Company outsources telecom expense management and saves big

As wireless costs increase, many companies are looking for ways to better manage their telecom expenses. One construction company decided to outsource its telecom expense management and saw its phone equipment and wireless service expenses almost cut in half.

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A growing number of corporate decision makers are setting their sights on wireless telecom expense management as the "Next Big Thing" in IT outsourcing. "They see wireless usage and costs increasing; they don't have the resources or knowledge to manage telecom expenses effectively, so they go to [an outside vendor] who has that capability," says Phil Redman, a research vice president at Gartner Inc. in Stamford, Conn.

Emcor Group Inc. is way ahead of the crowd on this one, according to Joe Puglisi, CIO at the Norwalk, Conn.-based global construction and facilities maintenance giant. "In fact, I think we helped start this trend."

Two and a half years ago, Emcor hired Telwares Communications LLC to negotiate and manage wireless rate plans; and Wireless Watchdog to handle employee cell phone purchases. The payback: mobile phone equipment and wireless service expenses have been almost cut in half.

Historically, Emcor's 70 business units have been responsible for their own IT purchases. During the last few years, however, the corporate IT group has taken over the administration of a growing number of commodity IT purchases, such as PCs and software. This has enabled the company to realize significant cost savings and efficiencies through standardization and national purchase contracts, Puglisi reports.

Pleasanton, Calif.-based Telwares was originally brought on board to help get telecom wireline costs under control, with wireless a secondary target. However, the two companies quickly identified wireless services as an area where more effective and proactive expense management would provide huge payoffs.

At the time, Emcor had about 8,000 cell phones. "They're standard equipment on construction sites, plus our executives use them," Puglisi says. Each business did its own cell phone purchases and made its own arrangements with carriers. As a result, "We had a tremendous number of rate plans, and a wide variety of contract terms," Puglisi says.

Telwares inventoried Emcor's current mobile installation and discovered a lot of waste. This wasn't surprising, given that business units had little motivation to conserve or recycle, according to Puglisi. A common practice was for managers to get their employees new cell phones for free, by signing them up for some wireless service provider's two-year plan. As a result, Emcor was paying a lot of unnecessary activation fees, and carrying literally thousands of unused wireless accounts. Once Telwares had identified and cleaned up those accounts, the total went down to 5,500.

Telwares consultants also analyzed cell phone usage patterns at Emcor and negotiated more favorable contracts with wireless carriers. Emcor charges back its subsidiaries on a flat per-minute rate, "which makes operating company telecom costs highly predictable," Puglisi says. "Plus we no longer wind up either wasting minutes we never used, or paying extraordinary charges for overages."

The flat rate also makes it easier to track usage patterns, both across the corporation and within business units, for purposes of chargeback and fine-tuning rate plans. However, managing Emcor's wireless telecom expenses across all 70 businesses was much too big and complex a job for the small corporate IT group, Puglisi concluded. "We're talking about trying to monitor 6,000 people whose calling patterns may change from week to week." So Emcor outsourced that job as well.

Emcor's IT group now negotiates with cell phone suppliers for the company as a whole, leveraging volume purchasing clout that the individual business units lacked. Furthermore, centralized inventory management under the TPA has enabled the firm to reallocate and reuse cell phones both within and across different business units, Puglisi reports.

Wireless Watchdogs tracks cell phone usage patterns across the corporation on a monthly basis, and finds the best wireless rate plans and deals available on the market.

The new arrangement has already provided Emcor with a major windfall when a carrier announced extremely aggressive rates, Puglisi reports. Under the old, decentralized setup, a few of Emcor's businesses might have picked up on the deal. "But because of our program, pretty much everyone took advantage," resulting in incremental monthly savings of tens of thousands of dollars.

Emcor also hired Wireless Watchdogs as a Third Party Administrator (TPA) that acts as a central liaison through which all employees order new cell phone equipment, repairs and services. Employees order a phone by calling an 800 number. The TPA may recommend an alternate model if the caller requests something that goes outside company guidelines.

Wireless Watchdog monitors invoices on an individual account level, to ensure that business units are complying with terms and conditions. The corporate IT group monitors invoices and compliance on an enterprise level.

Emcor has benefited hugely from the "specialized expertise" of its WTEM vendors, Puglisi reports. "I think we're above average in terms of our technological savvy, but we're also smart enough to know what we don't know." For example, "We recognized that it made sense to hire a TPA who monitors rate plans for a living, and has the systems and support staff to handle and optimize a high volume of transactions."

Emcor now applies the principle of "central administration combined with local autonomy" to other business areas, Puglisi says. For instance, the construction giant centralized office supply purchases across all of its businesses, and deals with one supplier instead of several. "Yes, volume purchasing seems like an obvious idea, but if you start out decentralized, it takes time to evolve," Puglisi says. "That's what we're doing: evolving to a higher order."

Elisabeth Horwitt is a contributing writer based in Waban, Mass. She can be reached at ehorwitt@comcast.net.

This tip originally appeared on SearchCIO.com.

This was first published in July 2006

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