Simple Price Structure Better for Managing Telecom Costs

Posted on Posted in Cost Savings, Telecom Expense Management

Commodity Services Mean Lower Prices

As I am sure you are aware, many telecom services have become a commodity. There is virtually no differentiation from one long distance service to another, or even Internet access from multiple providers with the same technical specifications. This has caused pricing to come down dramatically over the years, and it continues to come down. This is the lowest hanging fruit available to increasing your telecom management ROI. 

Simple price structure is better for managing telecom costs

Even if you may have already reduced costs significantly, there may still be room for improvement.  For example, consolidating vendors, electronic billing, and negotiating vendor contracts can drive down costs.  One thing to remember to help manage telecom costs more effectively, is to keep your price structure as simple as possible.  

The key to obtaining the best possible pricing and terms is to have as much leverage on your side as possible. Understanding your spend and usage patterns, and which vendors are best suited to those patterns will go a long way to reducing your costs, and help you avoid a situation like the City of Toronto found themselves in in 2005.

If you have a purchasing department, they can help with the process of negotiations, and will generally help you get better pricing. Couple the purchasing expertise with your own domain expertise, and that of your peers in other organizations. Find out what the current competitive rates are so that you can benchmark vendor proposals against the best of breed.

You might also consider enlisting help from experts who specialize in negotiating telecom contracts, and managing telecom costs, since they will always be up to date on the latest market rates and the terms that are available and realistic for your organization. 

Simple Price Structure Is Better

Whenever possible, negotiate to get the simplest possible pricing structure. As an example, in Canada, flat rates for long distance across North America has been the norm for many years. It costs the same per minute rate to call from Toronto to a neighboring suburb, to Los Angeles, or to Alaska. This happened because of intense competition, and insistence from businesses and consumers to make pricing simpler. 

Some other countries, however, are likely still stuck with regulation that dictates certain tariffs for different types of calls. Working on getting the simplest possible price structure will help you validate those invoices, and help you manage your costs in the long term. It may even be worth paying a small premium.

 

If you would like help negotiating your vendor contracts, or to get more advice on how to go about the process, please contact Avema for a free consultation.

 

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