Step Away from The Telecom Poker Table
The telecom business is full of middlemen. It’s often referred to as the best-margin stacking business in the world as no network goes everywhere, though every network needs to connect to all places. This is true whether you’re going to the internet, transferring digital files, or making a phone call. To solve this, carriers buy from one another. The big guys from the small guys, the small guys from the international guys, etc. Then there is a vast number of agents that just add to the margin stacking.
It’s important to remember that carrier costs are constantly coming down because the technologies that support data transfers are improving at an exponential rate. This enables service providers that once maintained a digital “2-lane highway” to expand to “2,000-lanes.” This expansion supports more traffic which dramatically decreases the cost per packet (or vehicle) that transverses its path.
IT and telecom financial management is becoming a huge problem. This is a result of increased volumes and the poor level of economic visibility service providers (aka carriers) offer surrounding their services.
To understand this problem, you need to start with how a telecom service is sold. For data networks, a service provider sells a service (capacity) on a specific technology. The activation of each individual service can take anywhere from 30 to 120 days. The customer commits to a term from 1 to 5 years and agrees to what happens at the end of that commitment, this is typically an automatic renewal. The length of this renewal is negotiated and can vary by vendor, by contract, and by service; 1-month, 1-year, the original term, etc.
Where this gets complicated is that 100 offices can have 100 unique start and end dates. Some sites may even have different end-of-term renewal lengths and advanced notification windows required to make a change — 30, 60, 120 days etc. This means users are deciding the fate of their services at different times throughout the year, and in advance of each service’s term expiration date.
Sounds confusing? It is and it’s a bit intentional. The most important rule of telecom management is understanding dates (many, many dates). This is when you need to act. Lack thereof always benefits the carrier. This is not dissimilar from gambling and losing track of time; the longer you stay at the table, the better the odds are for the house. Though at the telecom poker table, if you’re unaware of your time (dates), cards (documents), and players (transient workforces), the odds are greatly stacked against you. You will lose money and you will waste time doing it.
This evolving chaos benefits the carriers primarily because the end-of-term actions are already agreed, so doing nothing is a predefined decision. You keep paying for a service until you act (or leave the table). Also, the myth that going month-to-month, on vendor commitments, will avoid this problem is fundamentally flawed. Instead, moving to month-to-month agreements simply swaps significant savings for the short-term flexibility to cancel. This practice is not lost on your service provider, they know most people forget and pay their non-competitive rates for years.
This lack of action is costing most businesses millions of dollars of bottom-line profits each year. For larger organizations and MANY Government Agencies, think tens, hundreds of millions of dollars wasted for services forgotten, duplicated, and unmanaged. It’s not maleficence on part of the employees, they are unaware and figuring it out is time-consuming, tedious, and not core to their job description. It can be viewed as “grunt” work that requires a higher-level business acumen. Also, and not surprising, service providers are of little help as they are not in the business of telling customers when they’re paying too much.
Removing oneself from the telecom poker table is complicated. Anyone who has looked at a carrier invoice or logged into their portal (or hundreds of them) knows that the data provided is confusing and, frequently, incomplete. This is partially due to the legacy technologies and disparate systems service provider use for billing and inventories. Invoices rarely tell you what you have, they are simply designed to tell you what you owe.
Fixing the problem is not impossible. For companies, you must first want to solve the problem (be purposeful). Bottom-line savings is not the priority for all divisions of an organization. Therefore, the solution must entail operational efficiencies that save time in doing difficult tasks. Start by automating and demanding better data from your providers. The best time to make a request is when you’re about to sign a new commitment or extend the length of an existing one. Do this with all your providers and you will have your data, your way.
The correct data requests can generate data consistency and save you hundreds, even thousands of billable hours. Next, store this data in a system that manages time. Each day that passes, your service is one day closer to a decision that you should pay attention to. Also, this data should find you, not you find it. Remember, telecom costs are constantly coming down, so each day that you delay should be viewed as a missed and unrecoverable savings opportunity.
Be forewarned, your carrier will say customizing their data is impossible. It’s not. Plus, if they are unable to provide you the information from their systems, how are you supposed to achieve this task? Be steadfast and they will agree, especially for bigger deals, in lieu of losing a sale to a more accommodating competitor.
The telecom poker table rules are simple; don’t pay for what you don’t need, don’t pay too much for what you do, don’t waste resources to know the difference. Not following these rules is a reactive strategy and is expensive. Knowing what you have and when to act is the only proactive move that will change your odds and the ability to pull true money from the vendor table