Private equity firms are known for generating attractive profits. In fact, it is the profitability factor that drives many investors to select among the different funds for various rounds of additional funding.
As each company works hard to achieve the most attractive results on its investments, it only makes sense to take the right steps and keep those profit percentages from slipping out the back door from needless expenses. Controlling general and administrative expenses is an ongoing battle requiring constant diligence. Advances and competition often result in decreasing prices, representing low hanging fruit for many G & A managers.
The Telecom Trap
With the advent of the Internet and other high speed communications, telecom in all its variations has become an essential part of every business. Private equity firms consider communications the lifeblood of their business. A constant flow of timely information is simply essential to every firm.
There is, however, something of a trap to these telecom tools. The more important they become, the easier it is for total telecom costs to skyrocket. That is even more the case when considering the broad range of uses of telecom, including:
- Traditional telephones. While the traditional landline is disappearing in many areas, it remains an integral tool of many equity firms.
- IT applications. As more and more applications move to SaaS and the cloud, high speed Internet communications require greater capacity and throughput.
- Teleconferencing. Video is increasingly seen as a standard part of daily communications. However, video consumes a great deal of any online capacity, and the demand grows with the number of participants.
- Mobile devices. From laptops to tablets to smartphones, vendors are adding additional charges for data, just as more apps demand usage of more data.
In each of these applications, increasing utilization equates to increased costs and overhead. However, as the industry continues to grow at unprecedented rates, the volumes and scale are exerting downward pressure on many of the telecom niches.
Controlling the Costs
While it does not make sense to block productivity by narrowing access to the latest telecom tools and applications, it is practical to look for those areas where real savings are easily obtained. Achieving this objective requires that those responsible for the telecom line items in the budget adopt several basic practices. These include:
- Establishing at least a quarterly review of telecom usage and vendors
- Avoiding long-term commitments to pricing plans
- Negotiating savings from bundling and volume discounts
- Offloading communication and telecom costs to other vendors, such as SaaS providers
- Eliminating monthly costs for services no longer used. This can include mobile devices for employees who have left the firm, unused landlines, etc.
Within each of the areas of telecom usage, there are individual opportunities for potential savings. For example, when IT signs up for various seats to offer certain services, such as a SaaS application, the costs of telecommunications may or may not be bundled. Negotiations should include this cost as part of the contract elements.
Mobile devices and communications offer some of the most easily picked fruit today. As the market matures, the competition is presenting a number of new opportunities to save. These include:
- Finding ways to use internal WiFi to minimize use of vendor data plans
- Selecting plans that include long distance and international calls as a part of the monthly rate
- Ensuring calls are free across multiple carriers and vendors, not just the primary
- Subsidize employee devices and phones rather than incurring company inventories and commitments for them.
A disciplined approach to telecom costs provides constant and ongoing opportunities to easily save on them.
[author_bio username=”Ken” name=”yes”]