Burning Dollars Top Five Trends in US Telecom Spend

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1 white paper Burning Dollars Top Five Trends in US Telecom Spend Telecom costs are among the largest operating expenses for organizations worldwide. Yet, they re often the most inconsistently managed. So it comes as no surprise that businesses increasingly feel they need to scrutinize these expenses as one area of potential drastic costcutting. Exactly how and where do organizations currently their dollars, and what does the future hold in terms of broader market movements such as enterprise mobility and the rise of bring your device (BYOD) strategies? Dimension Data, a global provider of Communications Lifecycle Management and other ICT services, recently analyzed information collected from its database of clients in the US over the last three years, in order to identify these top five trends in telecom.

2 Contents Trend 1: Businesses burn dollars unnecessarily on variable costs 01 Average cost of data downloads almost doubles as volume increases 02 Device upgrades and replacements need careful management 02 Increase in data costs 02 Growth in average total costs higher for employee-owned devices 02 Variable costs offer a major cost-cutting opportunity 02 Trend 2: Tablets are king 03 High uptake of tablets driven by individuals rather than employers 03 Trend 3: Businesses love the iphones 04 Trend 4: Mobile users surf the web for business purposes too 04 Trend 5: Unlimited data plans aren t going away soon 04 Wrapping it all up 04

3 Trend 1: Businesses burn dollars unnecessarily on variable costs As with many other business expenses, telecom costs are on the rise. Gaining better visibility of all expenses is the first step towards savings. By analyzing the breakdown of costs across all s which includes corporate liable s and employee-owned device s a few telling trends have come to light. The tables below give a breakdown of average corporate-liable and employee-owned device from 2010 to Corporate-liable Fixed costs Variable costs % % % Avg voice cost % % % Avg data cost % % % Avg msg cost % % % Avg tax cost % % % Avg occ cost % % (0.35) 0% Avg 1x other cost % % % Avg download cost % % % Avg special feature cost % % % Avg directory assist cost % % % Total Employee-owned device * Fixed costs Variable costs % % % Avg voice cost % % % Avg data cost % % % Avg msg cost % % % Avg tax cost % % % Avg occ cost (0.11) 0% % % Avg 1x other cost % % % Avg download cost % % % Avg special feature cost % % % Avg directory assist cost % % % Total *Note: download cost referenced in the above tables represent all data capable device types. 01

4 Average cost of data downloads almost doubles as volume increases Over the last three years, the average consumption of the data downloads for voice devices has nearly doubled per user. With the average corporate-liable download per device as USD 3.94 per month and nearing USD 50 annually, these charges are easily dismissed by companies. However, their threat is not only cost, but volume. When comparing corporate-liable device downloads to employee-owned device downloads, the employee-owned falls nearly 47% lower to only USD Thus, it is essential that corporate-liable device downloads are managed to discern between valid software (such as GPS) and abuse of privileges (such as ringtones, songs, movies, books and recurring subscriptions). These small recurring charges can quickly spiral out of control. Device upgrades and replacements need careful management Another area in dire need of management is device upgrades and replacement. Annually, about of 29% of users either replace or upgrade a device 1% of these replacements are insurance replacements. Through the management and reporting of placed orders, we can distinguish between necessary orders and simply a desire to have the latest and greatest devices. With carriers now providing users with the option to buy down their upgrade eligibility date, more users are ceasing the opportunity to get a newer phone sooner, and at the employer s cost. Increase in data costs While voice costs have maintained an average of about 40% of cost, data has grown 4% since 2010 to claim 32% of all costs The main reason for this increase is the migration of users from feature phones to smartphones. Growth in average total costs higher for employee-owned devices There s also been an increase in the average total cost of both corporate-liable and employee-owned device s, but this growth was greater for employee-owned devices (15%) than for corporate-liable (5%). Leading this upswing is voice with an increase of almost USD 8 per plan. Data is next with a near USD 4 increase. As more enterprises turn to employee-owned devices, ironically the data suggests that this may not be the most cost-efficient solution because the power to negotiate rate plan prices is now at the individual level instead of the corporate level. Thus, enterprises lose any leverage to negotiate better pricing. Variable costs offer a major cost-cutting opportunity Arguably the most compelling result, however, came from comparing fixed costs versus variable costs across all s. With voice, data, messaging and tax making up 83% of average, the remaining 17% is left to more variable items such as downloads, special features, directory assistance and one-time charges. This presents a major cost-cutting opportunity for organisations, as variable costs can be more easily controlled than fixed expenses. Most corporate fixed plan costs are negotiated and are therefore static for the term of the contract. Variable costs largely represent user preference and, just like users, preferences vary. If one-time downloads, recurring subscriptions, special features, unnecessary insurance plans and directory assistance are reported and managed, user behaviors can be changed Often these categories of are thought of as small dollars and at only 17% of an this is a fair assessment. But 17% of every billed mobility does paint a much different picture. While voice costs have maintained an average of about 40% of cost, data has grown 4% since 2010 to claim 32% of all costs

5 Trend 2: Tablets are king Device type to 2012 change Corporate-liable tablet 1% 23% 76% 75% Employee-owned tablet 1% 18% 82% 81% High uptake of tablets driven by individuals rather than employers As far as devices are concerned, tablets seem to continue stealing the limelight, but more so thanks to consumer interest than corporate purchases. While tablets have seen a 75% uptake from indicating a dramatic increase in the general popularity of these devices they ve registered a much lower average annual growth rate of 38% in terms of corporate purchases. Where there s a higher BYOD increase in tablet adoption, Dimension Data believes individuals are bringing their personal devices to work, which aren t funded by their employers. Smartphones which have a lower price point and a multitude of free download choices experienced an upswing in growth entering Smartphones, the use of which is on the rise, haven t attracted organizations completely yet due to security concerns. However, it s those same security concerns that organizations may be passing over on the way to employee-owned devices as a solution. As far as devices are concerned, tablets seem to continue stealing the limelight, but more so thanks to consumer interest than corporate purchases. 03

6 Trend 3: Businesses love the iphones In terms of the type of mobile phone that s most popular, it s perhaps not surprising that the Apple iphones still remain the top choice for corporate purchases, whereas the devices of choice in the employee-owned arena are smartphones. The appeal of the iphone is twofold: primarily, it s the most secure device available. But it also holds the perception of being best in its class. Because iphones have the same operating system, albeit varying versions, companies value its platform stability. Such stability isn t necessarily offered with other smartphones. Trend 4: Mobile users surf the web for business purposes too It would be incorrect to assume that all web surfing on mobile devices is for personal or entertainment purposes. On average across the corporate websites polled, it s clear that the majority of visits to these sites were still from non-mobile devices. However, it s also encouraging to note that an average of at least 7% of visits to each site came from mobile users (who didn t just stumble upon the websites). The average duration of the visits around two minutes showed that the visitors lingered, which means they were there for information-gathering or business purposes. Trend 5: Unlimited data plans aren t going away soon It s true that we re all making fewer mobile phone calls, opting instead for cheaper text or instant messages whenever possible. So, with the transition of mobility voice minutes into data, many have posed the question: Are unlimited data plans going away? Many carriers have now shied away from unlimited data packages offered to the public. So, it s important to exploit this opportunity while it s still in the offering. Regardless of that, it s vital to note that unlimited data availability remains a staple of a well-negotiated enterprise contract. Leveraging that component means organizations aren t kept at the mercy of their employees usage. Given these five trends in US telecom, it s clear that costs in this area are bound to do what most other business expenses do: increase. Wrapping it all up Given these five trends in US telecom, it s clear that costs in this area are bound to do what most other business expenses do: increase. It s important that organizations start gaining a more detailed picture of which telecom expenses burn dollars unnecessarily. It impossible to manage what you can t see. Only once such visibility has been established often instantly, with the help of an experienced communications lifecycle management partner can businesses begin to take simple measures to stop the burn. CS / DDMS-1327 / 04/13 Copyright Dimension Data 2013 For further information visit: 04

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