white paper

Burning Dollars
Top Five Trends in US Telecom Spend
Telecom costs are among the largest
operating expenses for organizations
worldwide. Yet, theyre 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 spend 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 spend.

white paper | Burning Dollars: Top Five Trends in US Telecom Spend

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 arent going away soon

04

Wrapping it all up

04

white paper | Burning Dollars: Top Five Trends in US Telecom Spend

Fixed costs
Variable costs

The tables below give a breakdown of

average corporate-liable invoice spend and
employee-owned device invoice spend from
2010 to 2012.

2010 2010%

2011 2011%

2012 2012%

in USD

Base of
invoice
spend

in USD

Base of
invoice
spend

in USD

Base of
invoice
spend

Avg voice cost

42.44

39%

45.00

40%

44.22

38%

Avg data cost

30.85

28%

32.21

29%

36.55

32%

Avg msg cost

7.81

7%

9.08

8%

9.33

8%

Avg tax cost

4.92

5%

5.23

5%

5.79

5%

Avg occ cost

0.08

0%

0.87

1%

(0.35)

0%

Avg 1x other cost

6.74

6%

3.12

3%

3.92

3%

Avg download cost

3.41

3%

3.03

3%

3.06

3%

Avg special feature cost

7.36

7%

7.72

7%

7.51

7%

Avg directory assist cost

5.55

5%

5.60

5%

5.41

5%

Total

109.16

111.86

115.44

Employee-owned device invoice spend*

2010 2010%

Fixed 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 invoices
which includes corporate liable invoices and
employee-owned device invoices a few
telling trends have come to light.

Corporate-liable invoice spend

Variable costs

Trend 1:
Businesses burn dollars
unnecessarily on variable costs

2011 2011%

2012 2012%

in USD

Base of
invoice
spend

in USD

Base of
invoice
spend

in USD

Base of
invoice
spend

Avg voice cost

43.28

41%

49.50

40%

51.09

41%

Avg data cost

31.17

30%

36.21

29%

35.02

28%

Avg msg cost

8.89

8%

9.70

8%

7.98

6%

Avg tax cost

6.15

6%

6.60

5%

7.07

6%

Avg occ cost

(0.11)

0%

2.18

2%

2.72

2%

Avg 1x other cost

6.14

6%

3.53

3%

3.11

3%

Avg download cost

1.98

2%

4.68

4%

4.51

4%

Avg special feature cost

2.47

2%

6.29

5%

6.37

5%

Avg directory assist cost

5.22

5%

5.57

4%

5.51

4%

Total

105.19

124.26

123.38

*Note: download cost referenced in the above tables represent all data capable device types.

01

white paper | Burning Dollars: Top Five Trends in US Telecom Spend

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
spend 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 2.10. 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
employers cost.

Increase in data costs

While voice costs have maintained an
average of about 40% of invoice cost, data
has grown 4% since 2010 to claim 32% of
all invoice costs 2012. 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
Theres also been an increase in the average
total cost of both corporate-liable and
employee-owned device invoices, 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.

While voice costs

have maintained an
average of about
40% of invoice cost,
data has grown 4%
since 2010 to claim
32% of all invoice
costs 2012.

Variable costs offer a major

cost-cutting opportunity
Arguably the most compelling result,
however, came from comparing fixed costs
versus variable costs across all invoices. With
voice, data, messaging and tax making
up 83% of average invoice spend, the
remaining 17% is left to more variable
spend 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 spend are thought
of as small dollars and at only 17% of an
invoice this is a fair assessment. But 17%
of every billed mobility invoice does paint a
much different picture.

02

white paper | Burning Dollars: Top Five Trends in US Telecom Spend

Trend 2:
Tablets are king
Device type

2010

2011

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 20102012
indicating a dramatic increase in the
general popularity of these devices theyve
registered a much lower average annual
growth rate of 38% in terms of corporate
purchases. Where theres a higher BYOD
increase in tablet adoption, Dimension
Data believes individuals are bringing their
personal devices to work, which arent
funded by their employers.

2012 2010 to 2012 change

Smartphones which have a lower price

point and a multitude of free download
choices experienced an upswing in growth
entering 2012. Smartphones, the use of
which is on the rise, havent attracted
organizations completely yet due to security
concerns. However, its 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

white paper | Burning Dollars: Top Five Trends in US Telecom Spend

Trend 3:
Businesses love the iPhones
In terms of the type of mobile phone thats
most popular, its 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, its 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 isnt 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, its clear that
the majority of visits to these sites were still
from non-mobile devices. However, its also
encouraging to note that an average of at
least 7% of visits to each site came from
mobile users (who didnt 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.

CS / DDMS-1327 / 04/13 Copyright Dimension Data 2013

Trend 5:
Unlimited data plans arent
going away soon
Its true that were 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, its important to exploit this
opportunity while its still in the offering.
Regardless of that, its vital to note that
unlimited data availability remains a staple
of a well-negotiated enterprise contract.
Leveraging that component means
organizations arent kept at the mercy of
their employees usage.

Given these five

trends in US telecom
spend, its 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 spend,
its clear that costs in this area are bound to
do what most other business expenses do:
increase. Its important that organizations
start gaining a more detailed picture of
which telecom expenses burn dollars
unnecessarily. It impossible to manage what
you cant 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.

For further information visit: www.dimensiondata.com

04

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