Wireless as a Priority

During tough economic times, managers, responding to directives from the C-Suite/Board room, typically look to the expense half of the income statement. Top line growth, the more sustainable practice to improve bottom line (costs can’t be cut in perpetuity but revenue can ostensibly grow to the current size of the overall market plus organic growth), is viewed as unrealistic and as such, controlling costs becomes the corporate dictum. In my recent travels, I have heard of 20% across the board cuts mandated by “corporate”. That sort of arbitrary pronouncement seems not only unrealistic but also not very well thought through. Perhaps focusing on areas that are truly wasteful and where an impact can be felt quickly without any material change to performance is a better strategy?

One of the challenges TEM/WEM vendors face during the sales process is the notion by potential clients that telecom really isn’t a priority; that they are looking to achieve significant savings and wireless (in our case) simply doesn’t measure up. Independent research has shown that telecom represents the third largest line item on the expense half of the Income Statement with wireless accounting for a significant and growing percentage of that spend. Yes, there are larger issues and perhaps areas where wastefulness is even more egregious. However, when you compare cost savings opportunities, managers must also consider the time and resources required to implement such changes. That is where IRR comes in.

I am a venture capitalist by trade. VCs are typically measured using two metrics: cash on cash return (our preference) and Internal Rate of Return (IRR), the preference of those that typically evaluate our performance. IRR measures investment and returns over time. The critical thing to understand here is that time is as important in the calculation as is return. Think of it as ROI weighted to reflect the time value of money; money today is worth more than money tomorrow. It is absolutely critical for managers to consider the value of their time when evaluating projects side by side. Implementations of WEM projects typically take 90 days. During that time, the vendor is determining requirements, gathering information, building and reconciling inventory, consolidating accounts, evaluating policy, analyzing bills, configuring reports etc. At the conclusion of those three months, the client should begin to experience the benefits, both economic and execution, of outsourcing to an industry expert. Compare that timeline to that of some of the oft sited initiatives competing for the hearts and minds of managers and there is really no comparison. I am certainly not eschewing the virtues of other cost cutting mechanisms. However, telecom seems to be continually subjugated to other, “larger” initiatives. When put in what I believe to be the proper context, a comprehensive analysis and shift of the telecom environment makes quite a bit of sense.

But it certainly doesn’t end with hard cost savings. It is hard to ignore that the wireless world is changing every day. Competing for a saturated market (in a country of 300M, there are more than 270M cell phones) carriers are shifting their pricing models. We are clearly moving toward a buffet style pricing strategy on the voice side; the all you can eat for $40 strategy. So if the price of plans is static, doesn’t that change the game for WEM provider? Well, the answer is yes and know. Let’s start by clarifying the savings generated by a good WEM vendor. We have discussed hard costs but we really haven’t gone in depth as to the soft cost savings. In the most recent “Voice Report” published by CCMI, the responsible ratio of Devices-to-Staffer is 500-to-1. The same report postulated that outsourcing to a WEM Vendor can move that number to 5,750-to-1! Just think about those numbers. For an organization with 11,500 cell phones, they would require 21 less full-time staffers to manage the wireless environment (from 23 to 2). Even at a modest, fully loaded cost of $50k/employee, that equates to $1,050,000 in employee cost savings. That more than covers the $800,000-$900,000 a WEM vendor might charge that company annually. And an effective WEM partner will identify and curtail employee behavioral issues that impact costs (mobile media, texting, directory assistance etc.) representing another significant savings category.

Beyond savings, outsourcing management of your wireless environment can have a dramatic impact on the organization from a process perspective. A true knowledge expert can employ best practices as it relates to policy, costing, and reporting. I spoke of policy in the prior post so I don’t need to reiterate that argument. Costing can become an issue in large organizations with numerous cost centers, especially when they are already pooling minutes in their wireless plans. For example, I may have a 200 minute plan and Jim is on the 1800 minute plan. Between us, we average about 1900 minutes each month so the numbers work. However, at present, my department is being charged for my 200 minute plan and Jim’s is charged for 1800 minutes. But, if I typically use 1100 minutes and Jim uses 800, does that paint a clear picture of performance? Is that fair? Of course not. Some companies assign costs to centers based upon headcount believing it gives a more accurate portrayal of actual costs. Perhaps but the best methodology is clearly to charge each center based upon actual consumption. A good WEM vendor can do precisely that. When you add custom reporting to the picture, the argument for outsourcing the wireless program is clear.

We are living in difficult economic times. Managers, working with fewer resources, are being asked to analyze key initiatives, departments and processes to find and eliminate waste. I have made the argument in the preceding prose that the wireless environment deserves a seat at the table. I’m convinced….. are you?