Companies waste millions in unnecessary telecom charges, report finds

Aberdeen Group urges users to take control of telecom expenses

Businesses that don't have full control over their telecom expenses are losing millions to unnecessary telecom charges annually, according to a new report from Aberdeen Group.

One source of extra expenses is late fees. Based on survey results, 65% of businesses are getting hit with late payment fees from their service providers.

On average, respondents incurred 2.9% late payment fees, which could be significant if a company's monthly bills run in the millions and are several months late, says Joe Basili, research director at Aberdeen and author of the report, The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report.

Telecom expense management (TEM) vendors MDSL, Paetec Communications, ProfitLine and Tangoe sponsored the report, which is available free of charge through Jan. 27.

In the report, Aberdeen's Basili describes ways to save money, such as using a reverse auction to secure new telecom services.

In a reverse auction a company states what it needs, whether it's a worldwide data network or wireless voice service for 2,000 sales representatives. Carriers then bid for the contract, with prices dropping as competition heats up. The carriers include contract terms when they make their bids, such as service-level agreements (SLA), early termination fees and specifics on pricing.

According to Basili, companies achieve an average cost reduction of about 33% after using a reverse auction. Yet only 14% of respondents are adopting reverse auctions as a means of securing new telecom services. Most business users appear uncomfortable with this RFP process, with 61% saying they have no plans to use reverse auctions.

Other things Aberdeen Group suggests companies can do to reduce their telecom expenses are: centralize telecommunications procurement with a single order management system; aggregate all telecom expenses with an invoice-processing system; select metrics to track telecom expenses; and select metrics to track labor costs associated with telecom expense management.

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