Analyst Angle: Money to be saved by businesses that centralize their wireless services: 2009 tough on enterprise mobile and wireless spending

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Since March 2007, the good folks at RCR Wireless have been very patient with my quest to shame and otherwise motivate employers to provide cellular service for employees that make more than an occasional call related to business. At that time, I had written a report that found only 44% of the employers in a survey of 1,023 respondents provided a cellphone for the business and incidental personal use of its employees. This implied that 56% of businesses employed some strategy or another to avoid paying for the calls that their employees make for business.
This struck me as wrong at a fairness level. An employee should not be expected to pay for services that are necessary to be competitive in their job. From a pure business logic standpoint, it seems that an employer should be eager to pay for the tools that make their employees more productive.
In fact, the research found that users with a corporate-supplied phone, referred to as “corporate-liable” since the employer takes liability for paying for the service, used more airtime for business calls than their peers that were individually liable and paid for their own bills. At the time, the study found that the difference in additional personal airtime was negligible, but that business use was more than two hours monthly.
It is not possible to know if these two hours turned unproductive lulls to perfectly productive time, but how many rational employers would not jump at the chance to pay an extra $30 monthly for an increase on productivity measured in hours? Apparently, the percentage in March 2007 was 56% of employers.
It is now February of 2009. It is a fair bet that every employer is looking at ways to scale back expenses. For many organizations that have not embraced wireless expenses with the same procurement strategy as wireline expenses, it is expedient managerially to reduce budgets by having employees take on more of their cellular costs.
This is not entirely logical even if it is effective. Most employees would balk if their employer eliminated office photocopiers and required them to run over to a FedEx Office Store (formerly Kinko’s) to make convenience copies. There would be a great outcry if employers deducted 10 cents per minute from your paycheck for each call you made from your desk phone. However, employees seem to be OK with a similar arrangement with their personal cellphones. As it is, the top reason why employers back in 2007 that were moving more liability to their employers justified this action was to save money on departmental budgets.
The reality is that there are times when business necessarily become short-term focused. Early 2009 is one of those times. In a more recent study of how firms pay for wireless services, the percentage of employers that provide employees corporate-liable phones dropped to 40% from 44%.
This is in spite of more compelling evidence that corporate-liable plans for cellular service are profoundly valuable. The latest study found that, instead of two hours of more business calls each month, the latest results showed that the amount of business calls is now three hours.
This increase in usage coincides with continued decreases in the average price of airtime has dropped for both consumers and business users. The rule-of-thumb over the past decade is that airtime pricing has been dropping 30% annually while minutes of use has been growing at 30%. For business users, prices have dropped faster and usage has grown faster. Wireless service has increased in importance to business users in general.
Interestingly, corporate spending on wireless in the U.S. is almost as large as corporate spending on wireline services. While each expense report for wireless service that comes in to a business is relatively small, the cumulative amount is in the billions of dollars. The main difference for employers that offer employees corporate-liable plans and those that have employees submit expense reports is that in the latter case, the company gets to spend much more for less service at a higher administrative overhead. Business users spend about a 25% price premium for a minute of airtime when they have employees negotiate price at the local mall rather than professionally negotiating with cellular carriers.
This 25% difference probably underestimates the true impact of centralized negotiations for the wireless telecommunications. Telecom expense management firms specialize in centralizing the acquisition of telecom services, have the greatest opportunity with wireless services. By examining the expenses reports and contracts throughout the client organization, these firms are able to significantly reduce expenses for their clients.
In discussing some of these finding with several of these firms, many claimed that their cost per minute of airtime was about half of the average corporate liable respondents reported in the study. The finding is that many firms are leaving a great deal of money on the table by having employees submit expense reports for wireless services.
Contrary to common sense, the current trend is that more firms tend to be going in the direction of leaving money on the table. At some point, business conditions will improve and business will be able to expand their planning horizon beyond expediency in the short term. At that point, there is a great deal of money to be saved and productivity to be recognized by firms that centralize their acquisition of wireless services and offer corporate-liable phones for the employees that need this capability.
Questions or comments about this column? Contact Bill at hughesanalysis@live.com. Contact RCR Wireless at rcrwebhelp@crain.com.