Are Telecom Audits Still a Worthwhile Effort?

As a company that includes technology audits as one of its core competencies, we are clear in our opinion and have the data to back it up.

Starting at the highest level of technology expense, most consumers of enterprise level IT services have become accustom to seeing costs increase.  In some cases senior management doesn’t necessarily scrutinize the various components embedded in the IT budget like they once did.  According to industry reporting trends, IT budgets are typically comprised of the following major cost components:

• Personnel
• Hardware
• Software
• External IT Services
• Telecommunications
• Supplies/Facilities

Analysis of various reports suggests that telecom services (voice and data) represent on average, 14% of the total IT budget across all industry segments.  This single cost element is second only to Data Center costs at 22% which, happens to be another area where we help clients achieve significant cost reductions but, let’s stick to telecom for now.

There was a time when telecom was a stand alone cost center but over time, the function and associated cost was incorporate first into the more encompassing MIS budget which then morphed into the larger IT budget.  As an integral part of the much larger IT utility, the cost impact of telecom can easily be overlooked and result in an organization spending more than necessary.  Historic results in our own practice speak for themselves and average about 22% in annualized cost reductions not including any associated one time recoveries that can be significant in their own right.

So why is this an area where such results are possible?   There isn’t a simple answer but there are many contributing factors:

1. The industry as a whole is in a continual state of flux which creates both opportunities and risks
2. Limited knowledge of the overall market conditions and market specific negotiation strategies
3. Non existing or dated supplier contracts that aren’t market competitive
4. Inaccurate application of contracted rates by the suppliers
5. Less than optimal service configurations either self or supplier created
6. Inaccurate supplier invoicing
7. Inappropriate application of fees and late penalties

So should you consider an audit?  Perhaps you don’t believing that:

1. Telecommunications costs aren’t such a big part of their overall IT budget
2. All IT costs are totally under control by the IT manager and IT team members
3. Its too much of a distraction and we don’t have the time

While all of this may be true, maybe it’s not.  It might be worth a few minutes of your time to ask yourself or your IT manager:

1. What percent of the IT budget is telecom related
2. Is each cost component of the budget optimized and market competitive
3. Are all services and suppliers covered by recently negotiated contracts
4. Who negotiates our contracts are they well versed in the telecom marketplace
5. How long has it been since an audit was conducted

As we have proven time and time again, while most believe that they have this area of overhead well in hand, many don’t.  This table plays out the potential for a small/medium sized entity.  Consider the potential for your organization.   Obviously the larger your IT budget, the greater the potential.  Optimizing your Telecom spend can help you fund other initiatives, retain or obtain staff resources, meet and potentially exceed budget projections and/or simply allow for greater internal compensation or improved bottom lines.

The steps necessary to identify, address and implement cost savings initiatives is non-intrusive/disruptive and typically produces positive bottom line results in very short order.  The most difficult part of a technology audit is the time it takes to convince an organization that they may have a problem.  While not all organizations do and, maybe you don’t, why not make sure.  It’s probably safe to say that any corporate executive would rather improve their bottom line than continue to help the telecom industry improve theirs.