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Cloud Services as the New Telco Bill
I once had a Microsoft SharePoint subscription with a local Web hosting company that got absorbed into a well-known global IT supplier. After several years of using SharePoint for some specialized applications and databases, my needs changed, and I decided to cancel the subscription. “Just a quick email to the billing department should do the trick,” I assumed. Six months later, after repeated emails and telephone calls, I finally was able demonstrate zero activity on the site and secured a credit for all past due balances. With that experience, I predicted at the time -- a decade ago -- that continuing growth in cloud services would create major issues with expense management.
Telecom bill auditing was a “thing” before the deregulation cycles of the 1980s and 1990s, but it exploded with the appearance of myriad competitive local exchange companies (CLECs), readily approved by the FCC to encourage competition with the divested but still pervasive Bell companies. The CLECs’ immature operations and billing support systems caused errors that rarely existed with highly regulated services. At the same time, Bell company billing systems were beyond mature, written in prehistoric computer code, and these carriers fought stubbornly against new rates and contract terms by defaulting to legacy pricing. This perfect storm of uncontrolled expenses led to creation of telecom expense management (TEM) as an industry.
Telecom Contracts vs. Cloud Service Contracts
Once heavily regulated, telcos were required to file tariffs and get approval for every service offering. Although these regulations were intended to protect consumers, telcos became adept at often using filed tariffs to their advantages, since these tariffs would override any custom terms and conditions requested by a consumer or business. Despite the de-tariffing of many services, telcos continue to use the same methodology of referencing “posted” terms and conditions in individual customer contracts, subject to change from time to time, and cloud service providers have adopted this same methodology. The result is that by default you don’t have a static contract, unless the service provider is willing to make an exception to standard practice.
A cloud service provider will often give a subscriber the option of cancelling a contract in writing if the subscriber doesn’t agree to revised terms and conditions. While this sounds reasonable, switching to a new cloud service isn’t as easy as changing your brand of laundry detergent. Regardless of the service (UC, storage, servers, conferencing, etc.), most enterprises will have significant hardware and operational dependencies on the existing provider. If you’re not able to obtain a static contract, it’s important to evaluate how your provider will notify you of contractual changes, and how long you have to accept or reject them.
Telecom SLAs vs. Cloud SLAs
I’ve never found service-level agreements (SLAs) very practical. Legacy telco SLAs provided for a partial month credit, and usually put a large burden on the customer to document and comply with specific requirements in reporting an outage, all for maybe a 20% discount off the month’s phone or data bill. Cloud service providers are likely to have more flexibility but can also have weaker baseline SLAs than traditional telcos.
To some degree this makes sense, since the cloud service has more moving parts than just a telecom or data circuit. In the case of UCaaS, a service provider can only provide an SLA on the components it provides. In order to be able to offer an end-to-end SLA, a UCaaS provider must provide the access, equipment, and platform.
Outside of ideally having no outages, what would you want from an SLA? Incremental credits won’t really remedy the lost business or customer trust from an outage. I once had a client that had such problems with a CLEC that the client “couldn’t afford them if they were free.” If service is extremely bad, what you’ll want to be able to do is to leave. It’s not impossible to negotiate termination for cause into SLAs -- the ultimate remedy for consistently bad service.
Telecom Inventory Management vs. Cloud Subscription Management
In a great No Jitter article about cloud subscription costs, Sara Uzel, with the SCTC, described some of the savings opportunities in analyzing cloud costs (see “Stopping the Leaky Faucets of Cloud Subscription Costs”). Just like with telecom, a company can waste a lot of money on unused services. This is especially true if a company has adopted cloud services to “get out of the business of IT.” Freedom from managing servers, power, patches, etc. doesn’t include freedom from managing costs.
However, cloud services have one significant difference from telecom services; there’s no physical wire to trace or inventory. This means that methodologies for auditing cloud services must be different from telecom. While there is less physical visibility, there are many more resources available for identifying users and usage and a larger variety of services. Our best savings for a client so far has been a 40% reduction in costs by identifying unused services. This was a result of staff reduction, which led to a decline in needed services. Among those let go were IT staff who would normally manage those costs.
The best time to start managing cloud costs is when you’re first planning to adopt the service. This is when you have maximum leverage for costs savings and flexibility, the two main values enterprises expect from the cloud. If you’re already committed to a service, it’s still worthwhile to evaluate usage, costs, terms, and conditions for the next time around -- and just like with legacy telecom, “next time around” usually happens way before we’re ready for it.
I’m going to pick up on this topic at Enterprise Connect 2019, coming the week of March 18 in Orlando, Fla., in my Wednesday, March 20, session, “Cloud Communications Cost Management.” I hope you can join me!
Register for Enterprise Connect 2019 today using the code NJPOSTS and save $200 off our current conference rate!