Research Shows Cutting Phone Costs is First Priority for European Businesses, Ahead of Redundancies and IT Spending

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

For immediate release: Wednesday, July 02, 2003

WATERLOO , BELGIUM - Almost six in ten businesses in France, Germany, Italy and the United Kingdom 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 Avaya1 Inc. (NYSE:AV), a leading global provider of communications networks and services for businesses. In terms of priority, telecommunications savings (31 per cent) came first ahead of job cuts (28 per cent), reduced IT spend (20 per cent), employee benefits (18 per cent), cuts in corporate hospitality budgets (20 per cent) and general office expenditure (17 per cent). Nearly twice as many small-to-medium sized businesses (SMBs) than corporates prioritised telephony as an area in which to cut costs, 41 per cent compared to 23 per cent 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 per cent 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.

The European Business Landscape
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 4 in 10 Italian firms. The trend looks set to continue with 72 per cent of German and 44 per cent of UK firms still actively planning to make cuts. 43 per cent 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 ten in the UK, less than a fifth in Germany and only nine per cent in France.

Italy was also the country most focused on preserving budgets through more measured use of the phone with 45 per cent of Italian firms cutting telecommunications costs. 36 per cent 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 email, 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, Datamonitor said: "The much publicized 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."

Does size matter?
The research found that in the past 12 months over half of firms in the SMB (52 per cent) and large enterprise space (65 per cent) 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 amongst the SMB community. A third of corporates compared to just over a fifth of SMBs had made redundancies.

About Avaya

Avaya Inc. designs, builds and manages communications networks for more than 1 million businesses worldwide, including 90 percent of the FORTUNE 500?. Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol (IP) telephony systems and communications software applications and services.

Driving the convergence of voice and data communications with business applications ? and distinguished by comprehensive worldwide services ? Avaya helps customers leverage existing and new networks to achieve superior business results. For more information visit the Avaya Web site: http://www.avaya.com

About Benchmark Research

Established in 1985 Benchmark Research is a full service agency providing business and consumer research. Benchmark Research Ltd. has a specialist focus on IT & Telecoms markets. We build creative, customised research solutions that are delivered using leading edge technical skills. Clients use our experience to help guide their decision making in a range of areas including customer retention and development, concept validation, Branding and positioning and product development. Although we have worked in almost every sector imaginable key areas of speciality include:
IT and Hi Tech
Telcos
Manufacturing
Construction
Training and Education
Public Sector
Publishing
1 Research conducted by Benchmark Research Ltd., commenced May 2003 & completion in August 2003. Sample: 500 office workers across UK, France, Italy and Germany

Source: Avaya