Voice, data convergence can provide long-term solution for communications cost savings

Almost six in 10 businesses in France, Germany, Italy and the UK have cut costs in the last year, of which a third highlighted telephony costs as the number one cost saving imperative according to research commissioned by Avaya Inc (1), a leading global provider of communications networks and services for businesses.

In terms of priority, telecommunications savings (31%) came first ahead of job cuts (28%), reduced IT spend (20%), employee benefits (18%), cuts in corporate hospitality budgets (20%) and general office expenditure (17%). Nearly twice as many small to medium-sized businesses (SMBs) than corporates prioritised telephony as an area in which to cut costs - 41% compared to 23% respectively.

Looking ahead to the next 12 months, the majority of European businesses surveyed have earmarked further cost savings to come from telephony budgets. Three in 10 said they would prioritise cost cuttings in this area before shaving expenditure from other budgets.

Patrick Lelorieux, regional president, Europe, Middle East and Africa (EMEA) at Avaya, commented: "Tough economic conditions have forced businesses in Europe to look hard at day-to-day business overheads. Avaya commissioned this research to better understand how European firms are managing their costs and to see where the opportunities lie."

He continued: "It is reassuring to see that firms recognise that telephony systems can present a significant cost saving opportunity. However, organisations need to realise that cutting costs through short-term measures, such as reducing call volumes and restricting international calls, are not sustainable in the long-term. In terms of communications savings, investment in IP telephony may be a better option, with proven ROI. For example, the Avaya converged network used at the 2002 FIFA World Cup saved FIFA more than $200 000 in telephone and network costs over the month-long event."

Across Europe the average time spent on the phone each day equalled 34% of a seven-hour working day. Over the course of a year, this amounts to more than 567 hours per employee. With call time so high, it is not surprising that businesses are looking closely at telecoms expenditure as they try to reduce expenses.

According to the survey, firms hardest hit by cost saving measures have been in the UK and Germany. Two-thirds of British and three quarters of German businesses underwent cost cutting exercises in the last year, compared to just over half of French and only four in 10 Italian firms. The trend looks set to continue with 72% of German and 44% of UK firms still actively planning to make cuts; 43% of French and a quarter of Italian firms are also looking to do the same.

Compared to the other markets surveyed, Italian businesses made the most redundancies with just over half of Italian firms making some head count reductions, compared to four in 10 in the UK, less than a fifth in Germany and only 9% in France.

Italy was also the country most focused on preserving budgets through more measured use of the phone with 45% of Italian firms cutting telecommunications costs. 36% of French and approximately a quarter of UK and German firms opted for this method. Compared to its European counterparts, UK businesses were more likely to cut jobs and corporate hospitality above their telephony spend in a bid to improve bottom lines.

On the topic of reviewing telecoms expenditure, Lelorieux continued: "Organisations can see real benefits from combining their voice and other communications systems, such as e-mail, with key business applications. IP Telephony and converged communications, help organisations to unlock network value by realising the benefits of tying together applications that until now have been completely separate. Benefits include not only cost reduction, but improved operational efficiency, enhanced responsiveness and productivity; in short, helping customers to achieve superior communications-driven results."

Caroline Bryan of Datamonitor said: "The much publicised operating costs for a converged system is significantly lower than the conventional separate voice and data networks, however, the capital expenditure is much higher. What makes the converged system a viable solution is the ongoing management of the single network which reduces costly maintenance, administration and staff support time."

The research found that in the past 12 months over half of firms in the SMB (52%) and large enterprise space (65%) had cut costs. This is a trend that European businesses see continuing over the next year, but the figures quoted by respondents were approximately 10% lower for the coming year. For larger businesses, redundancies were more widespread that among the SMB community. A third of corporates compared to just over a fifth of SMBs had made redundancies.

For further information on the Avaya research, please contact 0044 (0) 20 7386 1411. A full report will be available in August 2003.