Do you know how much a company spends on telecommunications services, from mobile phones to fixed lines to data feeds to video-conferencing? David Stanton, vice president for enterprise sales, Asia, at Cable & Wireless can tell you.
“It can get out of control,” he warns. “Ten thousand dollars can become 100,000, can become 1 million, can become many millions. The geographies in the region are spread out and you have a lot of mobility inside your workforce.”
Stanton spoke to CFO Innovation’s Cesar Bacani on what large companies in Asia are doing to manage telecom expenses in today’s environment, how much they are saving and how much they are paying service providers like Cable & Wireless.
What have you been seeing in Asia during the global financial crisis in terms of telecom services?
What’s unique about Asia versus Europe or North America is many of the markets [in Asia] that our customers are operating in are actually growing very strongly. Of course it’s always important to save money, but not at the expense of growth. What I have witnessed since about October 2008 is that many organisations did not have control of their [telecom] cost estimates. Speed and execution was more important.
The other thing we have noticed over that time in Asia is that usage-based consumption of mobile, remote access, voice services – all of sudden it can get out of control. Ten thousand dollars can become 100,000, can become 1 million, can become many millions. The geographies in the region are spread out and you have a lot of mobility inside your workforce.
So then you have a dilemma in many of these companies: How do you give the business what it needs in real time every time without giving up control on visibility? Do I procure all these services centrally or do I trust my business and have federated buys? There’s no right answer. Every organisation is finding out what balance works for them.
What I get from this is that there has been a lot of large companies over the past 18 months or so that have turned over management of telecom services to Cable & Wireless rather than do it in-house.
Yes. In Asia, we have acquired more than three dozen customers [since June last year] . . . Some organisations have the scale to do it in-house and do it very efficiently. But many don’t. And of the companies that do, some would not choose to use their highly skilled people doing what they would consider as fairly utilitarian tasks. They’d rather invest their talent on more strategic issues, which actually is a common sense approach.
How much are these companies saving from the resulting cost efficiencies?
It varies a lot, because the expertise with which many companies manage their system varies. We’ve had examples where we have been able to drive 30% cost efficiencies. In other clients that had been able to control their vendor mix better, perhaps that isn’t achievable. But we’re finding great efficiencies to be had, particularly in the mobile area.
Many clients that perhaps do not have the control, perhaps do not have the visibility into their total communications spend today, it’s a little bit of a guess what efficiencies could be possible, particularly if [telecom expenses have not] been managed closely. We’ll have to focus for a year, two years. It’s very realistic to drive 30%-plus efficiencies. If you have a total telecommunication budget of tens of millions of dollars, all of a sudden, those efficiencies are actually worth a lot of money.
Let’s talk about specifics. How do you as a managed services provider squeeze out savings from your client’s total telecom spend?
There are many different approaches to optimising your cost on, for example, mobile phones. At a very basic level, what is the inventory the client has? Is the inventory the same inventory that they’re getting invoiced for? Not always. Are the tariffs on the mobile phones the tariffs the sourcing team spent many months negotiating with the chosen service providers? Has the tariff plan been applied properly? This is all about bringing simplicity to the communications expense management.
Are you finding that what the company paid is not for services and the tariffs that were negotiated by the sourcing team?
It varies. Across Asia, there are different degrees of sophistication in billing systems because many countries are perhaps less liberalised, less deregulated, more historically incumbent businesses. Sometimes government owns them, sometimes not. Some of these billing systems are very old. They haven’t been invested in for decades, so the flexibility that you can get out of those billing systems insofar as perhaps electronic billing just does not exist.
Some of the billing, even today, is still paper. So when you’ve got tens of thousands of line items coming to you in a paper delivery every month and you got multiple languages, multiple currencies, multiple formats and you want to digitise all of that information so you can just get a single dashboard, I can understand how it becomes very daunting for many clients to do that in-house.
There’s been software that you can buy for decades, mainly out of North America. But the observation is many of these software companies that provide telecom expense management software are exactly that, software companies. They’re not managed-services companies. Their business is selling licenses. What I find is that many of the clients that we serve in telecom expense management actually don’t want to buy a license. What they want really is just control and visibility on costs they’re finding hard to track.
Then you have basic optimisation, where you can look at the aggregate, the volume of devices you are procuring. It might be voice, mobile or data, it might be calling cards. It could be voice conferencing. But you look at aggregate demand and you say, OK, is there an intelligent way of leveraging that volume, leveraging that sale? Am I getting a good deal? Is this the market rate? Am I getting good payment terms?
Many organisations in Asia have different tactics to manage that spending. At a very basic level, they just give them an allowance, said number of dollars per month. But if you’re going single [plans], you’re not going to get the best [rates]. Corporates that aggregate their volume into a corporate account not surprisingly can get much better leverage from their chosen service providers.
Would you, as the managed-services provider, negotiate service plans and tariffs with mobile phone companies and generally deal with them so the client don’t even need to pay the bills itself?
That is possible, but what we see in Asia is that many organisations are comfortable [doing these things themselves]. They just need help doing the heavy lifting . . . I can understand the ownership of the sourcing relationships being held by clients.
What we will do is work through our telecom expense management service through to your accounts payable function, right down to the plug-ins, to your ERP systems, your Oracle systems, to the point where we can say, that invoice, that inventory, against that tariff is ready for payment. So we streamline everything.
When we started developing this practice more than two years ago, the first thing we asked ourselves is: What sort of behaviour does our clients expect us to have? And we believe that those behaviours are: We have to be easy to do business with and we have to be a natural extension of their team. So if that’s true, how do you translate that into a managed service? So it’s all about openness, transparency, accountability. I can do as much or as little as you need me to do because the role I play is just filling gaps or substituting ways that you’re already doing. But you’re in control the whole time.
And if you find something wrong?
We handle the disputes. Or we would give you all the information you need to make that dispute resolution very efficient. So, here’s the dispute, here’s the order trail, here’s all the data that you need to ask your provider for said credit, for said rebate, for said cancellation. It’s all the heavy lifting.
What happens to the client’s infrastructure, do you actually take those over?
We can do it. Many organisations may not have invested wisely in whatever infrastructure it might be, it could be routers, switches, LAN devices. The interesting one at the moment is video conferencing. What happens is you have this orphan capability out there and they’re not getting used? There are cobwebs on them. Where [the videoconferencing equipment] is still on support, we try to get it used because you spent good money in buying these capabilities.
We ask ourselves, OK, what happened? It was a good idea at the time, but now no one uses it. Is the technology no good? Is it not fit for the purpose? What we generally find is that it’s not the facility or the equipment that does not work, because technically it’s sound. But the booking, scheduling, the pre-flight preparations for the meeting, no one’s managing those. We’ve been actually quite effective in optimising and improving some of these investments that really the business hasn’t been seeing value on.
Do you train their in-house staff?
We can train, but also as far as pre-setting up a video conference, we have our dedicated teams. All video these days is IP [Internet protocol]. So we’re managing those appliances [remotely] just like another end point.
Even better than that, we will actually pre-launch the meeting. So when [participants] walk into the room, whether it is an immersive experience tele-presence or whether it’s non-high definition, or they’re just moving into high-definition, we will pre-launch those meetings. When it’s over an IP fabric, the unit cost of doing those meetings can be low. What’s important is that as soon as the audience join the meeting, they can focus on their agenda, not focus on how they get this thing working. Why waste 20 minutes of the meeting before even getting started?
Do you find that demand for video-conferencing has risen because companies are cutting travel budgets?
It’s not just travel budgets. All expenses are under pressure. In many organisations there is a thirst for eliminating wastage. If I’ve got a logistics sourcing company that has maybe 300 people based out of Hong Kong and 150 of them travel every month, there’s enormous cost for that.
It’s not just the cost of traveling; it’s actually the inefficiency of looking at a product getting manufactured in China for a retail store in Europe or the U.S. . . . There’s a number of deployments where we’re using visualiser technology now on a tele-presence platform to look at products that are destined for a retail brand. That’s actually streamlining the supply chain process. It’s more than just cost-saving on travel. It’s completely reinventing the logistics supply chain for many retail franchises. This is fairly innovative, though I wonder if in two, three, four years’ time, it’s just going to be routine.
The actual hardware equipment we don’t make, but we provide the network, we provide the managed services, we provide the enabling technology. We have done it completely end-to-end, and we have also done it unbundled, that is, the client provides the equipment and we provide the network.
Can you give us any idea of how much a typical managed services contract would be worth per year?
Many of the clients that are using this service would have tens of millions of dollars worth of telecommunications expenses, up to hundreds of millions of dollars. Depending on the volume of spending, it is realistic to have these services provided at a small percentage of the total.
So 1% of the total spend?
Maybe a little bit more, but you’re in the range.
1% to 5%?
That would be a good range.