Telecom Cost Management

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August 13, 2007

Why Companies Spend More on Mobile Costs Than They Should

By TMCnet Special Guest
Robert Pommer, President and CEO, Optelcon

There are many myths and misconceptions that lead companies to believe that they are powerless against the exploding use and expense of mobile phones and devices. This article is intended to clear up some of these misconceptions and show enterprise companies how they can effectively manage an ‘unmanageable’ situation.

Misconception  #1: I already have negotiated a great corporate contract.

Having a corporate contract provides companies with a number of benefits that include waived early termination penalties for devices under the contract, volume discounts and other assorted terms. Contracts also provide the enterprise with a false sense of security. These volume discounts are almost always based on the total dollar volume spent and not on the individual rate plans underneath its umbrella.  

By optimizing the individuals rate plans the discount will applied against a smaller gross number, thus significantly reducing your cost. Typical corporate contracts provide a discount of between a 12 and 20 percent off the total bill. Optimization can yield an average additional savings of  25 percent. Even companies with the best large corporate contracts can benefit from optimization services.  

Misconception # 2: We have a pool of minutes and therefore don’t need to optimize. 
Pooling plans can provide companies with significant benefits. However, they can also provide a false sense of security regarding cost of use. Pooling is incredibly complex. Carriers do not just provide you with one big pool of minutes; in actuality, a pool is made up of the sum of the individual contributing plans. This means each user either gets a plan which has a certain number of included minutes which other people can share or they get a “bolt-on” plan which does not contribute minutes, but they can take from the contributing minute plans.

There are hundreds of different variations of pool plans, each with different rates for data, night/weekend, roaming, international etc. If you company has 1,000 users, the collective pool plan will have 1000 individual plans that make up the total. In addition, as your company’s usage grows or contracts, having the wrong pool plan can actually cost you significantly more than if you were on individual plans.

Using a professional mobile optimization company with access to the thousands of rate plans and the algorithms to systematically analyze these different variations and combinations will assure you are getting the lowest cost per minute overall. On average, even companies with pooling plans can cut their usage costs by more than 25 percent.

Misconception #3: I don’t have to worry because my employees own their own phones and expense their business calls.

Due to the speed with which mobile phones have taken over telecom, many companies still allow their employees to own their own phones and expense their charges. This equates to waving the white flag and believing that mobile phones just it can’t be managed effectively. Although this removes the management burden, it creates a number of other problems, including:
  1. Individuals paying rates that tend to be 20 percent higher than corporate plans
  2. Very little visibility and accountability
  3. Missed allocation of expenses
  4. Management lacking the time or tools for effective management
  5. Corporate liability (employees leaving the company with a company-related phone number and possibly an address book full of clients)
Quite often, the reason for lack of management is that company executives feel they don’t have the experience, resources or tools to get their hands around this growing problem. But, during the past several years, a new breed of firm has sprung up—firms the technology, processes and expert advice that allow you to manage mobile telephony just as you would any other large expense.  

Everything from procurement, helpdesk, reporting, and policy management is available. Typically, for just a few dollars per month per device your company can get control and reduce overall costs by more than 25 percent. 

Misconception #4: My vendor takes care of that for me.

This is tantamount to the wolf guarding the hen house. Although there are some good account managers and well-meaning people, asking your vendor to reduce the revenue they receive from you is an inherent conflict of interest. Ask yourself if your company would train each of your account managers to contact every customer monthly and tell them how to spend less money with your company. In most cases even the best account managers only have access to the same rate plans and Web interfaces that you do.  

Using a truly objective mobile management company that is not compensated by the carriers is the only way to know for sure that you are getting the best deals. Using a professional mobile management firm will enable you to keep your vendors honest.

Misconception #5: I don’t want to have to change carriers and phones and coverage areas to save money.

By utilizing a professional mobile cost management company, you do not have to make such changes to save money. Optimizing your rates based on your specific usage patterns by using the latest computer algorithms allows you to keep your existing provider. Stay away from any firm that advertises optimization but recommends switching all your phones to another carrier. Chances are they are getting paid by that vendor. If you use the right company to do this, the only thing that changes is a lower bill.

Misconception #6: I have a department that handles this. 

Even companies with the largest telecom staffs can benefit from bringing in an outside professional mobile cost management company. Most companies manage the costs on Excel spreadsheets and are doing it along with many other jobs. A professional management company uses rate plan algorithms that compare your usage patterns against more than 10,000 available rate plan variations and pool plans. The combination of the technology and industry insiders will provide your existing telecom team the tools to be more effective.

Misconception #7: We manage it pretty well, how much savings could there be?

A lot. On average each user spends approximately $100/month on mobile service. On average, a professional management company will reduce this cost by 25 or more. For example:
  • Monthly savings = $100 x .25% = $25/month per device or $300/year savings per device.
  • 1,000 devices results in more than $300,000/year in savings with relatively little effort by the company.
  • If a company operates on a net profit margin of 10 percent, every dollar saved is equal to $10 in new sales.
  • 1,000 devices = $300,000/year in savings or the equivalent of adding $3,000,000 to the top line.  
Is it worth spending an hour of your time to look at this? You bet.

Getting control of both your spend and your processes is a very attainable and relatively quick and easy solution. By using a professional telecommunications/mobile cost management company, you can take advantage of lessons learned by others, use proprietary technology, dramatically reduce your costs and improve your processes. Thinking this challenge going to go away is simply denial.

There are several firms that provide these services in a competitive manner. Our recommendation is to find one that you like and just go with it. Developing and managing and closing an extensive RFP can take 3-6months. Every month you put this off is costing you an average of $25,000/month/1000 devices. The extra couple of thousand dollars you save by completing the RFP will end up costing you significantly more at the end of the day.  

To learn more about managing mobile assets, please visit the Telecom Cost Management channel on, sponsored by Optelcon.

Robert Pommer is president and CEO at Optelcon, LLC, a provider of telecom cost management services for both wireline and wireless assets.

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