Why Big Biz pays too much for mobile phones

Most if not all organisations pay too much for their mobile phones, writes Robin Bloor. The way mobile carriers make their revenues is by being a little smarter than the customer. They offer a series of different usage plans and the customer chooses one. But the customer is usually ill informed and careless.

They do not always choose the one most appropriate plan for their level of usage. So they pay too much - in some cases way too much. In the United States, for example 22 percent of mobile phone revenues derive from customers being "on the wrong plan". The mobile carriers even have a term for it - which is "breakage".

Overpaying is particularly prevalent in large organisations many of which have issued hundreds or even thousands of mobile phones to their staff. The individual consumer has the regular bill as an incentive to manage his or her use of the phone, but the corporate customer doesn't care too much about the cost and may not even see the bill.

In the US, the need to manage mobile costs has given rise to a whole new business. In the US the situation is fairly difficult to manage anyway. There are six national mobile carriers and as many as 300 small operators that work through the major carriers. There are many different types of billing systems and the situation is generally out of control.

Traq Wireless, a software start-up out of Austin, Texas saw all of this as an opportunity and set up an ASP-based service to gather the data, analyse it and optimise the corporate use of mobile phones. It is proving to be a popular service with large organisations and it now has 75 customers and seems to be doubling in size on an annual basis.

There is something interesting in this that goes beyond the stark facts of mobile use and abuse. However, the stark facts are themselves quite interesting, so lets deal with them first. Traq Wireless has discovered that in corporate America between 7 and 10 percent of the mobile phones aren't even being used, even though the rental is being paid - and in one company with high staff turnover the figure reached 40 percent. Traq expects to save customers up to around 35 percent of the bill, which in the US averages somewhere around $1,250 per annum per phone. Consequently, it expects to deliver ROI on the cost of its service within 3 to six months.

There are quite a few areas where mobile costs can be trimmed, from controlling personal use through to getting the most sensible service for the executive traveler. Some executives are known to rack up bills in the thousands of dollars per month, some of it quite needlessly.

So Traq provides a fully automated analysis and optimisation service; collecting the bills on your behalf, analysing them and reporting on what needs to be done to button down the costs. It is implemented through a web site that the customer can access to examine the various reports that Traq provides.

Traq also stays up-to-date with all the plans from all the providers, which it says change with bewildering frequency. So there is a continual tactical battle going on with the carriers inventing new plans in order to maximize their customer revenues, and Traq responding by minimising the revenues for its smaller customer base.

Traq is likely to bring its business to Europe where it says the same type of sub-optimal mobile usage is occurring. The parameters are different but the game is the same. However that wont happen for about six months until it has geared up its software to deal with the European facts of life - starting with the UK.

There is a wider strategic consequence to what Traq is doing here. It is easy to think of it as a company with analysis software that has seen an opportunity and is exploiting it. However in reality it is sitting over an emergent and rapidly growing part of the corporate network.

If you boil it down, Traq is really a systems management company that focuses on the wireless device space. It already allows its customers to register PDAs and laptops in its database and in the medium term it will probably move towards gathering information on device configuration, the applications, licensing issues, the efficient use of ASP services and so forth.

In other words we can eventually expect to see Traq Wireless mentioned in the same breath as CA or Tivoli. And interestingly enough, the CEO of Traq Wireless, James Offerdahl was one of the original entrepreneurs that founded Tivoli. He and his company have their eyes on a bigger prize than managing mobile phone bills.

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