Wireless TEM: Why Managing Mobile Phones Is Different
By Robert Lee Harris
Published January 24, 2008
The cost of these devices is often included in large-volume, corporate-liable wireless deals, just as the cell phone is included in a consumer’s wireless contract. For a large enterprise, this can be a huge benefit, but only if it is actually used. The closest comparison with wireline equipment would be to a premises equipment vendor who includes free periodic hardware upgrades with a maintenance contract. In both cases, the cost is factored somewhere into the monthly bill and if you don’t use it you are paying good money for nothing.
Consider that the cost of a wireless device (when not defrayed by the carrier) is usually anywhere from $150 to $400, and multiply that by the number of devices a business uses. If the end users actually upgrade when they should, the organization is getting good value, but a new problem is created: Someone must take on the job of assisting the customer with setting up the new device, synchronizing data and training.
Many wireless TEM systems can track upgrade eligibility for every device, and include a provisioning tool to help users select and order the appropriate device. Some, including MobilSense, also offer a help-desk capability on an outsourced basis. “Many companies find that there are enough moving parts to a cell phone that they need a help desk or call center to support it,” said MobilSense’s Doug Stevens.
Managed help desk services were among the features that appealed to Rivermine in adding BBR Wireless to its product portfolio. Rivermine’s John Shea told me, “When the customer wants us to run a help desk and take over end-to-end management, in addition to the wireless expense management, BBR helps us do that.”
“BBR also provides an awesome catalog of new wireless devices updated by the carriers,” he added. “It shows all the different latest and greatest wireless devices, and the carriers run electronic links to get those orders in.”
Why Some Organizations Prefer To Reimburse Their Employees
If you think this sounds like too much to manage, you are not alone. Only in the past few years have the wireless carriers begun to offer corporate discounts of any significant value, and many IT managers are used to their end-users telling them how much less they can pay on their own consumer wireless plans. And there’s always someone in the office who has enough clout to demand a different
device, regardless of corporate policy, and who also wants IT to help him or her integrate it with the corporate email system.
What seems like an obvious response is to let users get their own devices and plans, and then reimburse them for work-related wireless expenses. One company I worked with years ago gave their employees a “cell phone allowance,” at a single rate company-wide. Employees who used more minutes than their allowance were responsible for the overage charges, whether the overage was work-related or not. There was no control to make sure that the base minutes were actually work related, and no reimbursement for a higher volume of work-related usage.
While many organizations are moving toward corporate-liable cell phone accounts, others still use employee-liable accounts and reimburse their employees. In fact, I recently met with a city IT manager who is in the process of moving every mobile device off the city’s accounts on to a reimbursement allowance. This approach may make sense for smaller businesses, but in larger organizations there is a huge loss of control and economy of scale when each user is allowed to purchase his or her own device. Users will still want email integration and other kinds of tech support for work-related usage whether they are using their own cell account or the company’s.
In many big companies that are still reimbursing employees, the IT departments are now stuck supporting a hodgepodge of devices and users who need access into the corporate infrastructure. Once email integration is achieved, there is no control over security; users can be running multiple email accounts or applications on the device, or they may swap out the phone themselves and leave proprietary information on the older device.
Another lesson that IT should have learned from the wireline world is that corporate telephone numbers should be considered a company asset. Many businesses spend large sums of money porting, preserving or forwarding published phone numbers during office relocations. Yet their best salespeople may have their own cell phones. If these people leave the company, they take their phone numbers with them—numbers that could be known to years’ worth of customer contacts and leads. If the company owns the phone numbers, these numbers can be reassigned to new salespeople.
These are some of the reasons many companies are moving away from employee-liable plans to take control of the whole wireless cost and assets. But there is an accounting issue that could make corporate-liable plans less attractive.
IRS Compliance Issues—Something To Think About
Since 1989, the IRS has considered cell phones to be in the category of “listed property,” that is, items which people can use as easily for personal as for business purposes. An IRS Fact Sheet explains, “‘Listed property’ includes items obtained for use in a business but designated by the Internal Revenue Code as lending themselves easily to personal use. This includes automobiles, computers, and entertainment or recreation-related items. In 1989, cellular telephones were added to this category. Although the use of these phones is much more widespread and economical today, they remain listed property and are subject to these restrictions.”
The IRS is in essence acknowledging that cellular costs have gotten cheaper, so maybe companies don’t care about some personal usage on a company owned phone, but the law still excludes this usage as a deductible expense. In fact, personal calls on a company owned phone are actually supposed to be reported as employee income.
According to telecommunications attorney Martha Buyer, “If the employee owns the phone and gets reimbursed for business usage, that’s a corporate expense which the company will likely deduct. If it’s the company’s phone, then the employee’s personal usage, as well as a portion of the value of the phone itself can be classified as income to the employee and will likely show up on the employee’s W-2.”
This factor alone could keep some organizations away from corporate-liable cell phone deals, since it is fairly easy to reimburse employees for usage that they submit on expense accounts. Doug Stevens of MobilSense said he had talked to companies that have been audited and, “they have had significant portions of that spend disallowed as an exemption.” He noted that MobilSense’s Mobilsentry service has a directory function that automates the process of separating business from personal calls. John Shea of Rivermine said the issue “does tend to surface,” and as of November, the Rivermine/BBR solution will add the ability to differentiate business and personal calls on a wireless bill.
I also asked some of my colleagues from the Society of Telecommunications Consultants if they knew of clients or other businesses that had actually been audited by the IRS for this. While most were aware of the issue and had made sure their clients were aware, none knew of actual IRS audit instances. Still, the consensus is that it is a good idea to be ready for this issue. “Nothing has happened yet” is never a good reason to be out of compliance with tax regulations! Strict compliance entails having a written policy about personal cell phone use, separating personal from business calls, and reporting personal call expenses as employee income or having the employee reimburse the company for these expenses.
Given these conflicting trends, it’s not surprising that some busy professionals are carrying around two devices, one from the company and one of their own.
Eventually wireless costs will be folded into an overall TEM strategy, but for now the issues remain different from wireline charges. Billing and device issues alone make this a different field of expertise, and industry expertise is an important characteristic of your TEM partner, whether that partner provides managed services or software.
I think companies like Rivermine, Tangoe, Telesoft and MGB are making a good call by merging or aligning themselves with the providers of wireless TEM solutions. Fixed/mobile convergence, once perfected, will make wireless devices much more common, even in the office, as a replacement to the desktop telephone. They will also lead to new billing complexities. Already having a unified cost management solution that handles both wireless and wireline will be very advantageous.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants, an international organization of independent information and communication technology professionals serving clients in all business sectors and government worldwide.
There are two main ways in which wireless and wireline TEM are very different: volume commitment issues and device management.
This article originally appeared in the December 2007 issue of Business Communications Review
Just this year, I have become convinced that cellular phone services bring unique challenges to the world of telecom expense management (TEM). Coming to this conclusion was a gradual process, and I still remember thinking that cell phone bills and rate plans could just be lumped in with all the other contracted services and circuits that traditional TEM packages help to manage.
Oh, sure, maybe the PC Support group managed the cellular devices, while the Network or Telecom Group managed the contracts for services, but those separate silos happen all the time in large organizations. That couldn’t be the only reason that a customer would select two separate expense management tools.
At the same time, I knew cellular expenses were significant, and I already suspected that mobile devices would replace PBX station hardware in the foreseeable future. These devices are gaining more features and ease of use all the time, as I wrote earlier this year (see BCR, March 2007, pp. 44–49).
It was also obvious to me that carriers and enterprise customers had begun pursuing in-building cellular coverage, via picocells and femtocells, to the extent that these options look to displace the early lead that 802.11 wireless data may have gotten in adding voice over Wi-Fi, or Vo-Fi (also see this article).
Looking ahead, as in-building cellular becomes an alternative for more enterprises, carriers may decide to offer fixed monthly costs for in-building services. In the meantime, cellular usage is clearly growing rather than diminishing, and so are the costs to provide it.
In retrospect, I think I overlooked the uniqueness of wireless TEM partly because I had my radar so closely focused on wireline TEM products and services. These keep getting better and better and I figured they could handle any special challenges that a wireless invoice might present. It seemed to me there was an applicable wireline TEM product component for every wireless challenge out there. But I was overlooking the unique issues associated with the management of mobile devices and with the cost management of cellular services (Table 1).
I was finally convinced there must be more to wireless expense management than I had thought when I noticed all the wireline TEM vendors merging or partnering with wireless TEM providers. For example, in March 2007, Tangoe merged with TRAQ Wireless, a well-tenured provider of wireless TEM. In July 2007, MGB Expense Management partnered with mindWireless, and in October 2007, Rivermine announced a merger with its long-time partner, BBR Wireless Management. Another wireless TEM provider, MobilSense, partners with many wireline TEM and call accounting vendors, including Telesoft.
To find out what the TEM vendors are trying to gain when they partner with the wireless TEM providers, I reviewed case studies on wireless cost savings and optimization methods and spoke to colleagues and telecom managers about their unique challenges in managing wireless costs. I then spent some time talking to Doug Stevens, the sales VP of wireless TEM provider MobilSense, and John Shea, the chief marketing officer of Rivermine.
I found there are two main ways in which wireless and wireline TEM are very different: volume commitment issues and device management. Let’s look a little closer at each, and then at some of the other concerns that come uniquely with wireless TEM.
Pricey Cellular Rate Pools
The difference in how cellular services are billed compared to wireline voice services is not trivial. With traditional wireline long distance services, the customer determines the minimum volume of minutes they will use over an entire year (known as the Minimum Annual Commitment or MAC), then negotiates a per-minute rate and commits to spend slightly less than what they expect. For example, a company might commit to pay a minimum of $60,000 annually, expecting to spend about $70,000, but knowing that any minutes they use will still cost whatever the agreed-upon per-minute rate is.
In contrast, wireless revenue commitments are based on monthly usage for either a single cell phone or for a rate “pool,” a number of minutes shared by a group of cell phones. Unlike the annual wireline contracts, wireless pricing plans can change as often as every few months and without notice to the subscribers. Month-by-month usage fluctuates more than usage that is averaged over an entire year, and wireless providers charge a significantly higher per-minute rate for minutes beyond the monthly usage allowance.
Although enterprise telecom managers would never pay AT&T, Verizon or Sprint five times as much per minute for wireline calls once the MAC was met, this is a common pricing policy for these same three providers’ wireless invoices, and customers have accepted it.
Recently, however, businesses have begun to realize how expensive these extra minutes can be, as well as how expensive it can be, on a per-minute basis, not to use all the contracted minutes. For example, suppose a business customer negotiates a plan that offers 700 minutes for $49.99 per month, which is a middle-of-the-road deal in today’s market:
At first glance it would appear that the effective rate is just over 7 cents per minute, but in order to actually get that rate the user has to use exactly 700 daytime minutes; no more, no less.
If the phone is used for only 350 minutes one month, the effective rate doubles to more than 14 cents per minute.
If the phone is used for 800 minutes the following month, and the extra minutes are billed at 40 cents per minute (again, a common charge), the effective rate is more than 11 cents per minute.
Pooling usage for multiple devices helps somewhat, but it does not alleviate the necessity of over-committing on minutes to avoid paying the terrible 40 cent per-minute overage charges. In response to this frustrating problem, businesses have begun requesting flat-rate plans with annual spend commitments that are more like the wireline plans—for example a commitment to spend $200,000 per year with every call billed at 9 cents per minute. Carriers will often accede to these kinds of arrangements, but usually they will withdraw other cost-saving plan features, such as free nights and weekends or free mobile-to-mobile calls. The net result is often still a rate that is much higher than advertised.
Plan Management Is A Big Deal
A well-negotiated contract is always a good idea, but another way to help avoid undershooting or overshooting your wireless pricing plan is to use what the wireless TEM providers call “optimization.” This is one of the main features attracting the wireline TEM providers to their wireless brethren, and one of the main reasons you might be interested in looking more closely at wireless TEM for your own organization.
Rate optimization systems work by electronically collecting (from the carrier) all of the invoices that are under the contract, and then calculating the effective per-minute cost. The rate optimizer then compares this information against its database of available plans, including all the overage charges, night and weekend rates and other incentives. The system then presents a recommended pool or plan, usually based on a three-month average. Some systems will notify users via SMS or email if they are close to their maximum number of plan minutes. Some wireless TEM providers offer managed services that will make the changes with the carriers, based on the system’s recommendations and customer approval.
According to Rivermine’s John Shea, the acquisition of BBR brings these capabilities to Rivermine. “We get electronic feeds from the carriers,” he said. “Rate plan management and optimization form the cornerstone of return on investment for the customer.”
No such feature exists in wireline TEM, because you cannot and would not want to change your contract every few months. Nor are the wireless carriers very interested in helping you find less expensive plans. Some carriers offer optimization tools, but these are a poor substitute for the TEM vendors’ independent products and services. Customers who want to achieve the best possible wireless rates will need a combination of well-managed plans that include pooled minutes, individual plans for specific users and flat rates.
Device Management Is Challenging
In addition to rate optimization, device management is a key reason why wireless TEM is different from wireline TEM. Wireless devices are constantly being updated and improved with more features and functions, while the packaging grows ever slimmer and more attractive.