Telecom Spending Is Out of Control. And CIOs Still Refuse to Care.
The more things change, the more they stay the same. I apologize for the cliche, but that's the most accurate description of the telecom industry today and the reckless and irresponsible way in which enterprises are managing their telecom spend. And, of course, let us not forget who is most often in charge of telecom and networking in those enterprises: the CIO.
I say all this for a couple of reasons. The first reason is that since reporting the feature story "Untangling Telecom: How to Get More and Spend Less" for the March 15, 2006, issue, I have had a chance over the last year to talk to many more people about the issues raised in the article. Recently, I have heard more anecdotal evidence that enterprises are hemorrhaging tons of money by not managing their telecom spend in a more standardized, accurate and centralized way. Another reason for the lax management of telecom expenses inside enterprises is due to carrier consolidation and the continued complexity and confusion surrounding rates, billing and contracts. And lastly, things are a mess because CIOs don't care about telecom -- they don't know much about, don't care to know more about it, and would rather delegate the responsibility to someone else. And that, my friends, is dangerous.
A couple of recent reports from Aberdeen Group both bolster my contentions and illustrate several problematic and costly trends that will gradually erode enterprises' telecom management policies and strategies, and overwhelm those in charge.
The first statistic from Aberdeen's "The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report" (Nov. 2006) should get every CIOs' attention: The average Fortune 500 company reported that telecommunications and related network services are a top line-item expense, accounting for 3.6 percent of their revenue. OK, so if I'm a CIO or head of IT, and something I'm responsible for has ballooned up to the top three overall expenses of the entire company, and there appears to be a need for better management of the function, shouldn't I be paying more attention to it?
According to the report, enterprises forfeit anywhere from 12 percent to 18 percent of all the money they spend on telecom "if they do not have a proactive approach to cost management that leverages technology and process improvements through business process outsourcing, hosted or licensed software." Remember that the respondents to this survey averaged $30 million in annual telecom expenses each year. (One enterprise had $250 million in annual expenses!) In addition, many enterprises aren't paying their telecom bills on time: Two-thirds of the survey respondents incur late-payment penalties as a result.
The report notes that the challenges in managing telecom-related expenses include "decentralized spending, continually changing inventory, complex billing for a wide range of offerings, and baffling contracts with amendments that are difficult to understand." What compounds the decentralized telecom spending problem is that "local service providers are often selling to facility managers at regional offices that are eager to buy telecom services on their own." The report notes that more than two-thirds of "enterprises do not have a program to drive centralized procurement of telecom services."
And then there's wireless services, which has turned into a blessing and a curse for companies. In "The Real Cost of Enterprise Wireless Mobility" report (Feb. 2007), Aberdeen contends that it costs enterprises nearly 10 times more to manage wireless services and devices than wireline. That's a scary figure when you consider that 80 percent of respondents are planning to increase their fleet of wirelessly enabled PDAs. At least with this survey base, it's interesting to see that the wireless problem has gotten somebody's attention: "It is no wonder that escalating wireless expenses is reported as a top priority for 64% of our respondents," the survey notes.
I could keep heaping on the doom and gloom regarding wireless, but Aberdeen's report sums it up best: "Enterprises do not have visibility into what they are currently paying for wireless services. They do not have an accurate measure of the costs to support devices, and they are unprepared for the proliferation of smartphones."
If CIOs don't start caring about telecom, networks and wireless expenses more, I think they're going to be in a world of hurt when (if they haven't already) get called out by the executive committee and asked why the company's telecom expenses are so high. You see, everyone -- including CIOs' peers -- knows that telecom costs have been consistently decreasing year over year for the last decade or so. So why, the executive committee might wonder to its CIO, are our costs continuing to rise?
Do you have an answer? Do you have a plan? Do you even care?
Print
I say all this for a couple of reasons. The first reason is that since reporting the feature story "Untangling Telecom: How to Get More and Spend Less" for the March 15, 2006, issue, I have had a chance over the last year to talk to many more people about the issues raised in the article. Recently, I have heard more anecdotal evidence that enterprises are hemorrhaging tons of money by not managing their telecom spend in a more standardized, accurate and centralized way. Another reason for the lax management of telecom expenses inside enterprises is due to carrier consolidation and the continued complexity and confusion surrounding rates, billing and contracts. And lastly, things are a mess because CIOs don't care about telecom -- they don't know much about, don't care to know more about it, and would rather delegate the responsibility to someone else. And that, my friends, is dangerous.
A couple of recent reports from Aberdeen Group both bolster my contentions and illustrate several problematic and costly trends that will gradually erode enterprises' telecom management policies and strategies, and overwhelm those in charge.
The first statistic from Aberdeen's "The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report" (Nov. 2006) should get every CIOs' attention: The average Fortune 500 company reported that telecommunications and related network services are a top line-item expense, accounting for 3.6 percent of their revenue. OK, so if I'm a CIO or head of IT, and something I'm responsible for has ballooned up to the top three overall expenses of the entire company, and there appears to be a need for better management of the function, shouldn't I be paying more attention to it?
According to the report, enterprises forfeit anywhere from 12 percent to 18 percent of all the money they spend on telecom "if they do not have a proactive approach to cost management that leverages technology and process improvements through business process outsourcing, hosted or licensed software." Remember that the respondents to this survey averaged $30 million in annual telecom expenses each year. (One enterprise had $250 million in annual expenses!) In addition, many enterprises aren't paying their telecom bills on time: Two-thirds of the survey respondents incur late-payment penalties as a result.
The report notes that the challenges in managing telecom-related expenses include "decentralized spending, continually changing inventory, complex billing for a wide range of offerings, and baffling contracts with amendments that are difficult to understand." What compounds the decentralized telecom spending problem is that "local service providers are often selling to facility managers at regional offices that are eager to buy telecom services on their own." The report notes that more than two-thirds of "enterprises do not have a program to drive centralized procurement of telecom services."
And then there's wireless services, which has turned into a blessing and a curse for companies. In "The Real Cost of Enterprise Wireless Mobility" report (Feb. 2007), Aberdeen contends that it costs enterprises nearly 10 times more to manage wireless services and devices than wireline. That's a scary figure when you consider that 80 percent of respondents are planning to increase their fleet of wirelessly enabled PDAs. At least with this survey base, it's interesting to see that the wireless problem has gotten somebody's attention: "It is no wonder that escalating wireless expenses is reported as a top priority for 64% of our respondents," the survey notes.
I could keep heaping on the doom and gloom regarding wireless, but Aberdeen's report sums it up best: "Enterprises do not have visibility into what they are currently paying for wireless services. They do not have an accurate measure of the costs to support devices, and they are unprepared for the proliferation of smartphones."
If CIOs don't start caring about telecom, networks and wireless expenses more, I think they're going to be in a world of hurt when (if they haven't already) get called out by the executive committee and asked why the company's telecom expenses are so high. You see, everyone -- including CIOs' peers -- knows that telecom costs have been consistently decreasing year over year for the last decade or so. So why, the executive committee might wonder to its CIO, are our costs continuing to rise?
Do you have an answer? Do you have a plan? Do you even care?
Previous Post: The Dirty Little Secrets of TelecommutingNext Post: What Happened to That Whole Hoteling Concept?
What is Tech Briefcase?
TechBriefcase is a new, free service where IT Professionals can Search, Store and Share IT white papers and content like this. Learn more
Bookmark content
Speed up your research efforts with content across the web.
Search and Store
Find the white papers you need. Create folders for any topic.
View Anywhere
Open your briefcase on your iPhone, tablet or desktop. Share with colleagues.
Most Discussed Posts
Cloud computing has emerged as one of the most significant game changers to hit the technology landscape in the past 20 years. With this massive expansion of the cloud, the perception of the IT organization is shifting from a utility player to a change agent. This eBook breaks down five ways progressive organizations are using cloud-based IT Management solutions to help drive innovation and become more strategic, including: adding visibility and analytics, speeding up time-to-value, lowering costs, improving prioritization, and providing a blueprint for future cloud deployments.
Read the white paper to see how IBM helped Citigroup deliver new services and enhancements to their 200 million customers faster.
There are 3 ways to modernize legacy applications: rewrite completely, acquire packaged solutions or migrate existing code. This paper explains why it's best to migrate and how IBM® Rational® software can help.
Accommodating specific lines of business can result in a hybrid ecosystem of applications and servers. The resulting complexity of this architecture makes for an environment that is costly to maintain and difficult to change when addressing new challenges.
This whitepaper will help you to define a mobile device passcode policy. Security managers must attempt to reconcile two opposing goals. They must: 1) create a passcode policy that is strong enough to protect the device if it is lost or stolen, while: 2) not annoying users with needless length or complexity.
This whitepaper, authored by The Radicati Group, looks at the key reasons organizations should consider moving to a cloud-based archiving solution. Email archiving solutions enable organizations to store, monitor, and collect electronic data exchanged by their users to comply with internal policies and regulations.
ATERNITY will showcase a 30-minute demo on how Fortune 500 companies are leveraging its award-winning FPI Platform to deliver a user-centric approach to Proactive IT Management.
For businesses to move forward and tap into the ever-expanding universe of Internet users and network-enabled devices, it's critical to learn how to make the transition to IPv6. Learn the critical steps your organization must take to make a seamless transition-and keep your business world connected.
Learn how IT teams can protect against spear phishing tactics. Harry Sverdlove, chief technology officer of Bit9 offers a frank discussion about spear phishing - the most common technique used in today's advanced attacks.
Learn how to build a solid business case for your migration to Red Hat Enterprise Linux so you can run leaner, innovate faster, be more flexible and own the New Now.
Social media isn't about you; it's about everything around you. As you consider how your customers want to communicate with you, social media is something that can't be ignored. But what should your strategy be? Is social media "just another channel?" What kind of a plan makes sense for your contact center and for your customers? Join our experts as they share their insight and research results.
Hardware tokens were a popular method of strong authentication in past years but the cumbersome provisioning and distribution tasks, high support requirements and replacement costs have limited their growth. The additional log-in steps that hardware tokens require and the resulting user frustrations have limited adoption and make them impractical for larger scale partner and customer applications.
Sponsored Links
