Cost Optimization Opportunities for Mobility Services and Devices Are Emerging.

Published 20 June 2019 – ID G00381743 – 18 min read

Traditional negotiation patterns for optimizing costs related to mobility are no longer working well. This research provides advice on how to source mobility costs effectively and address collaboration among infrastructure and operations leaders, in combination with sourcing and procurement tasks.

Overview

Key Challenges

  • Airtime offers are becoming increasingly “flat rate,” with unlimited voice and text messaging, plus an allocation of data. Roaming is often expensive, and “bill shock” is still an issue. It continues to be difficult to find a deal that’s a perfect match with requirements.
  • It’s difficult to compute total cost of ownership or ROI on managed mobility services deals, because of the mix of internal and external costs, which is the case even with a dominant pricing model that favors a fixed price per device. Such deals lack alignment between mobility and the enterprise digital journey.
  • The cost of mobile devices is increasing; however, they are often sourced without discount and volume effects. They can incur large upfront costs, and economic residual value beyond the average expected life span of 24 months may be completely lost.

Recommendations

Infrastructure and operations leaders responsible for strategizing and planning for I&O to reduce current spending should:

  • Reduce the impact of increases in mobile data consumption on airtime-related costs by investigating the possibilities and use cases for options such as mobile data carry-over, bring your own airtime and embedded subscriber identity modules.
  • Increase service provider responsibility for service quality and align metrics to their digital journey in an MMS deal, by tying the pricing to operational performance metrics, such as SLAs and experience-level agreements. Maximize service provider value by unpicking the bundle for competitive leverage and apply profile- and/or outcome-based pricing.
  • Reduce spending on new mobile devices by extending their use beyond the average of 24 months, deploying secondhand devices and implementing bring-your-own-device programs for new hires without compensatory payments.

Strategic Planning Assumption

By 2023, well-defined digital business outcomes will drive 40% of investments in new devices and wearables.

Introduction

Infrastructure and operations (I&O) leaders have exhausted typical mobility cost optimization ideas. However, the complexity of corporate requirements, the cost of supporting the mobile estate and the proliferation of devices and associated commercial options have made finding the best pricing model for airtime increasingly difficult.

This research provides advice on how to source mobility cost-effectively. Collaboration among I&O roles, in combination with sourcing and procurement roles, will generate the most effective outcomes. This will include knowledge of requirement, proactivity of what good would look like and the patience to negotiate, along with awareness of other, more suitable types of rate plans or simply what would be the best option.

Mobile devices prices are about three-quarters of the cost of a corporate notebook laptop; however, the procurement of mobile devices is often not treated with the same level of due diligence or negotiation prowess. There are many options for addressing the cost of these devices, and a cost-effective environment may also include the use of managed mobility services (MMS).

This research is about broadening the mindset and challenging providers (see Figure 1).

Figure 1. Emerging Options for Commercially and Operationally Effective Mobile Sourcing

Analysis

Airtime-Related Recommendations

Enterprise spending on mobile airtime globally now equates to spending on fixed voice and data services, (estimated at $244 billion this year). By 2023, Gartner forecasts show spending on mobile services will be 10.6% higher at $270 billion (compared with $224 billion on fixed services), given a 2.9% global IT budget growth (see “2019 CIO Agenda: Global Perspectives”).

Additional emerging approaches are required to avoid unnecessary mobile airtime costs.

Data-Only Option for Smartphone Use

Is it possible to use only collaborative applications that use the data allocation also for voice (e.g., WhatsApp or Teams)? This could be an alternative for roles in the workforce that use these tools regularly, as well as those that do not have a business need to call anyone outside their network, and, therefore, embedded contacts. When mobile voice and data are separate line items (rather than bundled together), the unlimited voice component often costs €5 to €7 per user, per month, although there are large variations, depending on scope and geography. In some regions (e.g., the U.S.), restrictions limit the use of the phone as a mobile hot spot, or slow data speeds significantly once the user reaches a monthly threshold, such as 10 GB of use. In such cases, a data-only plan may become too restricting. Price plans are the outcome of negotiations, and data-only plans already exist for use in tablets. Consequently, this should be achievable.

Mobile Data Carry-Over

Enterprises want to match individual packages or data pools/bundles to closely match consumption. This is to avoid paying for mobile data that is not being used. However, the ability to carry over unused mobile data for use the following month has, at times, been offered to the consumer segment, but not to the enterprise market. Finally, we are beginning to see a change, with some enterprise contracts also allowing for this. Such an improvement could affect overage-related charges that are typically priced at a 3X to 10X premium.

Bring Your Own Airtime

Similar to bring-your-own-device (BYOD) initiatives, there are efforts to reduce cost by requesting that users bring their own airtime. In principle, this approach is similar to when enterprises compensated or bought home broadband for their users. The rationale is users are likely to have their own broadband at home that is adequate for business use without affecting personal consumption. An initiative such as this can be politically challenging to introduce to the workforce without adjusting compensation packages. However, for new joiners, it may be worth considering.

Wi-Fi Calling With Mobile Supplement

This would mirror the consumer services model available from smaller providers in regions such as the U.S. They use public or private Wi-Fi as the primary network for voice, messaging and data connectivity. However, a limited amount of cellular network access is provided as a backup when Wi-Fi is not available. Similar to bring your own airtime, such plans may be politically challenging for some workforces, but offer the potential for substantial reductions in service plan costs.

Mobile Data Optimization

For years, enterprises have applied WAN optimization capabilities, and similar solutions are available also for mobile use, but remain less used. Solutions from providers such as Wandera and Asavie help enterprises set and enforce user policies by restricting access to specified content types and data consumption by compressing content, creating profiles, and preventing and reducing noncorporate consumption.

Dual-Sim Solutions

Enterprises with consistent consumption patterns between two specific locations (e.g., the U.K. and China) can use dual-sim solutions that eliminate roaming charges and support a flat rate structure, as well as local numbers, which may be preferred culturally. Providers such as China Unicom and Truphone offer such multicountry numbering solutions. The advantage is the local number and the eliminated roaming charge; however, this may require adding another mobile provider into the vendor landscape.

One Flat Bill Only for All Consumption; All Users for One Year

The cost of validating, processing and paying the invoice is high. These activities are carried out internally or by a telecom expense management (TEM) engagement, which costs about €3 per device, per month. Having one bill for all flat-rate consumption and another for exceptions (such as roaming) would reduce invoice-related costs significantly. However, there are likely to be only a few or no contracts like this at present. Billing cycles vary from monthly to quarterly. Having just one bill per year could be done, although the savings from reductions in invoice processing, might need to be compensated through higher rates to address the impact on cash flow for the provider. For this to be economically viable, it is important to know the internal cost of the process, plus the competitive airtime rates.

Embedded Subscriber Identity Module Solutions

Embedded subscriber identity module (eSIM) solutions allow users to change mobile providers, based on location or better rates. They have been discussed for years as a way to get better coverage and pricing. iPhone XS, iPhone XS Max and iPhone XR have two sim cards, a nano-sim-card and one eSIM. The eSIM can be used for a personal subscription (to reduce the data consumption bought by the enterprise) or for a local prepaid subscription when traveling abroad. This reduces the complexity of having to physically swap the sim cards in an unlocked phone, which would also eliminate the possibly of accepting calls at the “real” number.

Operators in 29 countries — including the U.S., the U.K., Germany, Sweden., Canada, Brazil, Spain, Qatar and Hong Kong, as well as GigSky and Truphone — offer mobile subscriptions on eSIM. However, the device needs to be unlocked, and users need to be informed of what is available and how to do it. Where two sim cards are enabled, the unified endpoint management (UEM) platform will require two licenses to cover that one device.

MMS Recommendations

MMS is a set of managed services aimed at ensuring the operational and commercial effectiveness of the mobile estate. This is an area in which investments may represent a saving, as internal costs are transferred to a provider. A 2018 Gartner survey showed an average total cost of ownership (TCO) reduction of 12% for a service that is usually bought at a fixed cost per mobile device. Half of respondents to a Gartner 2018 survey (see Figure 2) reduced TCO by at least 10%.1

Figure 2. Average TCO After Sourcing MMS to Service Providers

However, there may be a potential for greater ROI, because there are alternative ways to procure these services.

Unbundle the Components of the Managed Services Bundle

Although many MMS deals are centered on one provider, not all of them are or need to be. For example, in an environment in which costs and contracts have been largely unmanaged for a long time, initial savings from deploying a TEM solution could yield up to 30% in cost savings (see Figure 3).

Figure 3. Cost Savings

Similarly, part of device life cycle-related activities (e.g., disposal of devices, including shredding) could be bundled in with disposal of other hardware, such as laptops, rather than part of a managed services deal if that offered better commercial terms.

Profile-Based Pricing

Many MMS offers are for the same price per connection. On occasion, there are VIP add-ons that mean faster service, such as shorter response times by the help desk or faster delivery for new devices. However, depending on a user profile, mobile may be more or less critical. For example, for users in field sales, where the device is used to communicate, share collateral, place orders, etc., downtime significantly affects productivity. Users who have a desk somewhere, and also have PCs with conferencing and collaborative applications, would see mobile as less critical.

Next-day delivery could work — e.g., in a hospital environment, the devices work 24/7. In such situations, there is usually some spare pool, hot swap facility; however, the profile can be augmented with priority end-user support. This is a price model that is beginning to emerge. To progress in this direction, enterprises should be clear on what profiles they need and their key characteristics in terms of service demand.

Payment on or Related to SLA and Experience-Level Agreement (XLA) Performance

Operational quality is important in relation to MMS. Many subcontractors contribute to the overall outcome, so governance is key, as is, for example, operational performance, such as lead times, response and resolution times from the support desk. The performance is measured through SLAs. To encourage providers to adhere to or exceed the SLAs, pricing could be based on or related to this performance, where there is a reduced fixed charge that is complemented by a performance “bonus.” However, this applies only if performance translates into additional business benefits. It should never involve paying for quality you don’t need. The latter is the more realistic of the two, because help desk performance is already commonly measured, whereas a complete, performance-related pricing model would involve enhancements to the current, common SLA environments to adequately price the service.

Business Outcome

Mobility is an important part of enterprises’ digital journeys. Consequently, it follows that compensation for delivering mobility could be related to the outcome for delivering digital performance. Examples could include providing quotes from an app, taking an order/registering a mobile sale, or health/safety-oriented aspects relating to law enforcement or ambulatory services. Figure 4 shows how enterprises measured the ROI on their digital investments. The top key performance indicator (KPI) is centered on time savings. This is an area in which an effective MMS provider can contribute. The commercial model is related to the time savings generated.

Figure 4. KPIs in Use to Measure ROI on Digital Investments

The challenge in achieving such a construct would be to effectively define the baseline, how to measure contribution to the target and what form the compensation should take. Push/pull your providers to implement processes to measure value added, which should also be validated. Productivity could be measured as increased time spent working on tasks while outside the office using the mobile device. This could be compared to working on the same tasks inside the office or from a laptop. The objective is that pricing is strongly related to the outcome, which is the purpose of using MMS.

Device-Related Recommendations

Mobile devices cost about three-quarters the cost of a corporate notebook laptop (see“Market Share: PC, Ultramobile and Mobile Phone ASPs, 4Q18 Update”). However, procurement of mobile devices often fails to be treated with the same level of due diligence or negotiation prowess. Sometimes the cost of the mobile devices isn’t negotiated at all, and the overall volumes are often not factored into the negotiated price. There are several options for procuring the device, including outright purchase, installment plan and airtime contract. However, additional avenues have recently been highlighted in a 2018 Gartner survey for optimizing device costs (see Figure 5).

Figure 5. MDM Model Expected to Optimize TCO

Device as a Service

This is a pay-as-you-go proposition. Consequently, there is no need to budget for upfront payments of mobile devices. Instead, there’s a monthly charge that’s likely to include some management services, such as break/fix and, possibly, mobile airtime. It may also include support related to mobile devices, such as help desk, sanitation and disposal, provided by a third party, rather than by internal IT. The challenge with this model is to determine whether the deal is commercially sound. The cost of the hardware may be transparent and can be added to the business case. However, the cost of the additional management is often unknown and must be estimated, and the cost must then be distributed over the length of the contract. Employee downtime for resolving lost or faulty phones must also be added to the business case. Several services like this are available from carriers and managed mobile providers.

Stretched Life Span

By far, the most common time span for a corporate mobile device is 24 months. This contrasts with the average life span of a corporate PC, which has grown from three years to four years in many organizations. This also contradicts global trends overall (i.e., consumer and enterprise), where, through 2023, premium phones’ lifetimes will increase an average of 2.6 years to 2.8 years. Most users in mature markets and, increasingly, in emerging markets (e.g., China and Eastern Europe) already own a basic or premium phone with decent specs, and vendors struggle to provide good reasons to upgrade them more frequently. As a result, there is likely to be an opportunity to extend the life span of the mobile devices by approximately 33%. What is required is to purchase devices outright, buy them off a leasing contract at the end of term, or retain them in use after the installment payment plan has been complete and the organization owns the devices. Even though commercial 5G networks that require new devices are beginning to emerge, the actual business cases for 5G are specific, and there’s no indication of a potential need to dispose of 4G devices prematurely.

BYOD — No Stipends

BYOD programs often include financial compensation to users; however, 7% of survey respondents believe it would be better without it. In some markets, legislation affects this opportunity (see Note 1). BYOD provides a corporate channel to acquire personally owned devices, cut hardware costs to the user and motivate participation.

The principal argument behind the idea not to pay for hardware in any form is that enterprises rarely pay for home broadband any longer. Everyone is expected to have it as part of their lives as consumers. Users also use their home broadband for their corporate consumption at home, because it doesn’t increase the cost. It is argued that this logic extends also to mobile devices. That may be true, particularly for users who have grown up with a mobile device.

Clearly, in any case in which a personally owned device is used for corporate consumption, there must be a UEM client installed. This has the potential to be a sensitive issue. Consequently, it requires clarity around what such a client monitors to avoid concerns about personal integrity. Other users have only ever had a corporate device, and to take it away without compensation would be viewed as a deterioration in their financial package.

The easiest path here is to not include hardware for new hires. Several of the newer devices also have eSIM functionality that enables a corporate airtime plan to be added to their personal devices. However, this is a decision that must be taken jointly between HR, legal, finance, procurement and IT. If specific corporate applications are available on a specific OS, that must be taken into account in this use case. Although BYOD is often related to cost reduction efforts, such an objective is not always achieved. (For more on BYOD cost factors, see “How to Successfully Navigate the Hurdles of Global-Scale BYOD Implementations.”)

Secondhand Devices

In 4Q18, the average cost of a premium mobile device was $650 (see “Market Share: PC, Ultramobile and Mobile Phone ASPs, 4Q18 Update”). The use of preowned or secondhand devices could reduce this cost by some 50%. The overall life span for such a device may not be much longer than 24 months. However, if that equates to the expected life span of the mobile device, then it is a realistic option and is available in geographies such as the U.S., the U.K. and, soon, in Australia. Providers include companies that lease the devices to carriers or managed mobility providers, and, on occasion, the carriers themselves. For some users, it may be surprising, and even challenging, to accept that they are now being issued a secondhand device. In reality, the quality of such devices is usually good, and it can be difficult to distinguish such devices from new ones.

Evidence

1 “Survey Analysis: Top Trends for Managed Communications Services”

Results presented are based on a Gartner study to understand the end-user buying behaviors of managed communication services, primarily across the communication service families of mobility, networking, machine-to-machine (M2M), TEM and multisourcing service integration (MSI). The primary research was conducted online from June 2018 to July 2018, among 430 respondents in the U.S., the U.K., India and China. Of these, 277 were asked questions based on their MMS implementations.

Organizations were screened to have at least 1,000 employees (large and global organizations). They should have already implemented managed services for at least two of the five communication service families, and sourced them to vendors. Respondents were required to hold a manager or higher designation in roles that are completely IT-focused or an equal mix of IT and business. They were also required to be responsible for managed service decision making by being at least a member of such a group in their organization. The study was developed collaboratively by Gartner analysts who follow communication service providers (CSPs) and the Primary Research team.

Disclaimer:Total or overall results do not represent “global” findings or the market as a whole, but reflect the sentiment of the respondents and companies surveyed, as well as Gartner interactions with clients.