5 Tips to Reduce Telco Costs

By Tara Swords

Saving money on telecommunications for your business is easier than you think if you mix common sense with some of the new technologies available.

Any business owner who opens the monthly phone bill is acutely familiar with the feeling of anxiety. Telco costs can be a ghastly expense, sometimes rivaling the cost of payroll, and they can get progressively out of control as your business grows. That’s why it’s a good idea to assess your telco expenditures now -- and make it a habit to regularly reassess them. The good news is that many companies can cut costs just by starting with a common-sense approach to controlling telco costs and exploring use of new technologies to keep spending in line.

1. Check your bills for errors.

This tip is so obvious that many companies overlook it. In fact, Jim Browning, vice president at Gartner Inc., the Stamford, Conn. research firm, said in a recent report that enterprises “typically overpay for six percent to eight percent on their telecommunications invoices because of billing errors. The most common problems are circuits that have been disconnected but continued to be billed, and invoices that do not reflect new, lower rates.”

The problem is so pervasive that a whole category of business -- telecom expense management (TEM) -- has sprung up. You can hire a TEM company to audit your bills and help you find other ways to save, but this service may not be a practical option for smaller businesses with less complicated bills. Just make it your policy to regularly audit your invoices, and don’t forget that even the small overcharges add up.

2. Renegotiate your contracts.

If your telecom contract is set for automatic renewal, you might be cheating yourself out of a better deal. Talk to other providers and see if they can beat the price you’re currently paying or can offer more services for the same price.

According to a 2006 Gartner report, “When renewing a contract, we have found that enterprises that just renew their contracts do not get deals as good as enterprises that make their contracts competitive. The differential is often as high as 15 percent." New options from telecom firms are available as cable companies start offering telephone service and telcos start offering cable. There is also the increasing trend to use wireless service for a primary business phone, which can lower long-distance fees and provide you with a fixed monthly rate for service. If you want to stick with landlines, you don't need to bother with a formal RFP process if you don't want to, the Gartner report notes: "Just ensuring that the incumbent vendor knows you're getting quotes from other vendors can improve the price."

3. Consider VoIP.

You’ve probably heard the buzz around voice over Internet protocol (VoIP). It’s already taking the enterprise world by storm, and adoption among small and mid-size businesses is gradually increasing. VoIP enables you to use your data network -- which you already use to access the Internet -- to place phone calls. It can be much more cost effective than owning your own private branch exchange (PBX), not only because the equipment is cheaper, but also because you can make many of your calls without ever using the public switched telephone network or paying for long distance.

Keegan Mills, technology director of Virginia-based consulting group Delta Resources, says his company’s investment in VoIP using an IP-PBX system was a no-brainer. “I don’t know if you’ve done any sort of cost analysis on a PBX, but there wasn’t anything on the market that was even close” to what they could save by switching to VoIP, Mills says. “I almost thought it was too good to be true. But we’re three years into it and we haven’t outgrown it yet.”

If you’re not ready to commit to an all-VoIP system, consider letting employees use a computer-based VoIP service such as Skype. Your employees can make computer-to-computer calls to anywhere in the world for free, and they can make computer-to-phone calls around the world for a fee, which may be significantly cheaper than you’d pay for international calling over the traditional phone network.

4. Investigate package deals.

Seek out providers that offer multiple services and can give you a deal when you sign up for more than one service. For instance, if you’re not ready to switch to VoIP, you may still be able to use the same provider for both telephone and high-speed data service. Additionally, you should regularly analyze your usage patterns. If your company has grown since you signed up for telephone service, your needs might have changed. You might be suited for a different, cost-saving package.

5. Let employees use instant messaging (securely).

Many business owners have banned the use of instant messaging (IM) services because of fears that they distract employees who would rather chat with friends than work. It can be a valid concern, but many companies have realized that the benefits of letting employees connect via IM to conduct business far outweigh the potential drawbacks. If a large portion of your telco spending goes toward communications between branches or offices, consider allowing employees to collaborate over IM when it makes sense. Just be sure to institute rules for how IM is used -- and do your homework about how to prevent IM security problems, which can present a threat to your network if not addressed.