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Businesses are spending more on cellular services than ever before. Are they getting slammed?
Karen Bannan, CFO Magazine
June 1, 2004
In one of the more memorable episodes of the "Brady Bunch" — and really, how often do we get to use that opening? — parents Mike and Carol are shocked when they see how big their monthly phone bill is getting. The solution? They install a pay phone in the family room, forcing the kids to deposit a dime when they place a call to classmates, coaches, and Child Services.
Harsh, yes, but a few corporate controllers might vote for a similar approach. The fact is, business spending on telephone services — and specifically, business spending on wireless telephone services — is mounting dramatically. According to industry-analyst firm Yankee Group, U.S. businesses now spend a quarter of their telecommunications budgets on wireless offerings. All told, that works out to about $33 billion.
Granted, this hefty phone bill is due in large measure to the ever-increasing corporate reliance on wireless devices. These days, you'd be hard-pressed to find an executive or salesperson who doesn't carry a company-provided cell phone or BlackBerry. In fact, many CEOs seem to think that sky-high cell phone bills mean sales staff are diligently calling prospective customers.
They could be calling Movie Phone for all anybody knows — few companies analyze the wireless spending habits of their employees. In fact, Yankee Group reckons that barely half the large businesses in the United States manage their cellular accounts centrally. For the rest, bills are usually handled by a welter of departments, functions, and business units. Moreover, employees typically lump in their bills with the rest of their monthly expenses.
That's a big blind spot, one that has some companies paying way too much for their wireless service. Take Getronics, an information and communication technology specialist with about 22,000 employees worldwide. More than 2,200 of the company's North American sales personnel have cellular phones.
Until two years ago, the company's management couldn't get a handle on what it was paying for those phones. "It was very difficult, if not impossible, to obtain correct management information on our mobile telephony," recalls Romolo Pallini, Getronics's director of networks, Internet technologies, and telecom. "Some of the bills were paid centrally. Some employees put in expense reports each month. It was a total mess."
In the Roaming
Faced with similar problems, some companies have demanded that their wireless vendors provide audits of cell phone usage. That way, controllers can see which workers are running up unusually big tabs. The usual suspects: employees who rack up big roaming charges or exceed their plan minutes.
But experts note that companies often use several cellular carriers, leaving finance managers to deal with a fistful of lengthy audits each month. Desperate for a less-cluttered view of cell phone spending, some business managers are turning to phone-audit software. The programs, which aggregate calling data and analyze cellular trends, are available from a number of vendors, including Traq-wireless, based in Austin, Tex.; Framingham, Mass.-based AnchorPoint; MSS Group, based in Denver; and TelSoft Solutions, in Glendale, Calif.
The audit software, among other things, examines the call-detail records for all wireless phones and predicts future usage — including roaming and long-distance charges. Brick Thompson, interim CEO of MSS Group, claims the company's customers typically save about 22 percent on their cellular costs using MSS's audit software.
Vendor hype? Not necessarily. Industry experts point out that, with wireless-number portability, it's now much easier for business users to change cell providers. The providers know it, too. Keen to hold on to existing customers, they're more willing than ever to renegotiate terms, even midcontract. "The carriers have to spend $400 to $450 for each new customer," explains Charles Mahla, a senior economist with research firm Econ One, based in Los Angeles. "They'll do all sorts of things to keep you once they have you."
Pallini, for example, performed an audit of Getronics's wireless spending using Traq-wireless's software program. He found that the company was spending 22 cents to 25 cents per minute, mostly because employees were exceeding their plan minutes. Pallini took the data and used it to wrangle better rates from the company's many carriers. He also began adjusting the calling plans of nearly every cell phone user in the company. Now, Getronics's per-minute spend on wireless service hovers between 12 cents and 15 cents per minute — about half of what the company was previously paying.
Big Savings Evenings and Weekends
Given those sorts of savings, experts believe cell phone audits will become fairly commonplace in the next few years. They also believe many businesses will consolidate the management of their wireless programs, tapping a single department to oversee procurement and payment.
Such a move makes sense. "What you don't want is employees going down to the mall and signing up for service on their own or submitting expense reports each month," asserts John Dretler, AnchorPoint's senior vice president. "Then you've got everyone on different plans — there's no consolidated buying and there's no chance for management to review costs monthly."
By funneling all wireless data into one departmental repository, cellular records can be sorted and analyzed easily. Companies can then formulate usage policies, establishing different rules for different job functions or departments. Offers Thompson: "Maybe salespeople should not use more than 1,500 minutes each month, and field techs shouldn't use more than 750 minutes." Employees could then be sent an E-mail informing them of their overages. In some cases, Thompson says, workers could even be held responsible for any additional charges over their monthly limits.
Sales staffers are sure to love that. Indeed, weaning some workers from their addiction to lavish, company-paid calling plans could be the biggest hurdle in reining in runaway cell phone costs. But the truth is, many workers simply do not need cell phones to do their jobs. Others, particularly those who mostly call colleagues, would be better off with walkie-talkie service, which is less expensive than cell phone service.
Prepaid wireless-service plans might also help curb excesses. Says Mahla: "You can give an employee a prepaid phone and say, 'Here's your minutes for the month.' "
Karen Bannan is a Long Island, N.Y.-based freelance writer.
Lose your cell phone or cell phone charger, and you uncover one of the more unpleasant secrets of the wireless age: while wireless-service providers do subsidize new phones when renewals come due, they tend to charge rack rates — some would say wrack rates — when a customer wants to purchase a replacement phone midcontract. A handset that cost a mere $25 when bought in conjunction with a calling plan can cost five times that when bought à la carte.
Galling? You bet. And while some vendors will replace phones at cheaper prices, they usually demand a contract extension in return. Given that prospect, it's hardly surprising that companies have found new ways to replace lost phones. Some are buying low-end models, phones with fewer, well...bells and whistles. Others are turning to online auction houses, which often boast sizable inventories of new and used cell phone equipment.
Case in point: virtual-auction giant Ebay, which features more than 170,000 cell phone and accessory listings at any given time. According to Sergio Monsalve, the company's senior category manager for cell phones and portable electronics, more than 2,500 cell phones are sold on Ebay each day. "Ninety-five percent of our customers come in because they want to upgrade their phone but don't want to change their plan," notes Monsalve. "And 30 percent of our phones are high-end phones used primarily by mobile workers."
The savings can be substantial. Replacing an old workhorse like a Nokia 2260 can cost as much as $140 when purchased through a wireless-service provider. The same phone, albeit used, can be had for about $40 on Ebay.
Another way to keep the costs of replacement cell phones down, say experts, is to make employees liable for missing or damaged wireless equipment. While such a policy isn't likely to win management any friends down in the company cafeteria, it will keep employee chicanery to a minimum. As one industry insider notes: "Some employees lose a phone to get a new one. It's human nature." —K.B.