Telecom Cost Reduction Checklist

Note: The following is in no particular order or priority, and is by no means complete, but is meant simply to indicate the range of cost reduction possibilities we may evaluate for our clients.

Teleconvergence:

• Performs traffic engineering and evaluation to determine real bandwidth and trunking requirements, identifying underused or unnecessary facilities (as well as overextended ones).
• Creates statements and/or diagrams of the existing network and usage patterns, outlining financial opportunities to save money.
• Identifies circuits or services for which a client is contractually obligated but underutilizes as determined by SMDR traffic analysis and which can be:
  • Downsized or otherwise cost-reduced in exchange for modification of other contractual obligations which have no negative effect on the client
  • Beneficially modified or reused to provide redundancy or backup for critical facilities or services in event of unexpected demand or emergency contingencies
  • Parleyed or renegotiated to obtain additional needed circuits or to initiate bundled services that meet new or anticipated demands at little or no additional cost, or that provide additional cost savings over existing technologies or methodologies
• Identifies circuits or services that should logically exist but for which billing is ambiguous or which may be mis-billed and/or overpaid elsewhere
• Creates statements of contractual obligations
• Creates statements of contractual opportunities (Ambiguities and discrepancies, wiggle room, possible consolidation tradeoffs)
• Determines billing irregularities
• Determines if suppliers are billing contrary to contractual terms or tariffs or FCC regulations
• Evaluates contractual obligations to reduce costs where possible, increase coverage when necessary, and renegotiate on favorable terms as soon as we can. Examples of such contractual obligations are:
  • Long distance and International Calling agreements
  • Cellular Agreements and Usage
  • Data Networks and Internet Bandwidth
  • ISP and Managed Service Agreements
  • Equipment Leases
  • Maintenance Agreements and Time & Material Agreements
• Accumulates many of the details that will be required to issue an RFP (Request for Proposal) or RFB (Request for Bid) for new or replacement services
• May ultimately ask such questions as:
  • Why does so much capacity or capacity exist in this area, when demand or usage doesn't seem to justify it?
  • If this area is so important, and you've concentrated services under one supplier/circuit, etc., to save money, what plans exist to back up this circuit/service if it goes down? In other words, what's your Plan B?

Key Concepts of Telecom Cost Reduction

Frankly, I never expected to save as much as you said we would. .. Thanks again for your help. I'd be glad to share our positive experience with any of your clients that may have any questions.

Patrick L. Delaney, Controller

Landry's Commercial Floor Coverings

Key Concepts

• Short-term gains with lasting impact.
• Result turnaround frequently within 30-60 days.
• Potential for lower recurring costs, refunds, reduced billing complexity.
• We don't just look at bills to try to save our clients money.
  • We also evaluate contracts to determine the difference between what a client is obligated to do and pay and what they are currently doing and paying.  We also highlight when clients are unnecessarily exceeding minimum obligations.
  • Similarly, where appropriate or necessary, we will attempt to find ways to void or modify or offset existing agreements, especially for usage services, either by freeing up or redirecting existing usage or by identifying currently contractually unencumbered usage and either renegotiating it for less or else routing it via alternative means.

Notes:
(1) Although every item on this list is strictly limited to reducing telecommunications costs, a key aspect of the Teleconvergence approach is the use of telecommunications and other technologies as a strategic weapon to "cost-effectively" achieve other business objectives in marketing, finance, security, and operations. See the Strategic Telecommunications Planning (STP) and Strategic Telecommunications Marketing (STM) sections for more details.

(2) Cost Reduction may be a means to a different end. For example, consistent with client priorities, the objective may not be reduced costs per se. Instead, the plan may be to use savings or refunds to partially or wholly offset costs for increased capacity, robustness, or reliability. The savings may add a new level of redundancy or backup or may even allow an entire disaster planning contingency plan to be put into place. Similarly, while savings can be reinvested in Procedural Strip Mining projects, part of STP, such projects can create significant savings by themselves.

CDR-SMDR (Call Detail Recording)

CDR (or SMDR) is a concept that incorporates software, hardware, and business operations.

CDR processes telephone call information (date, time, calling/called numbers or extensions, duration, etc.) stored within most telephone systems in conjunction with other software and hardware to perform management reporting, cost allocation, and fraud prevention procedures.

The most expensive aspect of employee telephone abuse never shows up on your telephone bill. CDR identifies it, tracks it, and proves it.

Teleconvergence determines your needs and then selects the most cost-effective solution for your purposes.

Among CDR's’s other capabilities and benefits are:

• It detects and compiles usage data from phone systems, users, and sometimes carriers to:
  • Identify calling patterns and call volumes
  • Identify parties making calls, both outgoing and incoming (where possible)
  • Identify parties receiving specific calls or groups of calls
  • Identify calls to porn numbers or undesirable destinations by the calling extension
  • Identify and pattern unauthorized calls to competitors and/or key suppliers
  • Eliminate any need to manually key in long distance carrier project codes
• For time (re)billing of professional services, it captures incoming and outgoing calls, including client or project codes
  • With some phone systems, CDR captures and automatically (re)bills for time spent on internal calls and even voice mail messages.
• CDR allows Teleconvergence to employ traffic engineering to determine the correct number of trunks and/or the correct amount of bandwidth required rather than relying on invalid oversubscription rules of thumb
• CDR helps detect unusual calling patterns that characteristically represent hacked systems, calls to drug traffic-related locations, calls to pay services, etc.
• CDR allows management to document and substantiate cases of telephone abuse and excessive nonproductive work time.

Not all firms have excessive usage costs or suffer from telephone abuse or fraud.  But without the right tools and knowledgeable interpretation, how do you know yours isn't one of them?

Contingent Consulting and Auditing

Contingent telecommunications auditing and cost reduction is a consulting service whose time has long, long gone. We don't do it any more. This article tells why and explains what we do instead.

Today, although contingent work may work out for the consultant, it's inevitably going to be a bad decision for the client.  Consider the basic equation. A consultant shows you ways to reduce costs. If you accept the recommendations, the consultant implements them and your bill does down. You pay the consultant a percentage of the monthly savings over the next two to five years.  In such a perfect world, everyone wins.

When was the last time you thought the world was perfect?

First of all, the promised savings occur only if nothing changes. Suppose your call volume goes down because you're had layoffs or you're using e-mail instead of making calls.   Yes, your costs are lower, but it's because business is down and you're spending less, not because you're saving money, and especially not due to a consultant's recomendations. So do you owe the consultant more? Or less? Would you even feel right about paying the consultant the same monthly fee?  Is this really what you had in mind?

Similarly, if you start spending more, say, due to increased international calling, for example, does your savings percentage remain the same and so do you owe the consultant the same? Or do you owe more? Or are you saving less, and so should you pay the consultant less? Who decides? Such situations easily get very messy, and inevitably at least one party becomes dissatisfied.  And it's usually the party that has to pay the consulting fee regardless...

Here are three other very important factors to consider:

1. The Risk of Foreseeable Consequences

Remember, the independent contractor retained to perform the contingent work has no long term responsibility for unexpected results or negative repercussions.  If savings don't materialize, no payment is normally due. As is frequently the case, however, the savings may materialize, but at hidden risk. And regardless of your risk or loss, no matter how severe, the contractor does not have to compensate you.  Here's just one example:

Say your consultant recommends that you consolidate all your voice and data telecommunications on a T1, eliminating separate trunks. Let's even say it actually saves you some money, as promised.

However, a T1 is a single 4-wire circuit. If that single circuit is cut or one or both pairs of wires is mistakenly reassigned by the local phone company, it can take hours or days to relocate them and to restore service. With fiber optics, cross-connects are virtual, possibly complicating matters and potentially taking even longer to diagnose and resolve. 

If you are without telephone and Internet service for half a day, much less a few days, can you really ever save enough to compensate for the risk?

2. The Other Side of the Equation

Teleconvergence has expertise not only in risk analysis, but also in opportunity evaluation. Suppose we could show you how to increase productivity or how to add additional services or capabilities at no additional or even slightly additional cost? Wouldn't you want us to present to you and justify the recommendation? On a contingent basis, no consultant would even mention it because it wouldn't save you any money and thus wouldn't earn the consultant a fee.

We won't allow ourselves to be placed in a situation where we cannot do all we possibly could -- or should -- for a client.  So we won't perform any contingent work at all.

3. But aren't Audits worthwhile? Of course.

We will still audit, of course, just not on a contingent basis. And we audit not just bills, but contracts and leases and other obligations.  And even if your billing is correct, we still may renegotiate agreements for better future rates -- or free services -- because it's a buyer's market.  Teleconvergence clients don't have to be billed incorrectly to come out on top.

We insist on the right to give our clients any and all recommendations we deem appropriate, even for changes that may increase cost because they might greatly reduce risk or eliminate future uncertainty. Clients are under no obligation to accept anything we suggest, of course, but at least as our client, you'll be aware of your alternatives.

Businesses succeed in part because they profitably balance costs and benefits, risks and opportunities. Looking at only one side of the equation is like driving with one eye. A person can see, it's true, but without adequate perception.

If you decide to retain Teleconvergence for our perspective, why would you want us to wear blinders?

And if you like the way we think, why not give us a call to discuss how our thinking may benefit you?

Introduction to Teleconvergence VoIP System Consulting

Since VoIP is a technology, it can be used for many applications: a telephone system; a private or public, local or long distance or international network; to save money on long distance or international calls; to connect multiple physical locations or to extend one's presence to virtual locations; to reduce operating costs or to enhance operating capabilities, etc.

While there is much in the technology that is new, there is very little it can do that hasn't been possible for quite some time using older technology (This is currently quaintly derided as "Legacy." We'll discuss that a little later).

Before you start reading about alternative IP-PBX scenarios, here are some working definitions of the relevant terms. A PBX or Pabx simply refers to a telephone system with an attendant (live or automated), a central system (real or virtual), and numbered extension telephones associated with individual users. A Pabx that uses VoIP is simply a Pabx that uses Internet Protocol (or IP) technology. Such a system is frequently called an IP-PBX.

It is important to note that these systems can be housed on your premises or they can be shared remotely by tens or hundreds or thousands of companies, in which case they are called "Hosted Systems"."They range in price from free Open Source software  to proprietary hardware and software costing millions of dollars.

In fact, the possibility of a client offering VoIP service for resale is raised twice elsewhere in this site. 

• It is mentioned in the section Strategic Telecommunications Marketing, notably in the article, Tenant Services Help Pay the Rent."In this context, a client turns an operating cost into a new revenue stream.
• It is the focus of the other section on VoIP, VoIP Business Opportunity Development. Here, the discussion is about entering or bettering one’s existing position in the VoIP or other segments of the telecommunications industry.

The next part of this section is Some IP-PBX Alternatives and Scenarios.

Some IP-PBX Alternatives and Scenarios

Interestingly, the main reason many executives have for wanting a new IP-PBX telephone system is that it is the only alternative they've been offered. This is unnecessarily restrictive and does not reflect the range of real choices available to businesses today.

What are some of the options (which may or may not apply in any given situation, of course) potential buyers actually have?

1. Expanding or updating a current non-IP system. Even if the existing system is at capacity, most systems come in families, and a larger version may be available. Now, it may not be available from your current vendor, or at least not until the vendor faces losing your business. However, making the vendor face the facts without endangering the relationship is merely one of the functions of a competent consultant. Since Teleconvergence only recommends systems with multiple sources of supply and maintenance, alternatives are always at hand.

2. Expanding or updating a current non-IP system by adding VoIP capabilities where needed. Note: in general, they are not needed everywhere. Most good-sized phone systems work perfectly well in Legacy/IP-PBX form. Think of it as a hybrid: if it works for a car, why can't it work just as well for a telephone system?

3. If your existing phone system would be good enough if it wasn't too old to be any good any more, consider purchasing a newer preowned system that's the same as yours -- perhaps one with a larger capacity -- and using the extra equipment as a virtually free source of free cards and telephones.

4. If your system is getting old and replacement parts and models are unavailable or the feature set is also antiquated, consider purchasing a different but newer preowned Legacy system from a company that has recently purchased an IP-based system, whether they really needed it or not.

5. Using VoIP for some locations, but not all, and not necessarily for the main location.

6. Purchasing a new VoIP IP-PBX. See it really is a choice, just not the only one.

7. Instead of buying your own system, use a Hosted IP-PBX service to satisfy your needs, for headquarters, or for your branch offices, or even both.

Teleconvergence isn't biased against technology or VoIP (after all, part of our practice consists of helping clients determine whether to get into the VoIP business), but we do think a company should consider its alternatives based on its needs, not on the latest technology or what the first three salespersons you contacted said you should buy.

As we do elsewhere in this section, we'd like to again suggest that you read the information in The Teleconvergence Process, especially the first part, Selecting a System --- And Getting it Backward. The information will give you a good idea of whether our approach is right for you.

VoIP Myths and Reality Checks

The following are often presented as flat statements, truths, if you will, about VoIP. There are undeniably elements of truth in most of them, but absolutely, positively true? 100% of the time?  Harrumph. You be the judge.

"You'll save money" Compared to what?  If your current system is functioning, the new one is an expense, period. Can you save money on long distance calls? Perhaps you can get VoIP domestic long distance for only a few cents per minute (quality business VoIP is Not free). However, traditional long distance is generally available for only a few cents more.

When you look at the total cost of implementing VoIP to be able to save, perhaps, two or three cents a minute, it takes a very impressive number of minutes just to break even. And the more minutes you use, the less traditional long distance costs -- if you negotiate properly. (Something else a competent independent consultant is good at doing on your behalf!)

Can you save enough on international calls? It all depends on where you call. VoIP international rates can be significantly lower than traditional rates, but the greatest savings show up on routes of much lower quality than traditional ones. Can you really save enough money to justify you or your customer not being able to hear each other clearly?

"New IP-PBX technology is better and more reliable" More reliable than what? Phone systems ran for years without any loss of service whatsoever. To the degree that  IP-PBXs are based on computer technology, they're as reliable as, well, computers. They can be made robust and redundant, but so were traditional legacy PBXs, which, in the days of the old Bell System, were actually designed to last for 40 years – and did.

In fact, let's talk about PBXs. The term Legacy began to be used by IP-PBX vendors at the beginning of this century to refer to non-IP-based systems. Why "Legacy"? Mostly because the IP vendors had to imply obsolescence without being able to prove it. Especially at the beginning, existing "Legacy" systems did much more and did it much better than the new ones. Not even mentioning how much more reliably.

Legacy systems are presumably "do nothing" systems, but they are reliable. IT may expect to change systems every three or five years, but knowledgeable management knows this isn't necessarily desirable -- and it isn't necessary, at least in the case of traditional telephone systems.

Why do vendors scoff at Legacy systems? Perhaps because they last too long, usually long enough to allow the owner to avoid replacing them on a vendor's preferred time schedule. Or else perhaps because, under close scrutiny, an existing Legacy system's life cycle is longer than that of the vendor's replacement product.

It is interesting that many vendor's products become obsolete (or cease being supported) long before they can even be categorized as "Legacy." Put differently, why do some vendors help you plan for obsolescence rather than prevent it from ever occurring with their own products?

"Unified messaging is made possible by VoIP." An interesting theory, but articulated only by the ignorant. Unified messaging (voice mail, e-mail, and fax available in a single in-box) has been around for more than 20 years, running on pre-Windows operating systems like DoubleDos and OS2.

"VoIP allows companies to operate with a single dialing plan anywhere in the world." True, but the Bell System was putting together such networks for companies more than forty years ago. It is far easier and usually less expensive to create such networks using VoIP, but it is not new.

Does this all this seem as if we're negative about VoIP and IP-PBXs? It shouldn't, as we explain throughout the site. We are not against technology. We are against treating technology as an end rather than simply as a means to achieve a business objective.

For a balanced discussion of  the subject, please turn to the last article in this series, The Promise of VoIP.

The Promise of VoIP

VoIP will play an increasingly important role in technology as the Internet gradually supersedes what could be termed "Legacy" platforms such as circuit-switched telephone networks, television airwaves, even traditional radio. This will happen not because the old telephone network or the airwaves don't work: they obviously do.

But the Internet -- with VoIP representing the part of the Internet used for voice communications -- will become dominant because its inherent interactivity simply makes for a richer and more rewarding communications, informational, and entertainment experience.

What Teleconvergence does is help our clients take advantage of this technology to better achieve their business and strategic objectives.

Please spend as much time as you like or as long as it takes to determine whether we can help you and whether you might like us to.

When you're ready, drop us a note or, better yet, give us a call. Everything here is about we can do or what we've done for others. At some point, when you're ready, it'll be time to discuss what we can do for you.

We look forward to the conversation.