White Paper Series:

Effective
Cost Per Minute
Measuring Success in Wireless Expense Management
by Chet Thaker

Introduction

Business and government organizations are becoming increasingly adept at developing and implementing policies that control their wireless expense. The success factors in controlling wireless expense include: having employees make purchases under the corporate discount agreements negotiated with the providers, closely matching employees’ calling plan minutes to their actual business calling needs each month, and making employees aware of their wireless usage, in real-time, at specific usage thresholds to enable them to avoid exceeding their plan’s allowance.

Many metrics are available to assess the success of an organization in controlling wireless cost. Among these are: average cost per user, number of zero usage accounts, accounts with overage minutes, rate per minute, total wireless spend trends, and many more. The true test for success of wireless expense management is effective cost per minute (ECPM). This overview further examines the success factors of wireless expense control and explains the preference for ECPM as a key benchmark worthy of adoption.

Procurement

Assisting employees with purchases under the corporate discount agreements (up to 25% below street prices) is made easier by having a catalog shopping portal available on the company intranet site. The wireless portal should offer the employees a broad choice of vendor plans suitable for their geographic area, a calculator for savings analysis based on their own calling patterns, and a side-by-side comparison of all calling plans, phones, and accessories to assist in making an informed decision.

Controlling cost is more complex with employee expense reimbursement. The intranet wireless portal tools support employees in getting reimbursed for their expenses, while capturing a sufficient level of detail to enable the corporate cost optimization effort.

Matching Usage to Plans

Change happens! Life is unpredictable. Changes in an employee’s monthly wireless usage have to be expected and accommodated. The cost of each minute over the plan allowance increases greatly as shown below:

The cost penalty for exceeding the plan minute allowance is three to twelve times that of the base plan price. Therefore, a cost control strategy in dealing with the base plan overages must either reduce the usage or change the employee’s base plan minutes allowance.

Often overlooked is the effect of under-utilized base plans for employees. These are the cases where an employee does not fully use the allowed minutes of the plan. With the exception of Cingular’s Roll-Over plans, which transfer the unused-minutes to the next month, most other vendor plans are based on a  “use-it or lose-it” philosophy. When plan minutes are “lost”, the effective cost per minute of the minutes-actually-used rises similar to the over-utilization. The chart below shows the typical effects of under- and over-utilization of plan minutes.

If all employees talked on their wireless phones exactly what their base plan minutes offered them, the (ECPM) measured collectively, would approach the peak efficiency at near 5 cents per minute, the bottom of the parabolic curves shown in the chart. Unfortunately…this almost never happens!

Cost Control Approaches Based on ECPM

The monthly cost control battle for a Telecom Manager is to place the high users and the low users on to calling plans that closely match their needs for wireless minutes. Given the high cost (3x to 12x) of an overage minute compared to an unused minute, the plans selected should always be 5-10% greater than a rolling 5-month average of the actual usage for the user.

Most wireless services providers also offer pooling plans for business users. These plans function as a family plan whereby members of the pool can share a large number of common minutes. The goal is that the volatility of the high and low users will tend to cancel each other and that the pool utilization rate will remain generally stable. The volatility of pools must be analyzed each month in terms of ECPM, just as the individuals’ usage patterns are analyzed. Based on the volatility of these deviations, individuals need to be offered membership in the common pool of minutes.

Proliferation of items offered by service providers bearing a small monthly recurring charge is a hidden source of increasing, yet avoidable, costs for the organization. These items include 411 calling (directory assistance), unnecessary accessories, extended maintenance plans, insurance against the loss of the device or damage to it, ring tones, screen images, etc. Policies reflecting purchases of these items can make a measurable impact on the wireless ECPM.

Roaming and international travel requirements adds another expensive layer of complexity for the Telecom Manager. With the cost of calling the home office being classified as international roaming, the cost per minute may be as high as $0.80 to $1.50 per minute or even higher. Strategies such as issuing country-specific phones to the traveling employees or giving them SIM cards that are enrolled in those specific domestic plans may quickly reduce your costs.

Wireless data is now becoming a larger portion of wireless costs. Most vendors offer Personal Digital Assistant (PDA) devices, such as Treo or Blackberry, that also offer internet access, email synchronization, and documents created in Microsoft Office. As the screen sizes on these devices improve along with the operating systems, PDAs are increasingly becoming essential business productivity tools for busy executives.

Data Plans typically offer metered costs based on megabytes of data transferred. Most vendors also offer unlimited data transfer plans. The actual data use of an individual needs to be analyzed similar to their usage pattern for the base voice plan minutes. It may be possible to reduce wireless data plan costs by taking users off unlimited data plans. E-mail attachments count towards the data transfers. While the email volume may be low, emails with attachments may cause the costs to soar. As Voice over IP (VoIP) technology enters the wireless services domain, the cost structure of the service plans will also change considerably.

Self Management of Over Utilization By Employees

Clear articulation of wireless usage policies to employees is only the first step towards controlling wireless costs. Monthly reports of an individual’s usage, usually distributed at the end of the month based on the vendor invoices or emails, are not effective. Seeing the results of usage at the end of a billing cycle is far too late to compensate for the occurring trend change.  Real-time text messages are most effective when sent to employees as they approach milestones of 80%, 90% and 100% of the plan usage. These reminders help the employees reduce avoidable wireless chatter and avoid huge (3x to 12x) cost premiums extracted by the providers. Seeing such text reminders that “overage minutes are now costing 25-40 cents for each minute of conversation” is a sobering reminder and realization of the costs for these convenient wireless services. If these text reminders reduce just 7-10 minutes of over-utilization, their costs are well paid for!

Conclusion

We think it is a very good practice to periodically assess the success of your organization's wireless management policy. Success is measured in what falls to the bottom line. As you apply wireless policy enforcements and other cost controls, watching the results through the lens of ECPM as a simple, yet easy to compute metric will bring you closer to your objectives.

Copyright © February 2007 TeleBright. All Rights Reserved. Reproduction in whole or in part in any form or medium without express written permission of TeleBright is prohibited. The information contained herein is accurate only as of the date of publication, and is subject to change without notice.