Miscellaneous cost management strategies

Miscellaneous cost management strategies
Data networking is highly complex, but invoices from carriers are surprisingly simple. The next few sections offer a few miscellaneous practical strategies that nontechnical people can use to minimize the expenses of a data network.

Avoid billing errors with centralized control
Most of this book focuses on how a company can manage the external relationships it has with its telecom suppliers. Many large companies wind up overpaying because the internal relationships are mismanaged.

Most large organizations have an IT department that manages their companywide computer network. But the telephone bills associated with the network are managed by a separate department—the telecom department or the accounts payable department. The people who plan and order the services are different from the people who manage the costs. Even though the ones paying the bills might not understand what they are paying for, they can still successfully manage these costs.

The following is an example of a company whose internal processes ended up raising its telecommunications expenses. An aircraft maintenance company in Ft. Lauderdale, Florida, processed the telephone bills for all of the company’s locations. The company’s Austin, Texas, location ordered a new T-1 and informed the telecom department in Ft. Lauderdale. The Austin office handled all the negotiations and coordinated the installation with AT&T. Once the T-1 was installed, the Austin office was no longer concerned about pricing issues. The manager in the Austin office had an “if it ain’t broke, don’t fix it” attitude.

The Ft. Lauderdale office began receiving invoices for the new T-1, but it could not determine if the charges were correct. The Austin office misplaced the copies of AT&T’s proposals and contracts, so it was impossible to verify the pricing. The corporate telecom department felt the charges were too high, but the manager in Austin wanted to ignore the situation because he was losing face. In the end, internal politics prevented the telecom department from efficiently managing the T-1 billing, and the company ended up overpaying AT&T for the entire 3-year term. The company’s upper management should have established some strict guidelines for negotiating, ordering, and verifying all telecom services.

Free e-mail
Prior to the widespread use of fax machines and the Internet, businesses subscribed to e-mail service provided by carriers such as AT&T. The e-mail messages were transmitted across the carrier’s network. Pricing for the service consisted of a monthly fee and a usage charge based on the number of characters sent. The service was expensive, but it was quicker and less expensive than overnight mail. Most businesses have replaced this type of e-mail service with Internet-based e-mail. A small number of businesses still have active accounts with carriers and still pay the invoice each month, even though the service is not used. The customer should cancel the service with the carrier and try to negotiate a refund for the previous few months’ service.

Medium and large businesses pay their ISP for e-mail accounts in addition to the charge for monthly access to the Internet. Many ISPs will give their customers e-mail. This expense can also be eliminated by using one of the numerous free e-mail services available such as hotmail.com.

Avoid fraudulent charges
One of the latest telecom scams is “cramming” bogus Internet charges on a customer’s local telephone bill. Most businesses do not question these charges and the thieves make easy money each month. LECs allow other companies to add charges to the LEC bill because it earns a billing fee. The charges are listed with a legitimate sounding name such as “Web hosting” or “Internet,” and may be as high as $100 per month. In some cases, the thieves copy elements of the company’s true Web site and build a phony Web site. The bogus Web site should be canceled, and the fraudulent company should give a full refund of all past charges.

Use a contingency plan
One of the fundamental strategies for managing a mission-critical data network is to have a backup plan, normally called a contingency plan. If the primary carrier’s data network fails, then the data traffic can be redirected to a secondary carrier’s network. In addition to being a backup plan, a two-carrier contingency plan also has cost management benefits.

For example, a Boston brokerage firm has a dedicated T-1 connection to Wall Street provided by WorldCom. The brokerage firm also installed a 56-Kbps line with Sprint to be used in case of a WorldCom service outage. The data networks of the telephone carriers rarely fail, so the brokerage firm may never use the Sprint 56-Kbps line. Nonetheless, using two carriers can be a strong negotiating tool for the business. When the WorldCom contract expires, the brokerage house will be able to negotiate very aggressive pricing with WorldCom. WorldCom would rather trim its profits on the account rather than lose it entirely to Sprint. Most small- and medium-size businesses do not bother with contingency plans.