattern modifications, eg. internal mobile
calls to 0800 numbers, is a double hit.

Once a strategic plan is in place, it needs to be reviewed annually to keep it in line with business objectives and plans. This time frame is also appropriate for reviewing supplier agreements, in particular the telco.

Telecommunications companies

When dealing with the telcos, keys issues include:
. Obtain alternative proposals once every 12 months
. Keep informed about new products and services on offer
. Let the telco account manager thoroughly understand the organisation and its needs
. Take advantage of packages.

It is advisable to approach the challenge of choice with an appropriate planning framework in place, in order to be able to most effectively compare and contrast alternatives, and to take account of other major issues in the telecommunications arena.

Traditionally telcos (and other suppliers) have talked about partnering but in practice the relationship can be best described as "preferred supplier" or an alliance. Partnering tends to indicate levels of openness and shared risk that are not typically seen in telco/supplier relationships.

The previous cost savings example and the discussion so far have indicated a single telco supplier, delivering an "integrated" service. This is now a practical, and now a competitive way to manage costs and manage a telco, as it delivers the "single point of service" and the benefits associated with the single supplier. Large organisations will see benefit from having more than one telco but the benefits are typically service continuity related rather than cost management.

The cardinal rule in relating to your supplier is "Make sure your telco understands your organisation".

Technology

Another benefit from having a close relationship with a telco is keeping informed on technology updates and appropriate/innovative technology options that are used in other organisations. Organisations need to keep abreast of new technologies and implement appropriate solutions.

Emerging or changing technologies include:
. Voice over IP
. Internet based technologies - voice, fax, e-commerce
. Higher levels of integration - Intranet enabled call centres unified messaging
. ADSL.

Use of existing technologies in innovative ways is becoming more practical with competition and changing cost structures. For example, use of ISDN for teleworking is now more cost effective and integration with an organisation's virtual private voice network to give out-of-office access to company services and discounts.

TIMS (Telephone Information Management Systems)

A practical starting point for telecommunications cost management is identification of existing costs and usage patterns.

In conjunction with telco usage reports (eg. Insight from CLEAR and Vision from Telecom) many companies are implementing TIMS to better manage and control telephony costs.

Some of the new features for TIMS are reporting of not only traditional telephony traffic but also include reporting of network IP traffic (both voice and data) allowing identification and reporting of all user generated costs and the accurate disbursement of costs to cost/profit centres.

A TIMS can answer all of the following burning questions for IT&T managers:
. Do you know who is using your phone system?
. Do you know who staff call and how much it costs?
. Do you know what your total telephone usage profile is - across each office and department, and the whole enterprise?
. Do you know if you are experiencing fraudulent usage - by staff or customers?
. Is your telephone system delivering good service to your business and its customers?
. What additional resources do you need to allocate to the system?
. Which service provider will give you the lowest cost deal?
. Do you know what to invoice clients or sub-tenants for their share of the phone bill?
. Is your internal phone directory always up to date?

In summary, telecommunications is becoming more and more a strategic and critical component of every organisation's structure and operation and deserves a high level of management that is associated with its critical position and level in an organisation.

Expenditure on telecommunications will increase if it is not managed correctly, and also impede the way an organisation does business, affecting long-term viability.

The basis of good telecommunications management is information - information on internal needs, customer needs and the solutions that can bring them together.

This article is based on a presentation for the TUANZ Professional Seminar Series "Managing Your Telecommunications Costs Today" and includes information from several of the papers.