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Save by removing the flat rate

April 6, 2017

A good new

We would like to resonate a recent news which talks about a real case and explains how a public body, the Generalitat Valenciana, will achieve a significant saving on their telecom bill by removing the flat rate from their new agreement. We know that, with no details, this approach may create doubt. Due to the particular relevance for our sector, we would like to explain and demystify that the “flat rate”, by its own, generates saving.

Flat rate = saving?

Not necessarily. It is wrong to identify the concept of flat rate with the cost reduction without asking what this rate includes, if corporate requirements are met and which dimension and modality optimizes costs. It may be thought that it is quite predictable (not to the 100%), and comfortable as well, to know in advance how much we are going to pay. However, which is the price of this certitude? Probably, the best answer is too high.

We consider even less suitable to think that “work is done” and there is no possibility of a big saving (having in mind, indeed, that cost matters). We have heard the following question more than once:

Why reviewing the number of calls and their duration if I have already known how much they will charge me?

 

If, after the pertinent measurements, it is shown that they only use the 50% of what they pay, or even the 40% or the 25%.

flat rate

Motivation: to reduce costs

The serious economic situation greatly affected many countries and regions in the case of our country. This is the motivation for the majority to take action to mitigate the long-term effects that this situation may cause.

In this sense, asking which is the potential saving on telecom costs is a good beginning. And that is what the Ministry of Finance of the Generalitat Valenciana did after decentralizing the contracting of the Information and Communications Technology services through a framework agreement.

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The way: to analyze the situation

The Directorate General of Information Technology and Communications of the Generalitat Valenciana, made an inventory of the phone lines belonging to the institution, examined the bill history, obtained traffic volumetrics and analyzed the totality. In short: they established measurement criteria, faced models and achieved:

THE CONCLUSION: A potential saving of 85.6 million of Euros.

 

THE SECRET: To remove inefficient flat rates and to change to the “pay-per-use” modality.

flat rate

Reachable goal: a saving of 85.6 m €

This will potentially suppose a saving on the telecom bill of 85.6 million of Euros in the global computation of the four years of the duration of the agreement. To reach this aim, here is a first step:

INVENTORY ANALYSIS. The actual reduction of the phone operators’ bill starts with something as simple as cancelling the lines or services without use. This may seem quite trivial, but it is no so when the lines volume implies around 110,000 users as in this case. They detected unused lines and billing errors as “Internet lines were installed for an event and after the end of it, they remained active and being paid; some health centers were charged as two independent head offices because they had two access doors”.

Is my flat rate profitable?

Basically, it is needed to gather all the information to deduce the profitability of the flat rate applied by the operator: inventory, call volume, minutes and megas used… and once we obtain this data, we should apply the tariff per use and analyze both results.

However, depending on the information volume, this task may involve a large workload. Emprosoft, aware of these market needs and the benefits generated, provides a TEM Consulting service which, usually, the client refinances from the first moment. We can say that “there is an imminent ROI (Return on Investment)”.

Sources: castelloninformacion.com and elmundo.es (in spanish)

 

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