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Wireless Management: PATIENCE!!!!!
Tuesday, May 27, 2008
This should probably conclude my exciting series on wireless management, save for a few bits and bobs I may have forgotten or other concerns that may arise. I’m just as sad as you, but I’ll find other spend categories to rant about.

The final word when dealing with wireless providers is patience. I’ve worked on quite a few wireless projects for various clients in various industries and there has only been one team I’ve come across that was exceptionally responsive to the client’s needs. I’ve had a few who were marginally responsive, which is usually the best you can hope for. I’ve had other wireless teams that were just abhorred. I recall for one project I sent recommendations for plan changes in June and nothing was acted on until October, in spite of monthly invoice audits reminding them nothing has been done. That was a fun project.

I haven’t worked on the inside of the wireless world (thank god), but what I hear from reliable people, there are several reasons for the lack of care and responsiveness.

Sales: Wireless is a sales driven business. Once a provider gets you to sign a two year deal, they have you. Odds are you’re not going to change providers in mid-contract and take a huge hit on all the ETFs. Once a rep gets one contract signed, they’re on to the next one.

Turnover: This one is self-explanatory. Most sale-intensive fields have high turnover rates. If you’re not good at selling and you’re not making money, you’re going to jump ship pretty soon. This happens quite frequently in wireless. Also, there are many subordinates and call center people who might help out on your account, and those positions are also subject to high turnover rates.

Team Reshuffling: As a result of turnover, to fill in voids left that can’t quickly be filled, people may shift from wireless team to wireless team. Also, reps with a large workload may be needed to take on additional responsibility, so they don’t have time to attend to every account the way you would want them to.

I’m sure there are other reasons. I’m an eternal cynic of the wireless world and I could spread some nefarious theories, but I won’t. The bottom line is any major reshuffling of your wireless profile, anything from plan changes to consolidation to transfer of ownership, takes time. Even something seemingly simple as sending your wireless rep a spreadsheet of voice plans to change can routinely take at least two months; one month to get the bulk of it changed, then another month to fix any mistakes made.

Another word to go along with patience, which can seem like a contradiction, is persistence. Sending an email to request some changes and then assuming they got taken care of or waiting for the rep to send an update will get you nowhere. Stay on top of your rep, but try not to get ticked off when in spite of being on your game, your rep isn’t. These things take time. It’s not just you, believe me. Many, many, many people have shared in your frustration. It’s worth the effort, however, and the savings will be proof. Good luck.

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posted by Jazzy Sourcer @ 10:46 AM   2 comments
Wireless Management: Own the Lines
Monday, May 19, 2008
Sorry for the loose reference to the 1979 Toto hit "Hold The Line". I'm thoroughly embarrassed and need a cleansing shower (but Simon Phillips is a pretty damn good drummer, and Steve Lukathor aint no slouch on the guitar. Sorry, it's the musician in me coming out).

What I'm getting at is if you (the corporate entity) want to have a successful wireless savings implementation, assuming you have implemented the recommendations in the previous posts, you need to have some kind of a corporate wireless policy. So many companies have no policy whatsoever and it hampers any effort to reign in the costs.

A lot of companies have a mix of devices they pay for on a monthly basis and devices they expense. Doing the expense report thing is a waste of money. When you go that route, there is usually a cap on the amount of money allowed to cover the cell bill. Oftentimes, that amount is taken for granted. I've seen allowances as high as $175. I know that sounds absurd, which it is, but it's the truth. With an allowance like that or even remotely near it, the user probably has a family share plan where their spouse and kids are getting covered with the corporate dollar. Plus, when you go with an allowance limit, most people signing off on it won't dig in to the bill to see what they are paying for as long as it doesn't eclipse the cap.

The way around this is to have corporate ownership of all lines. Have a corporate wireless policy that clearly states that all reimbursed usage that is paid for by the company is owned by the company. That means whenever a new user is added to the company wireless profile, that line is owned by the company. If any user leaves the company, the device stays there as well as any contacts achieved under the payroll.

Implementing this is tricky. Various providers have different methods of legally transferring ownership of phones and it can get cumbersome. One thing that helps blunt this problem is many people, when faced with losing ownership of their own line, will opt to have the company buy them a phone that they use for business and can keep their personal phone so their friends and family won't have to learn a new number to reach you at. Be sure the wireless policy clearly states this option is available to them. This may lead to a large upfront cost when implementing the policy, but it will more than make up for itself in savings. Plus, if you have a large enough number of phones to buy and get a new contract signed, you may be able to get all the phones for free anyhow.

Once you have ownership of all lines, you have control over the plans and can dictate who gets what in terms of Blackberries, air cards, features, etc. There is a big savings potential with those costs. Also, you get consolidated billing. Rather than having to write 100 expense checks for wireless usage, you'll get one invoice per provider.

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posted by Jazzy Sourcer @ 2:52 PM   0 comments
Wireless Management: Contract Management
Tuesday, May 13, 2008
We’ve reached the peak. The apex. The penultimate. The zenith (not your grandmother’s TV). If you have a significant number of wireless users that you are re-upping or moving to a new provider, you have a decent amount of leverage when it comes to adding your terms to a new contract. I hesitate to say how many lines qualify as having leverage, because it depends not only on the provider, but also the time of the year (end of quarter).

There are certain items you want to have in the contract that won’t take maverick skills to accomplish. Here’s a short list:

Activation Fees: Most wireless providers will charge an activation fee of about $30 for new users. That’s a b.s. charge. It’s another way for them to line their pockets and they know it. You shouldn’t get much resistance for having this charge waived.

Co-terminus Contract End Date: This benefits the provider so it should be easy to get this in the contract. It will definitely help to have all phone contracts end at the same date. This will save time keeping a spreadsheet of when phones are out of contract. It helps you by keeping things simple. It also helps the provider by locking in phones for a longer period of time. Assume a phone you are consolidating is six months in to a two-year contract. By having a co-terminus contract end date, that wireless provider now has that phone for 30 months, not 24. They shouldn’t say no to that.

Early Termination Fees (ETFs): There are two points to address here: get a percentage of your headcount of users waived and have a sliding scale of ETF fees. ETFs are expensive, but you don’t have to be nailed down to them. The first thing you want to add to any contract is to have ETFs assessed on a sliding scale. What I mean by this is to have the fee reduced by a certain amount for every month the phone is in service. A standard amount is $5 per month. So if a phone is under a two year contract but needs to be cancelled after 12 months, the ETF will be $60 rather than $200.

Percentage of headcount is another leverage point. What this means is you can eliminate a certain amount of lines without incurring any ETFs. Say you have 200 devices and negotiate you can cancel 10% (fairly standard) of your current headcount without incurring an ETF. That means you can get rid of 20 devices and not pay a cent. Ten percent is a standard number. Shoot high and you never know what you can get out of this. But never go for less than 10%.

Equipment Pricing: I hesitate to include this, but it’s worth mentioning. It helps to have a uniform fleet of phones and there are many quality phones you can get for free when you enlist with a provider. When it comes to higher-end devices, like Blackberries, you can demand a discount if you have the numbers to back it up. The discount will depend on how many units you need to buy and when you ask in regards to the wireless provider’s sales cycle. If you don’t have an immediate need, collect all the orders for new phones and place them at one time. The volume will drive a better price. Also, ask for phones at the end of the provider’s quarter. They are more amenable to discounted pricing at that point of the year to meet sales goals.

Accessories: Again, this depends on the number of lines you’ll be contracting. It’s not hard to get free accessories such as car chargers and belt clips. Blue Tooths can be discounted but probably not given for free.

Current Pricing: If your company is under an old contract or some amalgam, you may not be eligible for the most current pricing. This doesn’t require any kind of specific action, but it’s worth mentioning. If there is a new pricing program with the provider, if you’re under an old agreement, you may not be eligible for the new pricing until a new contract is in place. Be sure you are up to date with everything to get the best pricing.

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posted by Jazzy Sourcer @ 3:06 PM   0 comments
Wireless Management: Come Together
Thursday, May 8, 2008
By now, you’ve heard me mention the word “consolidated” or “shared minutes” many times. This simply means all of your users (or a big chunk of your users) are all on one bill and one account and are able to share minutes with each other. I say “able to share”, not “are sharing”, because even though all users may be on one account, they may not all have shared plans.

Consolidating on to one provider, or as few providers as possible, presents a huge savings opportunity. It costs less to have peak minute coverage when shared as a group than on an individual basis. You end up purchasing less minutes because people who have high usage can use the minutes of people who have low usage. A person who uses 2,000 minutes a month can have a 450 minute plan and not go into overage because he’s taking minutes from others on 450 minutes plans who only use 100 minutes a month.

Let’s start with the basics of consolidation. You typically have to have at least five users to be eligible for business share plans. If you have less than five, an alternative would be to go on a family share plan. Just because you’re a business doesn’t mean you can’t take advantage of a family share plan; it’s all about the number of lines, not the nature of the entity.

Assuming everyone is on the same carrier but not on the same account, the next thing you need is to get the phone numbers and account numbers of all people you want to consolidate. Forward that list to your account rep for that provider and they should be able to help with the consolidation. Different carriers have different approaches to this. Some are easier than others.

What starts to get tricky is if you have individual liability phones (phones owned privately by the employee) that will be transferred to the corporate account and become corporate liability phones. Waivers have to be signed by the employee and submitted to the wireless provider, a bill may have to be given to the provider, the employee may have to call customer service and verbally authorize the corporation to take the line over. It can get obtrusive, believe me.

If you are migrating users from one provider to another, be wary of early termination fees, or ETFs. If your fleet of phones is scattered across the country and is a hodge-podge of users and carriers, it’s financially advisable to move people from small-time providers like Helio and US Cellular to larger providers like Sprint and Verizon. If you plan on doing this, make sure you know what the contract expiration date is of those users being migrated to another carrier. ETFs can range from $150 to $200, even if the user is just shy of fulfilling their term commitment. If there’s only a handful of months left on their contract, wait until it expires before moving. If a new contract was signed, it’s usually advisable to eat the ETF and move the user. If the user has 18 months left on a two-year contract and the ETF is $200, you’ll more than make up for the $11.11 per month the ETF breaks out to be.

When consolidating users, be ready with a new profile of plans. With some providers, you have to have new plans ready to go. With AT&T for example, if you consolidate individual users to a business enterprise plan, their individual plans don’t carry over. You have to know how many minutes you’ll need so you can buy that large chunk of minutes as soon as everything is consolidated. This isn’t as pressing an issue with Verizon or Sprint. Individual users will carry their plans with them and will start to share those minutes as soon as everything is consolidated and as soon as they have a share plan. With Verizon and Sprint, the difference between a share plan and an individual plan is $5. Verizon, as an example, has a 450 minute individual plan for $39.99; to be able to share those 450 minutes, it’s an extra $5 fee. You don’t have to change anything else but you have to specifically request this. Just because you’re asking to consolidate lines doesn’t mean your provider will automatically change the individual plans to share plans.

Consolidating multiple accounts to one may or may not require signing a new contract with that provider. That’s a perfect seg-way for my next post; what to include when entering into a new wireless contract.

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posted by Jazzy Sourcer @ 1:21 PM   0 comments
Wireless Management: Wireless Plan-tastic
Tuesday, May 6, 2008
So here we are, the moment of truth. You know how many users you have and you know what their usage patterns are. Now it’s time to go out there and shop around for the best plan(s) to fit your wireless usage. The problem is each wireless provider has their own unique (or at least somewhat unique) plans to accommodate business usage. Which one is best? There really is no “best”. There are just better and smarter fits for your particular needs. Again, to keep things simple, I will assume you are already consolidated and sharing across users. I will address this specific point in a subsequent post.

There first thing to know is there are two different types of shared plan approaches. I will loosely call them pools and buckets. A pooled plan means every user must contribute some minutes for all to share. Think of it as a March Madness office pool where everyone who participates chips in $10 to wager. Then there are buckets, which is just one lump of minutes that people don’t contribute to, they just take away from. It’s like a bucket of crab legs at a seafood shack; the server brings them to you, you put them to good use.

Out of the major players (Verizon, Sprint, AT&T, T-Mobile, and Alltel), Verizon and Alltel use the pool method. Every user has to have some kind of a peak minute contribution, whether it be 450 minutes or 4,000 minutes.

AT&T and T-Mobile use the bucket approach. They have business enterprise plans where a large chunk of minutes is purchased for all to use. There may be a small line charge per phone using that pool. AT&T has a limit on the number of lines each bucket can have and charges a line fee for each line. T-Mobile has no line limit per bucket and each bucket comes with an included number of lines at no monthly fee. A line charge will be assessed after going over the set number of lines. In this approach, no one technically has allocated minutes the way Verizon or Alltel does.

Sprint has a hybrid of the two. A single user can purchase up to 4,000 minutes to add to a pool, much like Verizon or Alltel. But Sprint also has what’s called “Add-On” users. These users don’t contribute to the pool of minutes but they can take away from the minutes, much like AT&T and T-Mobile.

Those are the basics. In most instances, if you are reconfiguring plans, you will be sticking with the incumbent provider. That pretty much narrows down where to look. If you’re looking to migrate service to another provider, then there’s much more work to do. Either way, you have to do your homework.

Knowing the different plans can also steer what you look at in your analysis. Some plans may have unlimited within network calling but no free nights and weekend. You’ll want to look at those elements of usage along with peak usage to get the best plan. If you have a lot of weekend usage, you’ll have to figure that in to your minute needs.

Look for the details and special offers too. For a short period of time, Verizon offered what they called “Option 1” and “Option 2” plans. Option 1 plans had the standard number of minutes (450, 900, 1350, etc) and had unlimited nights and weekends. With Option 2, for the same price, you would get more minutes (550, 1100, 1650, etc) but no unlimited nights and weekends. If you have no or limited night and weekend usage, Option 2 would be more cost effective. This is a good example where due diligence can reap rewards.

The moral of the story is once you have a handle on your usage, and I mean really have a handle on your usage, start scouring the web and making phone calls to wireless reps and know their offerings inside out. Devise different scenarios to see which plan of attack provides adequate coverage at the best price. Sorry I couldn’t give a magic bullet, but I never said this would be easy.

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posted by Jazzy Sourcer @ 4:16 PM   0 comments
Wireless Management: Usage Sewage
Thursday, May 1, 2008
In the wireless world, your usage drives the plans you buy, which in turn, drives your wireless spend. Squeezing every last drop of usage out of that spend takes some leg-work. Admittedly, it’s not easy, but it can add up to significant savings. If you’re starting from scratch, or just about scratch, it will take a large upfront time investment if you have a large number of users. The good thing is it will pay for itself. Once you have the right program in place, it just takes periodic maintenance after that.

There are two ways to go about getting your users’ usage: pour over the invoices or get a downloadable report from your wireless provider. Some providers are much better than others at making this information available. Intentional? Not only just providing it, but providing a respectable level of detail. Again, intentional? Did someone say conspiracy theory? Some times, you have no choice but to get your hands dirty and pull out the paper.

Until I say “stop”, everything I type from here will assume one wireless provider with all users consolidated and sharing minutes. I just want to keep things simple for now.

The main items you want are how many peak minutes have the users/company bought, and how many did they use. Most plans descriptions will have the number of minutes bought, and there’s also usually some table with minutes available and minutes used in a usage table per user. CD ROMs and online reporting should (emphasis on should) have these figures available. Once you’ve found this:

  • Spreadsheet the peak minutes bought and used for each user for the most recent three months at least
  • If the business is cyclical, try to capture the three or four peak months
  • Take a cigarette break
  • Take an average of the peak minutes used
  • Compare this to how many minutes are available
  • If average usage is less than 85% of available minutes, you’re over-subscribed
  • If average usage is more than 90% of available minutes, buy more
  • If average usage is more than 100% of available minutes, you’re in trouble. Remember that analogy to herpes I made in my last post?

If you’re over 100%, unless you have a roll-over plan, you hit the big-O; overage. Overage charges are usually easily seen on the individual user’s usage summary sheet. It may say something like “billable”, “voice charges”, “usage adjustment”. It can also be gleaned from the front page of the bill. If you see any exorbitant amount of charges for “Usage Charges; Voice” or “Cellular Services”, etc, unless everyone makes a ton of 411 calls, it can be safe to assume there is overage.

Stop. Ok, here’s an important caveat. Just because all users may be with one provider and they’re all under corporate liability, doesn’t mean they are all sharing minutes. It’s not uncommon for people to be added to a corporate profile of sharing users yet be subscribed to an individual plan. As you’re checking plans (for providers where it’s not just one big bucket) look for the word “share” in the plan name and look for that or some other indication in the usage box.

This will have two implications in your analysis. First, you have to take those non-sharing users’ minutes out of your calculation of total minutes available. Those minutes are only available to that person and that person only. If that individual user is in overage, stop the bleeding and get them minutes immediately. Don’t wait for that person to be absorbed into the pool.

Here I thought I would get into plans but I already wrote a book just on usage. Next time I promise to get to plans. Now that you know what the deal is with usage and you know your needs, you’ll have a better idea of what to look for when shopping for plans.

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posted by Jazzy Sourcer @ 5:05 PM   0 comments
Wireless Management: Minute Mayhem
Tuesday, April 29, 2008
You’ll hear me refer to “usage” quite a bit throughout these wireless management posts. Of course that means minutes used, but there are several different types and/or levels of “usage” or “minutes”. Wireless companies like to invent things at their convenience. In addition to the different types of minutes, different providers can have different terms for the same type of minute. I’m convinced this is because the implicit intention is to confuse as many people as possible. Here’s a rundown of the most common types of minutes you’ll encounter. Keep in mind, not all providers will offer unlimited amounts of some of these types of minutes. Know your usage (and type of usage) to find the best plan with the right carrier.

Peak Minutes: These are minutes used typically between the hours of 7am and 9pm, Monday through Friday. Peak minutes are the type of minutes that draw away from the plan minutes you bought into, but not in every instance. Keep reading.

Nights & Weekends: Common sense on that one. These can also be referred to as non-peak minutes. These minutes typically will not take away from the peak minutes purchased. Some providers, such as Sprint, have calling plans where nights and weekends start at 7pm.

Shared/Pooled Minutes: This applies to groups who have purchased a large chunk of minutes for use amongst all participating users with that carrier. This also applies to people on a family share plan. A “pool” can be a large glut of minutes bought that everyone pulls from, it can be a collection of minutes where every user has plan minutes contributing to be shared, or a hybrid of the two.

Within Network Usage: These are minutes used between people on the same provider (Verizon to Verizon, Alltel to Alltel, etc). Verizon refers to this as “IN” usage. Sprint and T-Mobile refer to it as “Mobile to Mobile” usage. Some providers have unlimited mobile-to-mobile calling on all plans, which will not take away from peak minutes purchased. Other providers may not include this is every plan but offer it at an additional monthly charge as a line feature. Still others may let you choose a certain number of people where you can have unlimited calling.

Push-to-Talk Minutes: This is also known as walkie-talkie or direct connect minutes. This is the feature that Nextel popularized with that annoying chirp and bad reception everyone within 250 meters could hear. As with everything else, it depends on the provider whether this comes standard with your plan or if costs extra. Also, depending on the carrier (how many times have I said that or a derivative of it so far), you may need to choose from a select variety of phones that are capable of this feature.

Overage Minutes: In the wireless mismanaged company, overage minutes are like herpes; you certainly don’t want it, but you may not know you have it. Overage minutes are any amount of minutes used over your allotted pool of minutes. Too many of these will put you in an early financial grave. Costs of overage can range from $.25 to $.40 per minute. You better have protection to prevent this. Always have at least a 10% buffer over average peak minutes used. I will get into this in more detail in the next post on usage.

Roaming Minutes: These are minutes where the call you make originates outside of the territory of the service provider. For instance, you bought your phone in Chicago and have a Chicago area code. You take a vacation to Cabo and call the office to check on things. Those minutes are considered roaming and you will be charged (oftentimes an arm and a leg) for those minutes. The reason for this exorbitant charge is you are using the network of a provider you have no contract with. I use the international example because that is most common. In the early days, roaming could occur within the same country. Now even mom and pop wireless providers will piggy-back on a large provider’s network who have nation-wide coverage. Most wireless providers on their web pages will provide a list of international rates.

Wasn’t that fun? I could have gotten into more detail and said what providers offered what, but we probably suffered quite a few casualties already. This is the jumbled wireless world we live in. For the individual, it’s not too bad. But for businesses, it gets ugly. Now that you know the various types of minutes, the next step is knowing your usage of each type of minute and finding the proper plan. The next installment will do just that.

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posted by Jazzy Sourcer @ 2:04 PM   0 comments
Wireless Management: Know What You Own
Friday, April 25, 2008
This post is going to sound a bit rudimentary, but I feel the need to cover my bases so much I’m posting on a Friday. There will be some overlap between this and my eventual usage post, but for good reason.

After you’ve recruited the company decision-maker, the next step is to know the inventory. On the surface, this sounds like a no-brainer, but it isn’t as easy as you think. In my experience, most companies assume they know their inventory, but you know what the acronym assume stands for. You can be dealing with different wireless providers (Verizon, AT&T, Sprint, T-Mobile, Alltel, Helio, etc), and among those different providers, you may have people who submit expense reports, and others whose invoice is billed directly to the company. You may also have single users who have family share plans (not individual plans), multiple devices (such as a cell, blackberry, and aircard) and those devices may be with different providers. That leaves ample room for people’s complete inventory of devices to fall under the radar. Can you now see how un-simple the inventory issue can be?

You can’t control your wireless spend until you can control your wireless inventory. There’s no one silver bullet to this situation, but here is a comprehensive approach that is as good as any I can think of:

  • Talk to your wireless rep for each provider and have them generate a report of all users they bill for on all company accounts and sub-accounts
  • Work with accounting and get all wireless expense reports
  • Get an HR listing of all employees and their cell phones (there is a fine line between corporate and private use, so use discretion with this)
  • Consult the general ledger and see if all costs in the first two points have been captured in wireless spend GL categories

Another issue with inventory, is once you know what you’re paying for, you know what you can get rid of. There may be spare phones sitting around that have had no usage in the past six months and aren’t even on stand-by and you’re footing the bill. Dump those devices. This is the cross-over with usage I alluded to. You can get rid of those devices without penalty if you’re slick about contract negotiations, but that’s a post I’ll get to down the road.

As I hope you can see, inventory management isn’t simply about having a head count. It has implications that are very broad. This is the foundation to get you on the path to wireless savings. Next time, I’ll speak about the different types of minutes. Until then, enjoy your weekend.

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posted by Jazzy Sourcer @ 5:12 PM   0 comments
Wireless Management: Find the Boss
Thursday, April 24, 2008
And I’m not talking Springsteen. The absolute first step in addressing wireless issues is to FIND THE DECISION MAKER! I know this sounds simplistic, but having done many wireless projects, you’d be amazed at how important this step is to a successful savings initiative.

The reason this is so important, which partly depends on the size of the company, is that different department budgets can be involved. You can have a sales department who handles the sales team, an IT department that handles Blackberries, a fleet department that handles push-to-talk phones, an executive secretary who handles C-level phones. See how convoluted this is already? When laid out like this, it sounds ridiculous to have so many levels of influence in something like wireless, but the reality is that many companies work with this model. When it comes to wireless, corporations immediately become schizophrenic. It reminds me of the Bill Murray movie “What About Bob”. “Roses are red, violets are blue, I’m a schizophrenic, and so am I.”

Before you can have any impact, find the one person in the company who can pull the trigger and supersede everyone else. It can be the CFO, the CEO, the COO, whoever. The example of schizophrenia above is actually dumbed-down. Not only can you have different department budgets to deal with, but you may have different wireless providers to deal with and corporate liable and individual liable phones. That’s a morass that can only be traversed with a solid, upper-level sponsor. Get that person or get out of Dodge.

Next class session I’ll discuss inventory issues and how that can affect the overall savings goal. It’s basic, I know, but you have to start somewhere. It’s all going to add up and save a bundle.

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posted by Jazzy Sourcer @ 10:04 AM   0 comments
Wireless Management: Don’t Hang Yourself With a Wireless Rope
Tuesday, April 22, 2008
Now that I’ve managed to wean myself off fleet management posts, it’s time to tackle another corporate enemy: Wireless.

Wireless is one of the most out of control secondary spend categories in the corporate world. It’s understandable to see how it can get crazy; add a few sales people here, write off some expense reports there, just another bill to pay, etc etc. That’s no excuse however, for not lassoing that spend. Depending on the size of the inventory, there can be huge hard dollar savings. Regardless of the number of lines, the savings percentage will be motivating.

The next series of posts will deal with what steps should be taken to stop the wireless spend bleeding. It will encompass basic issues such as inventory, to more expert knowledge such as contract negotiations. So if we’re all going to get brain tumors from being addicted to our cell phones like crack, we may as well do it on the cheap (and smart). Stay tuned.

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posted by Jazzy Sourcer @ 10:45 AM   0 comments
Here are a few simple steps that can help a company achieve efficiencies on the bottom line By Terry Wilcox
Friday, March 7, 2008

Oh boy, today's employment numbers . . . down 63,000 jobs for the month of February, according to the U.S. Labor Department, will likely have even more business owners battening down the hatches. One mistake they could make in doing so is focusing on what financial managers call "direct" costs of sales and doing business, and not "indirect costs." Direct costs usually mean the obvious stuff - like equipment and labor. Indirect costs are below the surface items like utility supplies, insurance and staff expenses.

Writes Terry Wilcox in the online publication Online Supply Chain, "too many organizations have very little visibility into these costs or an understanding of the controls that could be implemented to manage them, despite their impact on the bottom line."

Adds Wilcox; "The irony is that indirect costs can be much easier to control than direct costs. A purchase-to-pay (P2P) system will enable the company to undertake company-wide planning that can address issues such as maverick spend, contract visibility and economies of scale. If a purchase-to-pay system is able to integrate with other systems, including enterprise resource planning (ERP) systems and supply chain management (SCM), the visibility can deliver significant savings."

Okay, let's get specific. What does Wilcox mean when he writes about visibility and significant savings? To clear things up, the author cites several key steps business owners and manages can take to address indirect spending improvements. Let's have a look . . .

  1. Maverick Spend -- Maverick spend can be addressed by simply removing any ad-hoc purchase capabilities from anyone that needs to place an order within the organization. This will ensure that employees only purchase goods and services from preferred suppliers with which the purchasing department has negotiated a discounted pricing contract. Regardless of corporate procurement guidelines and processes, whenever staff need to buy goods or services they will find the easiest way to do this. An effective spend management solution will provide the easiest route, but one that has the appropriate controls in place to ensure maverick spend is kept in check, without direct involvement from the employee.
    Spend control is often hard to enforce unless some control mechanism, a component of any best-in class e-procurement solution, is put in place. Control mechanisms will prohibit impulsive purchases and will put into place an approval process that allows for authorization at the right level and stage, prior to the order being placed, when the spend is committed. Maverick spend issues will then be addressed before it is too late. The key to this is to ensure the control process is invisible to the user. The process of buying goods and services should be as easy and intuitive as possible.

    Without the right systems in place, companies can encounter what's known as a "reverse purchase order" process, which occurs when orders are placed without being noted in any form, electronic or paper- based, at the time of order. Once the invoice comes in it will be unclear where it came from, whether it is a duplicate, if it is within the budget and who it was approved by, if approved at all. To address this issue, which can cost a company thousands or even millions of dollars, efficient systems need to be put in place to ensure that the purchase order process is undertaken in the correct manner.
  2. Contract Visibility -- Most organizations are tied into multiple contracts that can be worth many thousands of dollars, but many will not have full visibility into those agreements, their values or expiry dates. With different departments in the business controlling contracts for different goods and services, a company needs to have a central view of its spending commitments, if only to appropriately allocate budgets.

    A system that provides a central view over contracts will address such issues as corporate governance, accountability and traceability, which if not identified could be the difference between meeting or missing financial targets. Contracts that are automatically renewed can also cause headaches for individual departments as the supplier, who has its contract renewed automatically, might not carry the same goods or services anymore. Also, costs connected to that contract may not necessarily be allocated in budgets, which can cause significant issues.
  3. Strategic Activity for the Purchasing Team -- It is essential that procurement systems are intuitive, so that anyone who needs to make a purchase can do so easily and in line with policies that are set out by the organization. The purchasing staff will then be able to focus on their core, strategic value-add activity, such as contract management and supplier relationship management (SRM).

    Read the whole thing at: Supply and Demand Chain Executive

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posted by William Dorn @ 1:30 PM   0 comments
The Small Business Owner's Recession Survival Guide
Thursday, February 7, 2008
If you asked a fellow business owner the largest threat to his business, he might say a recession. A sustained economic downturn, he might add, will cause companies to close the money spigot, layoff employees, and hunker down until the financial clouds parted on the economy and things were sunny again.

Maybe, but more likely, maybe not. First of all, it’s important to note that we’re not in a recession, so worrying about it is a waste of time. In early February, economic indicators showed the economy has slowed (to a growth rate of .09%), but not stalled, in its most recent quarter. In the opinion of most economic observers, a recession is defined as negative growth rates in two consecutive quarters, and that hasn’t happened yet and probably won’t, if most economists are to be believed. That’s because the impact of the Federal Reserve Board’s series of interest rate cuts will finally hit the economy, along with tax rebates of up to $1,500 per American taxpayer from President Bush’s recently proposed economic stimulus bill, and an up-tick in corporate spending for the first time in a year.

For small businesses the best strategy for staving off tough economic times is to be prepared. At the top of that list is beefing up their cash reserve accounts to help weather economic storms. That means budgeting and cutting back, but that’s a small price to pay to maintain your business’s good financial health. It also means negotiating lower costs for equipment, supplies and services. For some business owners, building a cash reserve may come at the expense of swifter business expansion. But the alternatives-- taking out a loan, dipping into personal net worth, or shutting the shop's doors-- are far less palatable.

If you’re in the retail end of the small business world, another good idea is to streamline your business operations to get a better gauge of how you’re business is doing. One way to do that is equip your computer armed with point-of-sale (POS) software that can provide you with a whole new set of management tools. A good sales software package can help you swiftly determine which are your best-selling products, how quickly inventory is turning over, how much of each item to is needed for future demands, and how to divide shelf space most efficiently. POS software also you avoid locking up cash in slow- moving goods, an extremely important goal during a recession.

One mistake some small businesses make in tough economic times is to cut prices. That sounds good in theory, but your customers will still value a job well done than they do a lower price. Besides, giving yourself a pay cut in an economic slowdown hurts you the most.

Instead of cutting prices, increase your value and reward good customers. Take a course and learn more about your customer’s business. Then put your new-found knowledge to work. For your best customers, start sending thank you notes or buying them lunch more often. People still appreciate the human touch, especially when they’re a bit nervous about hanging on to their own jobs.

Remember, your best selling point as a small business owner is you.
By cranking up the customer service dial, and by stashing some money away until the tough times are over, any small business owner worth his or her salt should easily survive a soft economy.

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posted by William Dorn @ 10:57 AM   0 comments
Top Tips for Recession-Proofing Your Business
Monday, February 4, 2008
We may not be in a recession yet, or maybe not at all this year, but why take a chance and be unprepared when a recession hits your business?

That's why, in the Sorceror's ongoing review of business trends, having a plan in place before tough economic times hits home. Such a plan today comes from Business Week, where columnist Karen Klein has a list of tips for businesses to survive and maybe even thrive in a recession.

1. Don't be caught off guard if the slowdown hits your company, says Gregg Landers, director of growth management consulting at CBIZ Accounting Tax & Advisory Services, San Diego. "Prepare a worst-case, 12-month cash flow scenario. Assume a 10% to 20% drop in revenues and identify what changes you would make and when," he says. If you need to, improve your management reporting so you can identify leading indicators for your firm. You don't want to react late after you notice a drop in your monthly financials.

To keep your company lean, you should set and measure inventory targets and keep in daily or weekly communication with your sales and operations staffs, Landers says. You may also want to weed out unprofitable customers. "Every company has customers that cost more than they add to the bottom line. Identify them, evaluate how to make them profitable customers, and if that's not possible, politely hand them to your competition," he says.

2. To keep from losing business, keep in close touch with your customers. "Show that you care. Understand how their business is being affected and look for ways you can help. Lasting relationships are built in hard times." And look for new market opportunities, recognizing that when the business climate changes, customer needs will change as well. That may mean new markets will open up for you, he says.

Jay Siff, chief executive officer and founder of direct marketing firm Moving Targets and Loyal Rewards, based in Perkasie, Pa., says his mom-and-pop retail clients have been struggling for nearly two years. "I can draw a line from the day Hurricane Katrina hit, through the spike in oil prices that followed. I instantly started hearing from my customers that their business was slowing down and their expenses were going up. Each month, their margins got thinner and thinner," he recalls.

3. Develop strategies to land more customers. Siff has counseled his clients that if they want to make their companies grow they will have to steal customers from their competitors, period. "The pie is shrinking. For the auto repair shops, cars are more reliable and need less frequent service. In the restaurant world there's been overbuilding and the average number of meals eaten out has declined for the first time in a number of years," he says. "The successful small business is going to have to win a bigger share of that shrinking pie."

The way to do that, particularly for retailers, is to create a positive experience. "Make sure you give every customer the best experience you can. That means clean restrooms, courteous staff, eye contact, handshakes. You've got to do this better than the other people out there," Siff says. Another good option for local businesses is community involvement. "Join the Rotary Club or the Chamber of Commerce. Sponsor a Little League team. Let the Girl Scouts do a car wash in your parking lot. This is part of bonding with your community and becoming an established part of it."

He also believes small companies need to reach out to the new residents in their communities. "They're going to choose someplace to buy their pizza and their shoes. You want to have an active campaign to greet them and bond with them," which is what his company and other direct-marketers do.

4. Spend on hiring. Tom Gimbel, CEO of Chicago staffing and executive search firm The LaSalle Network, says business owners should hire—not fire—during a recession. "Most of the time, economic downturns are short-lived," he notes, a powerful incentive to keep the bigger picture of long-term growth in sight. "It's easier to invest training time for new hires during slower growth periods. Employees that are fired during a recession will have to be re-hired—which costs companies a lot more money in the long run," he says.

Another strategy is to look around for people who have been laid off from other companies and pick up some available talent. "This is a great time to find top performers who will help bring your company to the next level," he says.

5. Continue to get the word out about your business. Dan Feder is co- chief executive officer of San Diego-based Five Point Capital, an equipment leasing firm whose clients include many small businesses.

He counsels those clients to continue marketing and advertising, rather than dropping those expenditures and decreasing cash flow.

"The first instinct of many businesses is to kill the marketing expense. What they don't realize is that could make things worse," he says. If you can't afford a full-blown marketing program, choose cheaper alternatives such as e-mail marketing, blogs, public relations, and online newsletters.

He also recommends staying positive. "Think of ways to bring in new types of customers, maybe partnership opportunities, or new products and services. Many businesses stop doing things that will help them grow in fear of the recession, and then do just that—stop growing."

Above all, entrepreneurs must keep their personal credit ratings high, since business borrowing often depends on personal credit, especially in the small business universe. "Curb your spending and don't give the bank a reason to charge you more money by being late on payments, says Ken Kamen, president of Mercadien Asset Management.

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posted by William Dorn @ 12:02 PM   3 comments
Yo Ho Ho: Reduce Software Piracy - and Save Big Bucks
Thursday, January 31, 2008
The Business Software Alliance has long been on the case of U.S. companies who use, inadvertently or not, unlicensed software for their business operations. Make no mistake, the BSA has aggressively gone after and imposed heavy fines on companies who are caught in the act using pirated software.

It's not hard to catch a software thief -- all it takes is one disgruntled IT employee who knows that the latest batch of Microsoft Office software was . . . ummhh . . . tainted. One dime dropped to the BSA and the manhunt is on.

This week, the BSA is adopting a softer, gentler tone. It's touting a study from International Data Corporation that says reducing software piracy in the United States by just 10 percentage points over the next four years could generate more than 32,000 new jobs, $41 billion in economic growth, and $7 billion in tax revenues above current projections. And it's not just the U.S. While the United States has much to gain from reducing illegal software, high-piracy emerging economies like China, Russia and India could experience even more dramatic, positive impacts, the IDC study suggests.

The study, commissioned by BSA says that the information technology industry is already a major contributor to the American economy. In 2007, the United States spent nearly $458 billion on IT goods and services including computers, peripherals, network equipment, packaged software and IT services. That spending accounted for 3.4 percent of gross domestic product (GDP), supported more than 314,000 IT companies with 2.9 million IT industry employees, and helped generate $485 billion in IT-related taxes.

Yet the IT sector’s contribution to the US economy would be even greater if America’s 21 percent PC software piracy rate could be lowered to 11 percent by 2011, the study said. Such an improvement would add highly skilled jobs to the labor force, support the creation of new companies, lower business risks, and fund government services without a tax increase.
Moreover, reducing software piracy has a "multiplier effect."

According to IDC, for every $1 spent on legitimate packaged software, an additional $1.25 is spent on related services from local vendors such as installing the software, training personnel, and providing maintenance services.

"When countries take steps to reduce software piracy, everyone benefits," said Robert Holleyman, president and CEO of BSA. "With more and better job opportunities, a stronger, more secure business environment, and greater economic contributions from the already robust IT sector, reducing software piracy would deliver tangible benefits for governments and local economies."

The study also reveals big changes in the global IT landscape that could result from piracy reductions in emerging economies.

For example, a 10 percent reduction in China’s 82 percent PC software piracy rate could make that nation’s IT workforce the largest in the world within four years, surpassing the number of IT workers in the United States. The number of IT jobs in China would grow by an additional 355,000 beyond those already projected, bringing the total number of IT jobs in China to almost 3.5 million by 2011. The improvement could increase IT spending growth from 10.3 percent a year to 13.7 percent between 2008 and 2011.

Likewise, a 10 percent cut in Russia’s 80 percent PC software piracy rate could help make the Russian IT sector larger than India’s within four years, putting it among the top three fastest-growing IT markets in the world. By 2011, with reduced software piracy, Russia’s IT sector would be a $33.9 billion industry, compared to $32.2 billion in India without a cut in piracy and $33.7 billion with a cut in piracy. Russia’s IT sector would see annual growth in spending rise from 14.6 percent to 18.2 percent between 2008 and 2011 with a 10 point cut in piracy, with 20.2 percent growth for India and 21.4 percent for Kazakhstan (both with a 10 point piracy reduction).

Appealing to a CEO's better, fairer instincts -- specifically, his or her companies' bottom line, is a new tactic for the BSA. But in a tough economic environment, perhaps this pirate pitch won't fall on deaf ears.

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posted by William Dorn @ 8:13 AM   0 comments
In a Bear Market, Source One offers these 10 Simple Ways to Reduce Spend
Monday, January 28, 2008
From a recent Source One Press Release.....

Amidst a slowing business climate, creeping inflation and growing fears of a U.S. recession, strategic sourcing expert Steve Belli of Source One Management Services, LLC offers up more than your average belt-tightening advice.

"Many business owners and managers forget that one dollar in strategic sourcing savings goes directly to your bottom line. In hard economic times like these, it's important to remember that it would take $10 in sales to make that same dollar," comments Belli. More than simply cutting costs, strategic sourcing involves a streamlined process that taps into the skills of the supply industry to optimize sustainable competitive advantage for the business and its customers.

Yet, most mid-sized companies lack the resources, disciplined sourcing practices, category expertise and spending power to negotiate and maintain competitive supply chains, according to the Aberdeen Group benchmark report, Strategic Sourcing in the Mid-Market Benchmark.

Aberdeen estimates that such deficiencies cost mid-sized firms in the U.S. $134 billion a year in missed supply savings opportunities. In light of international concern over a long-term U.S. recession, the time couldn't be better for more refreshing approaches to cutting costs.

With these 10 quick tips on how company decision makers can benefit from strategic sourcing without losing finance and purchasing management support, Steve Belli offers invaluable advice on recession-proofing your bottom line.

Source One offers the following 10 steps to cut costs in tough economic times:
  1. Creativity is the golden rule in every aspect of your approach-- including the identification and qualification of suppliers, the geographical and logistical aspects of the supplier and company's clients, the sourcing strategy, and the development and negotiation of contracts.
  2. Collecting data saves dollars: In order to maximize savings, learn how to study up on (less obvious) aspects of the market. Note: Strategic Sourcing consultants, like Source One, have access to data and information that most companies cannot afford to acquire for every one of their strategic and non-strategic spends.
  3. Examining (or re-examining) your sourcing strategy can be eye-opening: At the rate the current market changes, it is essential to stay on your toes and constantly reassess your strategy. Be realistic about your requirements by looking at your minimum needs and maximum desires.
  4. Developing a supplier list always adds value: Have you accumulated a large potential supplier base? Doing so will increase the likelihood of unearthing original opportunity and savings!
  5. The ABC's of RFPs : Open communication is key (and ultimately saves you money) throughout the Request for Proposals (RFP) process.
  6. Analyzing response can be the missing link: Turn to a fact-based objective market picture and plan from there.
  7. Only fools rush in. Negotiating issues carefully saves money. From both a qualitative and quantitative aspect, gauge each supplier proposal against your internal benchmark.
  8. Planning and implementing = results in action.
  9. Continuous performance management will ensure you savings (and keep your suppliers on their toes.)
  10. Watching your back keeps you moving forward. Take a careful look at what your competitors are doing in terms of source and supply.

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posted by William Dorn @ 8:59 AM   0 comments
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