Telecom Expense Management Blog

There are several ways a wireless expense manager can allocate the cost of the pool plan to different cost centers.

Average per line.  With this method, you simply add the total monthly recurring and peak charges and average per each line in the pool plan. 

1. 100% Cost per Minute.  With this method you take the total monthly recurring and peak charges and divide by the peak (non-mobile-to-mobile) minutes to derive a cost per minute.  Then you allocate the pool costs by charging each user the cost per minute times their peak usage.  Users with zero peak usage in that month should be charged nothing for the voice component.  Of course, if they only made text or data charges, those costs would be directly allocated to the individual and not averaged in the pool.
2. Base Plus Cost per Minute.  This method is a hybrid of methods 1. and 2. Here you would allocate a base charge (say $39) to all users in the pool.  This is the cost to have the potential benefits of a cell phone, regardless of how much you use it.  Any excess costs (pool monthly and peak charges) above the base charge times the number of users is converted to a cost per minute.  Thus, each user is allocated a base plus the cost per minute times their peak minute usage.
3. Everyone Gets Unlimited.  While this may not be the most cost effective option, it does simplify order, administration, and monitoring. If your company is large enough, you might be able to negotiate the unlimited plans down to $89/line.

If you need help with your wireless expense management, contact us today or call us at 877-219-8012

You would think that it would be easy to get approval from senior management to migrate to a pool plan to reduce wireless expenses.  This is not always the case. Migration can become a complex and contentious issue when there are multiple cost centers.  Cost center managers that have low usage individual lines do not want to subsidize the high usage cost centers that share the pool.  For example, cost center 1 has 10 users on the lowest individual plan of 450 minutes (at $39/line) and cost center 2 and 10 users on the highest individual plans of 2,000 minutes (at $89/line).  So the total pool size needed is 24,500 minutes for an average of 1,225 per user.  The closest plan that the carrier has is 1,500 minutes so you put all 20 users on the 1500 minute plan (at $59 per line).  Cost center 1’s cost has gone up $190 in the pool even though the company reduces wireless expenses and saves $100 ($1,280-$1,180).

In my next post on wireless expense management, I will explore different ways you can allocate a pool plan.

As a manager with responsibility for Wireless Expense Management you may be challenged with converting individual plans to pool plans. If you do some analysis, you can see that it is possible to reduce mobile phone expenses by a significant amount by simply placing all of the lines into an optimal pool plan. 

There is another benefit of the pool plans.  The number of minutes an employee uses in a given month can vary by as much as 100%, especially if the individual occasionally travels.  However, with all the users on a pool plan, the total usage usually doesn’t vary by more than 10%.  Obviously, the larger the pool, the less the monthly variance will be.  Therefore it is much easier to monitor and manage a pool plan rather than individual plans. If you manage your pool using a manual process or a spreadsheet, we think the optimal pool size is one that gives you about a 20% buffer over your average monthly usage. If you use a Wireless Expense Management solution, you can save money by reducing the number of minutes in your pool to give yourself a 10% buffer

Once you decide on the cost allocation methodology, the next step is to determine the monthly process to monthly monitor the pool plans and implement the cost allocation methodology.  I’ll discuss some ideas regarding this in my next post on Wireless Expense Management.

In my last post on this subject, I provided some background information on wireless handset insurance and discussed the hidden terms and conditions associated with these products that make them unattractive.

Now, because we are in wireless expense management business, let’s do some math. The biggest risk we can manage with Handset Insurance is the cost of a new phone with no upgrade; let’s say that’s $250. To manage that risk, we pay an average monthly premium of $6 per month and a deductible of $89 in the event of a loss. After a device life of 12 months, the net value of the risk we have managed is marginal;  $250-((12*$6) + $89) or just $89. Assuming a device life of 24 months, the net value of handset insurance is even less attractive; as $250-((24*$6) + $89) is just $17.

There’s an old truism that states one should buy insurance to protect against catastrophic loss and self insure less significant risks. If spending $250 to replace a smartphone represents a potentially catastrophic loss to you, go ahead and buy wireless handset insurance. For most business wireless expense managers, replacing a smartphone is a nominal risk that makes better financial sense to self insure.

Almost everyone has had the experience of buying an expensive piece of technology like a smart phone, laptop or even a refrigerator and being asked at checkout if we would like to buy some sort of insurance for our new purchase. The sales rep who is working with us can earn a big commission on this “upsell” and may pressure us into making a snap decision. We don’t have a lot of information about the potential risks to our new purchase or the economic value of those risks. We might be nervous about how our new acquisition is going to work out and the sales rep is offering an inexpensive-sounding solution to assuage our anxiety. It’s tempting to buy handset insurance for wireless devices, but it’s almost never a good deal, especially not for company liable mobile devices that are part of a wireless expense management program.

Before we dig into the economics, let’s review some background information about wireless handset insurance. The top four US wireless providers all have different names for the product, but the underlining carrier is always the same: Asurion. This company stays under the radar but insures millions of wireless handsets around the world. Wireless carriers charge between $5 to $12 per month for handset insurance, depending on the model of phone and the level of coverage. Insured users are covered if their phone is lost, damaged, or destroyed. Wireless carriers tend not to over advertise two important aspects of the wireless handset insurance coverage they offer. First, many claims are subject to a substantial deductible, sometimes as high as $89. Secondly, carriers fulfill customer claims with used, refurbished equipment.  The average market retail price for a used, refurbished handset is $100.

In my next post on the subject of wireless expense management, I’ll do the analysis to show the poor expected net value of buying wireless handset insurance.

The use of mobile devices increases the risk of loss of company data. This risk can be mitigated by using company liable mobile devices and following two practices. First, the company should maintain an accurate and updated inventory of all company-owned mobile devices along with each device’s user assignment. This is usually done as part of a telecom expense management process.  Second, the company should acquire the capability to remotely “wipe” or disable and delete all data from lost or stolen mobile devices.

Loss of Company-Owned Mobile Devices: Personnel Data Security

The use of mobile devices also increases the risk of loss of private data belonging to employees. An example of this type of loss could involve a human resources manager who loses a mobile device that contains company personnel data, such as employee tax identification numbers or medical information. If this type of loss occurs, we recommend employers notify employees immediately.  Here again, the employer can mitigate risk by implementing wireless expense management and maintaining  an accurate inventory of mobile devices and corresponding user assignments, along with the capability to remotely “wipe” mobile devices.

Mobile Devices and Enterprise Network Security and Performance

In addition to the risks discussed above, the use of mobile devices introduces vulnerabilities and potential performance issues into an enterprise’s network. Network security risks increase exponentially as an organization adopts mobile devices with e-mail and internet browsing capabilities, as a portfolio of such devices provides numerous attractive access points into a company’s network for viruses and hackers.  Telecom and IT managers must ensure that appropriate security measures are deployed to drive down risks as far as possible. Highly effective tools to manage risk include data encryption, firewalls, virus protection and the use of passwords.

It is very easy for employees to download applications onto company-owned smart phones, PDAs or mobile data devices. Some of these applications may create security risks or create network bandwidth bottlenecks. Employees should agree not to download software that is not approved by the company onto company-owned devices. Your service provider may provide utilities that prevent users from downloading unauthorized software or content.

Again, the employer can mitigate these risks by implementing wireless expense management maintaining an accurate inventory of mobile devices and corresponding user assignments, along with the capability to remotely “wipe” mobile devices. It is not good practice for the company to rely on wireless service providers to maintain this device and user assignment inventory, as it must be accurate and available at a moment’s notice.

My next post on the topic of wireless expense management will discuss the implications of employee use of company-liable wireless services.

When you are negotiating your telecom contract, you should set your negotiation goal to be a Minimum Annual Revenue Commitment (MARC) that is 60% to 70% of the total annual spend with a telecom supplier. Your account rep will suggest that he or she can offer lower rates in exchange for a higher MARC. The truth is that, with larger dollar volume telecom contracts, there is very little correlation between rates and the level of MARC.

Define all services and fees that contribute to the MARC and try to get as many charges as possible to contribute. Your agreement should specify that services being used by new businesses or acquisitions will contribute towards your MARC.

Do not commit to using one supplier exclusively. You want to be able to move some services to another supplier during the term of the contract to exert leverage, if necessary. Avoid language that requires you to prove you are giving a certain percentage of your business to any carrier.

In my next post on the topic of telecom expense management and negotiating a great telecom contract, I will write about the so called “regulatory fees” telecom carriers use to pad their profits.

In my next post on the topic of telecom expense management and negotiating a great telecom contract, I will write about selecting an optimal agreement term and include a business downturn and business divestiture clause.

In addition to the subject matter-specific information I provided about negotiating a better telecom contract, we offer the following general negotiating tips:

• Begin sourcing services 8-12 months before you need them so you don’t negotiate with your back against the wall.
• If you do have a deadline coming up, don’t disclose it to the seller.
• Understand what you need in great detail (this is the hardest and most time consuming part!).
• Get quotes from multiple carriers to understand the market rates for the services you are sourcing.
• Make a prioritized list of deal points to be negotiated. Be sure to include some items you can concede because they are not important to you.
• Offer a justification for every negotiating position you take.
• There is tremendous power in patience. Always tell the seller you do not have sole decision-making authority. This creates the perception of “institutionalized” patience.
• “Silence is Golden.”
• Never make two consecutive concessions to the seller. You can’t negotiate with yourself and obtain a favorable outcome.
• It is easier to negotiate with friends than with adversaries.
• Nobody likes to be made to look stupid.
• Ask for additional small but important concessions from the seller at the end of the negotiating process as a condition of closing the deal.

A significant source of gross profit for telecom carriers is late payment fees. Carriers often set unreasonably short payment intervals that begin at their invoice date. They then take their time mailing their monthly invoice to you. As a result, many customers receive their invoices with less than two weeks to process them and remit payments. When customers are not able to process invoices this quickly, carriers charge them late payment fees of as much as 6.5% of the unpaid balance!

Your goal should be to get the carrier to waive late payment fees. This goal is very hard to achieve, as there is a time value of money and businesses typically do not extend free credit to each other. If your carrier will not waive late payment fees, see if they will agree to extend the payment interval to something your accounts payable process can make every month, like 45 days. You can also ask your carrier to specify that their payment interval begins on a date you can verify; such as the date you receive their invoice. Do not put yourself at the mercy of the carrier’s inefficient invoicing process. It can be expensive!

Two carriers we know of try to include language in their agreements that limits the amount of credits or refunds they will provide for billing errors to the most recent six months’ overcharges. We recommend rejecting this type of limitation for obvious reasons. Additionally, these limits are not competitive and they signal that the carrier has low confidence in the accuracy of its provisioning and billing processes.

If you plan to implement a telecom expense management solution during the term of the contract you may want to ask the carrier to specify if they offer invoices in Electronic Data Interchange (EDI) format.

In my next post on the topic of telecom expense management and negotiating a great telecom contract, I will write about some great negotiating tips.

When negotiating a telecom contract, you should consider including a technology refresh clause. Technology refresh clauses address the risk that the lower-priced future technology could replace the existing higher-priced technology you currently use during the term of the term of the contract. You should negotiate a commitment from your supplier to upgrade you to future technology at no charge and reduce your minimum annual revenue commitment to reflect lower prices.

You should avoid giving your suppliers the right to migrate your services to a different technology at their discretion. As an example, in the recent past, many carriers attempted to commit customers to migrating from their existing Frame Relay networks to MPLS networks. You want to reserve the right to reject technology changes that create possible compatibility issues or impose significant additional costs.

In my next post on the topic of telecom expense management and negotiating a great telecom contract, I will write about including a technology refresh clause in your contract.