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Telecom expenses: Watch out for 'cost creep'

This article from IT Business Edge is a brief Q&A with Alan E. Gold, chief marketing officer for Avotus Corporation. Learn how to manage telecom expenses and get the biggest bang for your buck here.

With Alan E. Gold, chief marketing officer for Avotus Corporation, a provider of technology-based telecommunications and data expense management solutions. Its products include an on-site enterprise implementation, a hosted ASP model and a completely outsourced value-added managed solution.

Question: What are some of the biggest challenges companies face in tracking/managing their telecom expenses?

Gold: Incredibly complex bills that for large organizations can run to thousands of pages. This is exacerbated by the proliferation of new technologies, such as conferencing and Internet phones, and cell phones and PDA billings that are often reported on personal expense vouchers rather than in centralized invoices. In addition, telecom expense management covers logical assets that can't be seen or easily tracked (data lines, virtual circuits, etc.) Few companies have the internal resources to check and validate every bill and, even when they do, it is difficult to identify and correct errors with carriers. In general, companies lack the systems and procedures to track the ordering, coordinating, and billing of equipment and services.

Advances in telecommunications contribute to the complexity of the overall environment. Take cell phones as an example: A lot of them are on personal expense accounts — virtually outside of the corporate control system. How do you control their use? How do you inventory them? Here's a typical situation: A manager has a weekly conference call with the sales team, and 10 people call into an 800 number for the call. What's the effect? The company is paying for the cell call AND paying the 800 number minute charge. Multiply loose controls by thousands of employees and it adds up. Clear administrative and technical controls have to be put in place to control expenses.

Question: Are online auctions a good way for companies to lower their telecom expenses?

Gold: Online auctions can be especially effective for purchasing telecommunications services if they are properly structured. This is not a place for standard auctioning technologies that do such a good job for commodity products. Rather, telecom-focused online auctions must be designed to not only deal with the cost aspects (per-minute charges, etc.) but also with the terms and conditions and service level agreements, which are incredibly complex. It is important to create a level playing field for Ts & Cs in order to properly evaluate the offers. Our experience has shown that companies that buy telecommunications services through online auctions can save up to 55 percent of their spend and get much more favorable contract terms.

Question: What are some best practices companies should work toward in getting the biggest bang for their telecom bucks?

Gold: Control from procurement to payment. This sounds easy but it's not. It involves implementing disciplined strategic sourcing processes to get the best rates and terms — and then, and here's the hard part, putting those Ts & Cs into the contract, ensuring that the equipment or services have been installed, reviewing and validating the invoices, and interfacing with the accounts payable system to ensure adherence to the contract terms. Without these controls, there will be cost creep; that's when errors are made and carried from month to month, or service changes are made (a new office added, for instance) and instead of getting the negotiated rate, a higher, standard commercial rate is applied. Here again, let this happen over the course of a contract, and the costs skyrocket.

This article originally appeared on IT Business Edge.

The permission-based reports feature in-depth analysis, research and decision support information from hundreds of business technology publications and other sources, compiled by IT Business Edge editors and summarized in an easy-to read format.

Each of the reports focuses on a different IT priority, such as maximizing IT investments and aligning IT and business goals, that has been identified through research as being top-of-mind for time-starved CIOs and other executives.

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