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Benchmark Your Business: How to Reduce Telecom Expenses

We all know how telecom expenses add up. Keeping track of one provider for this, another for that, new lines, old lines, updated equipment and retired assets can be a real pain. In fact, telecommunications costs are among the highest non-operating expense for Fortune 1000 firms. Research suggests that billing errors and inefficiencies account for approximately 10% - 20% of an organization’s telecom spend — often with errors that directly benefit the carrier.

But it’s not just telecom expenses that can whirl out of control. Your cloud expenses can, too.

It’s hard to track:

  • multiple accounts and cloud service types
  • achieve a use-based, cross-charge model for business units
  • determine how to optimize variable costs

A recent survey shows that between 30 to 35 percent of a company’s spend on cloud expenses is wasted.

But benchmarking the costs of each type of voice, data, and cloud services you have can help cut those expenses — big time. Just hear what some of our clients have to say.

What Is Benchmarking?

Benchmarking is a “structured approach that involves data collection ... analysis, and reporting,” according to the Baltic Institute for Leadership Development.

It’s a way to measure how your company’s processes, products, or services compare against others in your industry considered to be the best. The goal is to identify opportunities where you can improve. In the case of telecom expense benchmarking, the goal is to discover ways to cut your costs without impacting performance.

Common Voice, Data, & Cloud Expenses That Can Be Benchmarked

  • 1MBs
  • DID / DOD trunks
  • Transport
  • Wireline and wireless services
  • Cloud services (SaaS, IaaS, PaaS)
  • Storage and applications
  • Contract terms
  • MPLS
  • Inbound 800
  • PRI
  • SIP trunks

Common Telecom Expenses That Can Be Benchmarked

How LinkSource Conducts Benchmarking

We look at all aspects of your spending in the Cloud and for voice and data services — contracts, invoices, service environments, and more.

Then we compare what you spend to the median of more than 1,500 customer data and price points. We use this information to provide you with market specific data as it relates to your industry, location, and size. In performing the benchmarking, we take into consideration your current contractual commitments and any special requirements you have so that we can ensure a fair representation of our benchmark pricing.

The benchmark price ranges are calculated by reviewing current market data for customers of similar composition. They include but are not limited to:

  • Similar industry
  • Similar geography
  • Similar size and scope

 

Example 1: Benchmarking Data

Let’s say you have a 1MB service. We’ll find the most popular providers of that service for your industry group and compare your spend to what their average costs are.

Product Carrier Benchmark Low Benchmark High Your Current Contracted Cost
1MB XX $28.00 $39.00 $36.19
1MB YY $21.00 $35.00 $31.17

Mean Price: $33.50
Percent Above Mean: 37%Based on this finding, you’re spending 37% above the mean, we’ll look at alternatives, offer you suggestions, or even try to renegotiate your current contracts.

Or let’s take SIP trunking as an example. Here’s how we benchmark that:

Example 2: Benchmarking Data with Recommendations

Product Carrier Benchmark Low Benchmark High Your Current Contracted Cost
SIP trunks 200MB ZZZ $3,500 $6,500 $8,355
Concurrent call paths ZZZ $12.00 $18.00 $18.00

Mean price of SIP trunks: $5,000
Mean price of concurrent calls: $15.00
Percent above: Out of range
Percent above mean: 50%
And this is how we evaluate the data and offer options to save you money.

Recommendations

 

OPTION 1 – INCUMBENT PROVIDER

If it is determined that ZZZ is the preferred vendor to continue to provide these services, you may want to consider negotiating with your carrier to bring down the cost to be in line with market competitive rates.

Another approach would be to consolidate other telecom services to this vendor as it can provide several of the services that you currently procure from other vendors. Adding additional spend or commitment will aid in the negotiation process and drive down costs.

With these two considerations, you should be able to save approximately $25K or 28% per month.

Considerations

  • A higher commitment could result in contract shortfalls if there are unforeseen changes in your environment occur.

OPTION 2 – ALTERNATIVE PROVIDER

If an alternative provider were considered, we believe contract terms would be more beneficial, commitment levels might be able to be reduced, and pricing would be improved.

We believe an alternative provider could produce a reduction of approximately $50K per month and add additional value through customized design solutions for capacity and redundancy.

Considerations

  • We would need to review your existing contracts for the service terms and commitments to ensure contractual obligations are kept if other telecom services are to be migrated.
  • LinkSource recently conducted an analysis of your current ZZZ SIP project. We found that you could decrease costs by up to $50K per month through a competitive RFP process and consideration of other providers.
  • We recommend conducting a traffic study to validate the requirements before releasing the requirements in an RFP.

 

Why Benchmark?

As a McKinsey & Co. article notes, “Making benchmarking an integral part of the way a company works can result in valuable data and performance transparency that triggers open and fact-based discussions and performance dialogues, leads to new ideas and improved operational practices, and helps establish a performance- and improvement-oriented corporate culture.”

When you’re ready to see how your telecom costs compare to those of others, give us call at 916-757-1100. It’s likely we can save you significant money.

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