Taming Telecom Costs

Overview
Hexagon Metrology is a rapidly growing supplier of measurement equipment that has made numerous acquistions over the past few years. With headquarters in Sweden and 11 subsidiaries operating out of nine North American facilities, the corporation needs frequent communications between team members located in its European and Asian subsidiaries.

As IT Director for Hexagon Metrology, Inc., Gary Padula has heard vendors make some extravagant promises. “So many vendors make outrageous claims that scare me away,” he notes. Thus he was initially skeptical when Better Cost Control (BCC) promised to significantly reduce his firm’s operating costs. But the Newton, Massachusetts-based firm proved its case. “They produced exactly the results they said they would,” Padula affirms. “It’s very difficult to do that.”
Hexagon Metrology, Inc. is the American subsidiary of Stockholm-based Hexagon Metrology AB, the leading supplier of metrology (measurement) hardware and software systems in the world. It has achieved its market-leading position by combining organic growth with strategic acquisitions. Today it has 11 subsidiaries, with eight of them operating out of nine facilities in the United States alone, including American headquarters in North Kingstown, Rhode Island.
While each of the subsidiaries brings core competencies and strong market share in their respective industries, they have also come with their own systems, processes and cultures. And when it came to IT and telecommunications, the decentralized operations meant disparate systems that resulted in higher operating costs.

Taming the Telecom Beast
In 2003, Padula and Hexagon Metrology’s CFO, Mark Delaney, were discussing how they might consolidate the company’s long-distance and cell phone plans when they were contacted by BCC. While a starting point might be to audit all existing contracts and then begin an RFP process, Hexagon Metrology’s staff lacked the time to do such an audit, compounded by the natural aversion to bringing in outsiders. “Our staff simply did not have the day-to-day capacity to perform this type of audit,” Padula acknowledges.

Further, he notes that telecommunications is an arcane area that, without expertise, it’s difficult to evaluate both the current situation as well as make an informed decision about the best way to proceed. “Industries such as telecommunications and freight are very vertical,” Padula points out. “You have to understand how the whole industry works.”

Such expertise is a core competency at BCC. It proposed a telecom management program to Hexagon Metrology in which it would only be compensated after Hexagon Metrology recouped savings projected by undergoing an audit. Given the risk-free nature of the proposal, Padula and Delaney decided to use BCC as a pilot program to see if such an approach could be implemented on a wider basis.

Savings Prototype
“We gave BCC a very narrow scope at first,” Padula recalls. “Just audit long-distance telecom contracts for the US operations and identify alternative service providers. We looked at it as a prototype for a long-term program. Any benefits from this specific one were extra.”

As “prototypes” go, this one was pretty successful: Using pricing benchmarks, BCC identified overpayment in five categories of domestic telecom costs resulting in $100,000 savings and reduced international sales and support calling costs by $48,000.

Emboldened by these results, Hexagon Metrology decided to tackle other areas of its telecommunications spending. This time, Hexagon Metrology invited other firms to submit proposals for reducing costs. Yet BCC was again selected because it provided a highly structured roadmap. “BCC had a more defined plan of what they were going to accomplish and how,” explains Padula. “Other firms proposed an open forum. BCC has a programmable way of analyzing telecom costs.”

Beyond understanding the intricacies of telecommunications and networking, BCC brought to the table a business perspective that Hexagon Metrology executives have found valuable. “It’s very unusual for technical people to understand business issues,” Padula observes. “BCC doesn’t just give you a technical solution; they give you a business solution.”

An Expanding Role
Hexagon Metrology has brought BCC’s expertise to bear on an ever-widening set of communications infrastructure, including videoconferencing, telecommunications and mobile phone services. As Padula notes, BCC is involved any time a new office is established or an upgrade is needed. “Today, BCC’s services are used widely throughout Hexagon Metrology in the US,” confides Padula. “President Steve Garson and his staff get involved in putting together all our new systems; he’s the point person for all upgrades.”

When Hexagon Metrology built its new headquarters last year, it needed a secure wireless network as well as cell phone reception throughout the 58,000-square-foot facility. BCC designed a manageable, application-aware wireless network, as well as a cell phone repeater/amplifier system to ensure that employees can communicate from anywhere in the building. Despite the complexity of the project, BCC was able to go from plan to implementation in little over two months.

Having an outside adviser who can analyze the existing infrastructure and supporting services of the separate operations and then make recommendations that benefit the entire organization is invaluable. “BCC gives us a control point we didn’t have before so that we know that someone representing our company understands the strategic as well as the tactical needs of how the regional subsidiaries’ offices will play into our larger corporate entity,” Padula remarks.

Though BCC works only for the American subsidiary, the global nature of Hexagon Metrology’s business is drawing it into projects beyond the border. Most recently, BCC specified and procured a video conferencing system for subsidiaries in Europe and China, taking care to ensure compatibility with existing systems.

The payback has been swift, notes Steve Ilmrud, vice president of Operations for Hexagon’s Romer Inc. subsidiary. “We saved approximately $5,000 to $6,000 and three to four days of lost time by video conferencing with our development team—consisting of Swiss, French and Americans,” he reports. “The 12-16 hours spent in video conferences were a lot more productive than flying 10 people half-way around the world.”

Given the number of departments that conduct meetings that formerly required flying in employees from multiple sites, this generates annual savings of $100,000. Now BCC is working with telecommunications services providers in both the US and China to securely integrate Hexagon Metrology’s Enterprise Resource Planning (ERP) system at US headquarters and the new facility in Qingdao, China.

With its track record in telecommunications now firmly established, BCC is now working with Hexagon Metrology to streamline its freight expenses.

Today, an organization’s competitive advantage depends on the ability to share knowledge. As a result of working with BCC, Hexagon Metrology is communicating more cost effectively than ever.