In the Corporate Liable vs. Individual Liable debate: which is stealing from your bottom line?
It is largely understood that providing enterprise employees wireless devices can sharply increase productivity and reduce cost; however, in a large organization the challenges of managing this process can become unwieldy and it is appealing to push the management of this process to a user level in order to avoid the hassles of procurement, administration and management.
In order to control cost and maintain control over productivity, your business will need to make an investment to track, manage and control wireless costs. Let’s examine the options:
Manage Wireless Cost with Internal Corporate Team and Corporate Billing Structure
Medium corporate investment, lower corporate cost
Pros:
- Contract centrally. “The most effective way for an organization to manage its telecommunications resources is to treat wireless the way most organizations treat wireline services and other business productivity services. This means that users contract for centralized billing for business lines”…states the In-Stat report, Wireless Billing for Organizations: Penny Wise and Pound Foolish
- Use one order system. The Bill Police benchmarking shows cost savings from two main areas: reduction of costs and process improvements for reductions in labor expenses and management of telecom expenses. Organizations should centralize telecommunications procurement with one order management system (see below)
- Low churn. The monthly turnover of customers, or the churn rate, is extremely important to the carrier and they are willing to forego monthly revenue dollars in exchange for the low rate of corporate liable churn (from an AT&T internal document regarding cost management)
- Corporate liable equals cost savings. Gartner advises companies to move from individual liability plans (where the user is responsible for the payment and contract) to corporate liability plans that allow for better control of costs through wireless optimization and corporate discounting. Businesses spend too much on wireless services Press Release July 24th, 2009
Cons:
- Lots of information to decipher. Corporate liable concierge services to end users means multiple carriers, billing and rate plans resulting in confusion and difficulty in finding meaningful data. The challenge here is being able to analyze the information on a timely (monthly) basis and make appropriate decisions to manage organization assets in a proactive manner.
- Corporate liable increases leverage. Lower costs through greater leveraging over the corporation can have political, cultural and administrative hurdles to overcome to embrace a true corporate liable program.
Use Employee Managed Individual Cost Structure Via Expense Reimbursement
Lower corporate investment, higher employee cost, highest corporate cost
Pros:
- Avoid corporate investment of procurement, maintenance and responsibility for device
- Less corporate time to manage equipment and applications
- Less corporate hassle when moving phones
Cons:
- $100 limit isn’t always $100 limit. An S&P 500 software company recently studied the effectiveness of its policy which limited employee wireless expense reimbursement to “no more than $100 per month”. Upon analysis of expense reimbursement data, they found that the average actual expense reimbursement was over $122 per month. They also determined that many employees applied the $100 “limit” as an “allowance”, expensing the full amount even if their actual wireless charges were less. Thus, with any financial policy, unless audited and monitored regularly, exceptions will occur and costs may rise even with reimbursement policies.
- Processing expense reports is costly. A Fortune 100 energy company completed a study to identify the cost of processing an expense reimbursement. Accounting for all costs, they determine the average total processing was $12. With their 4000 wireless devices, they determined they were spending over $575K annually just to process wireless invoicing while not getting any benefit of access to this data for meaningful management. (Note: Above items from Taming Wireless in Business: New Services and Capabilities Bring Increased Complexity Whitehurst, K. Wireless Telecommunications Symposium)
- No corporate oversight. Joe Basili, a research director in the global supply management practice for Aberdeen Group says, “There are still many enterprises choosing employee-liable plans.” This leaves companies blind to employees’ habits, whether that means making too many personal calls or using camera phones in confidential environments.
- Lots of wasted money. In-Stat, a Market Research Firm, in its recent research states: “Businesses in the United States are wasting in excess of $2 billion each year by not corporately paying their mobile employees’ wireless bills.”
- Employee Productivity Loss. “The cost in employee time spent filling out expense reports and lost productivity due to self-restraint in using wireless service amounts to $2 billion each year under a conservative estimate, The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report Aberdeen Group.
Outsource the Bill Reduction and Wireless Management Process
Lowest corporate investment, lowest corporate cost
Pros:
- Outsourced wireless management is worth it. “Enterprises forfeit 12 to 18 percent of savings, if they do not have a proactive approach to cost management that leverages technology and process improvements through business process outsourcing, hosted or licensed software.” (Aberdeen Group)
- Outsourcing saves internal labor. Aberdeen reported additionally that their benchmark also reported average (labor) savings of 21% for use of Business Process Outsourcing (BPO) or software for invoice-processing and 31% for service order management. These are the savings after the costs of the programs.
The Bottom Line on Individual Liability
In an ATT internal article, Making the case for enterprise mobility: wireless management and spend control, the carrier makes a very candid statement on cost: “There was a significant improvement in all key management and cost metrics for the lines managed by the enterprise purchasing in a corporate liable environment. On a $300 device, this can have major impact across a population. Average cost per user, month over month, will also be lower. With the organization in control of the devices, decisions can be made that embrace pooling, flat rates, or other cost-saving measures that are just not possible in the individual liability model. This can represent aggregate savings in excess of 30% for most organizations [thus] you can see how taking advantage of corporate pricing structures can have radical impact on expenditures”
