cost control for ict managers

Cost Control for ICT ManagersTips & Tricks for Immediate Bottom Line

Impact.Fintan Swanton,

Expense Reduction Ireland.Presented at the Irish Computer Society,

2 June 2010.

Cost Control for ICT Managers

• Examining electricity & voice telecoms.• Identifying common areas of cost leakage.• Explaining effective ways to plug these.• Intention is to enable you to make immediate

expense reductions, for little or no up front cost, usually in a timeframe of days to weeks.

• Not addressing more complex or costly topics, such as full-blown VoIP.

Electricity Supply

• Main suppliers– ESB – Bord Gáis– Energia– Airtricity

(Airtricity & Energia also supply gas.)

Energia

• General purpose tariff– Variable rate contract, 12% off ESB’s prices for

daytime units.– Night rate units & standing charge same as ESB.

Bord Gáis

• General purpose tariff– Variable rate contract, 10% off ESB’s prices for


Airtricity

• General purpose tariff:– Variable rate contract, 10% off ESB’s prices for


– Yearly fixed rate contract, 6% off daytime units.– Night rate units & standing charge same as ESB.– €500 charge per meter to break contract early.

Checking prices

– Check at least annually, preferably whenever the ESB announces price changes.

– The cheapest supplier for a given situation varies over time.

– Avoid fixed term contracts.– Suppliers who want more market share in a

particular tariff may price aggressively.– Converse is true: if a supplier has enough customers

for given tariff, it may price itself out of that area.

Regulation

• The CER has announced that from 1 October next, the ESB will be free to set its own prices for commercial customers.

• Should help reduce prices, but will make direct price comparisons more difficult – we will need to shop around more carefully!

Service

From the ESB Networks Customer charter:ESB Networks is the Distribution System Operator

in Ireland. This means that we build and maintain the infrastructure needed to bring electricity to you, the customer. ESB Networks does not generate or sell electricity. This is done by other, separate, parts of ESB and by independent generators and suppliers.

Low Voltage Maximum Demand

• Tariff based both on consumption and capacity.

• In addition to kWh charges, charges are made for:– Contracted Maximum Import Capacity (MIC)– Actual peak demand – Penalties for exceeding MIC

Low Voltage Maximum Demand

• MIC is very often incorrectly set, either too high or too low.

• If too high, you pay for capacity you’re not using - €26.79, per kVA, per annum.

• If too low, up to €13.40 charge, per kVA, per two month bill period for peak instantaneous demand in excess of MIC.

Low Voltage Maximum DemandCase Study

• Client had 17 LVMD sites, with 12 incorrectly set MICs.

• 11 sites had MIC too high – appropriate reductions yielded annual savings of ca. €9,000.

• 1 site had MIC too low - appropriate increase yielded annual savings of €1,100.

• Total recurring annual savings €10,100.

Low Voltage Maximum DemandChange Procedure

• Decide appropriate new MIC level (get professional advice).

• Download form NC3 from ESB Networks website.• Complete and return to ESB Networks in Athlone.• Your local area engineering office will review and

decide charge, if any.• On receiving quote, if you want to proceed, sign revised

connection agreement and return with payment.• Typical timescale, 6 to 8 weeks.

Low Voltage Maximum DemandDemand Reduction Schemes

• Several schemes, all aimed at reducing winter (Nov to Feb) demand between 5pm & 7pm.

• Simplest is Winter demand reduction incentive (WDRI).

• Demand measured only from 5pm to 7pm.• Cannot increase your bill and there are no

charges for participating.• More information on ESB website.

General Purpose Nightsaver tariff

• Night rate units are about 47% cheaper than standard GP rate.

• Night rate effective Wintertime 11pm - 8am & Summertime 12 midnight - 9am.

• But day units are around 10% higher, and standing charges are higher too.

• Break even is approximately where night time usage exceeds 10% of day time usage.

• Very often, the break even point isn’t reached.

General Purpose Nightsaver tariffCase Study

• Client with seven GP Nightsaver sites.• Only one was using enough night rate units to

fully offset the higher day rates & standing charges.

• Switching to standard GP tariff yielded recurring annual savings of €3,600.

• Once-off cost per meter changed of €170 – average payback, 3½ months.

Wattless Charges

• Electric power consists of two components: active power and reactive power.

• If wattless units exceed ⅓ of general units, charges will apply.

• If you are consistently being billed for wattless units, consider installing power factor correction equipment.

Accelerated Capital Allowance

• ACA allows you to write off 100% of cost of qualifying energy efficient equipment against profits in the year of purchase.

• Initial trial period expires 8 October 2011.• Qualifying product list maintained by SEAI includes

lighting, HVAC, BEMS, and a range of ICT specific equipment, such as enterprise servers.

• Claimed on self-assessment basis, but you must be able to justify in the event of a Revenue audit. See SEAI and Revenue websites for more.

Fixed line voice telecoms

• Large number of providers now in the market.• Competition is keen and you can almost

invariably obtain price reductions.• However, it is rare - if not unheard of - for

provider to proactively offer reductions.


• Need to assess alternative providers for suitability, based on your traffic mix, and their reliability & stability.

• Avoid fixed term contracts.• Bigger is not necessarily better.• Since Smart failure, regulator has agreed with

Eircom that grace period will be allowed for subscribers to find alternative carrier.


• Savings mainly on call charges.• Our average is about 25% reduction, higher if

incumbent is Eircom.• Make sure rate basis is no minimum call

charge, per second billing.• Seldom offered, but you will often get around

5% off line rental charges if you ask.

Fixed line voice telecomsRedundant items

• We very often find unused equipment and services being billed for.

• Unused, redundant lines.• Obsolete services, e.g., Eirpac/X.25, line

redirection.• Redundant equipment, e.g., many Eircom

handsets @ €27.50 p.a.

Fixed line voice telecomsRedundant lines – case study

• SME had five PSTN and six BRA lines surplus to requirements.

• Recurring annual savings by disconnecting - €3,600.

• Need to check carefully – no outgoing traffic doesn’t always mean unused.

• Could be for, e.g., fax, lift, alarm monitoring.

Fixed line voice telecomsConsolidating lines

• Combining two PSTN lines into one BRA line will save €113 p.a.

• BRA connection cost €99 – payback, 11 months.

• Case study – retail group with 80 shops, two PSTNs consolidated per shop.

• Annual recurring savings of €9,000 for once off cost of €7,920.

Fixed line voice telecomsConsolidating lines

• Consolidating PSTN lines into FRAs or PRAs could save up to €2,000 or €4,200 p.a.

• Connection cost €3,299 – but Eircom regularly waives this, current offer expires 8 July next.

• Case study – 10 PSTNs & 1 BRA consolidated into 1 FRA.

• Recurring annual savings €907.32.

Fixed line voice telecomsInvoicing Errors

• “On average, 7 to 12% of telecom services expenses are in error.” – Aberdeen Group.

• This is reflected in our work and if anything, 12% is a minimum.

• In our experience, these errors rarely, if ever, favour the customer!

• Check invoices monthly.

Fixed line voice telecomsInvoicing errors we have found

• Wrong rate per minute for some destinations.• Minimum call charge applied unprovided for in tariff.• Failure to carry out instruction to disconnect

redundant lines.• Rental charges being made for equipment no longer

in use.• Invoices being raised for discontinued data services.• Carrier invoicing for items it could not explain.

GSM Gateways

• Route calls from PBX directly onto relevant mobile network.

• Gateways available in range of interfaces from PSTN to PRA.

• Prices start from ca. €300 for PSTN version.• VoIP is no advantage when calling mobiles.

GSM Gatewaysand Number Portability

• Number portability means we can’t be sure 087 is Vodafone, 086 is O2, etc.

• Our recent analysis shows, however, that it’s a good enough approximation.

• 81% of 087 numbers on Vodafone network.• 73% of 086 numbers on O2.• This client achieved rates of 6.5c/min &

5.4c/min, compared to landline rate of 15c/min.

GSM GatewaysCase Study

• Three PSTN gateways installed in 2003 at a cost of €600, plus €75 for PBX LCR setup.

• Two gateways for 087, one for 086.• Still yielding €800 p.m. savings seven years

later.• Cumulative savings ca. €67,000.• Cumulative RoI almost 10,000%!

Directory Inquiries

• 11811 charges: 81.8c call setup, plus 41.15c/min for connected calls.

• Employees may use directory inquiries to conceal number called.

• Program PBX to block calls to directory inquiries.• Use cheaper service and redirect calls to dearer services

onto it.• In one instance, obtained €3,000 p.a. recurring savings

using cheaper service and advice to/persuasion of employees.

SIP for Teleworkers /SoHo

• Example: two geographic numbers, plus geographic fax number with e-mail gateway, ca. €40 p.m.

• Includes unlimited calls to Irish & UK landlines.• International landline calls mostly less than 2c/min.• Calls to Irish mobiles similar rate to standard carriers.• Fully featured voice mail & call forwarding.• Simplifies separation of personal & business costs.• Easy to set up with ATA & standard handsets.• Call quality on a par with mobile phones.• Landline provides fall back in event of service outages.

Mobile Phones

• Four main operators:– Vodafone– O2– Meteor– Three

• We often find a failure to consolidate on a single provider leaves potential savings on the table.

Mobile Phones

• Coverage can be problematic, especially for “road warriors”.

• Operators ought to be willing to provide handsets or SIMs on “appro” for enough time to assess effectively.

• Don’t forget coverage is continually improving – revisit previous decisions periodically.

Mobile Phones

• Operators will usually look for a fixed term contract.• However, they are often willing to renegotiate

pricing well before the contract expiry – ask!• Broad rule of thumb – “bundles” are poorer value

for more than about 12 to 15 handsets.• Increases incentive to manage down usage.• Straightforward per minute rates also make price

comparisons easier.

Mobile PhonesPersonal Use

• We often see– Hours of calls/hundreds of texts to one number – partner /

significant other / the mammy?– Calls to premium rate voice services.– Subscriptions to SMS based premium services, e.g., horse

racing tips!– Competition entries by phone or text (Late Late Show every

Friday is a regular . . .)• Smart phones also have possibility of significant data

costs.

Mobile PhonesPersonal Use

• Minimum requirement is an acceptable use policy, clearly communicated to employees.

• Some options:– Charge back an assumed flat rate proportion for

personal use, say 15%, with onus on employee to show it was lower.

– Reimburse business use of personal mobile phone.– Set out maximum monthly acceptable cost of personal

use and charge back personal use in excess of this.

Mobile PhonesSIP / Skype

• Take advantage of data services / Wi-Fi on handsets to use SIP services and/or Skype.

• SIP / SkypeOut outgoing calls to international destinations a small fraction of mobile operators’ rates.

• Incoming calls to a SIP-provided geographic number save caller about 85%.

• When abroad, can take incoming calls without incurring roaming charges (if using Wi-Fi).

• Fring provides a very usable wrapper for SIP, Skype and numerous other services, allowing easy selection of connection method.

Telecom expense management software

• Appropriate for larger enterprises• Handle large numbers of invoices from different carriers for

fixed & mobile•Automated cost and usage reports •Drill down costs to a country/department/user level• Inventory control e.g. PBXs, lines, mobile devices, etc. • Chargeback and allocation of telecom costs• Call classification - based on business vs. personal • Rate optimise and verify contracted rates vs. actual costs• Can be provided as SaaS / contingency basis

Expense Reduction Ireland

• Established 1996.• Over 1,200 projects in 96 expense categories resulting in average 20%

cost reduction.• “No savings, no fee” contingency basis.• Service is self-funding, since fee is a proportion of savings achieved.• Client base includes some of the best known names in Irish business &

industry.• ERI has the time, focus and expertise to bring projects to a successful

conclusion. Many companies start projects but cannot complete them due to other priorities. We have a very high success rate.

• 01 6854474 / 086 8271273 / [email protected]• www.expensereduction.ie

cost control for ict managers

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