How to setup and run a Voice Rate Analysis / Least Cost Routing LCR
In voice telecommunications,voice rate analysis or least cost routing (LCR) is the process of optimizing your voice cost by picking the path of outbound communications traffic based on the carrier with the best cost. Within a telecoms carrier, an LCR team might periodically (monthly, weekly or even daily) choose between routes from several or even hundreds of carriers for destinations across the world. A device or software program known as a Least Cost Router might also automate this function. This process is performed predominantly by carriers, as their focus is to maximize their margins, this is a hidden secret that some enterprises are missing out on.
Make no mistake about it carriers have the personal skill set, expertise and network infrastructure to fully understand their call volumes as well as “hot voice routes” and their associated costs to generate the most margins across their business. As an enterprise you need to be focused on this as well.
Understand this key aspect: every day carrier voice tariff rates decrease and every 7 days billing tariffs are increasing.
The margins in the carrier-carrier market are extremely slim (we’re talking about fractions of a pence) and re-routes or price increases must be made quickly to a destination where the current route is going to increase in price. Since the price increase itself has seven days notice, it must be issued within twenty-four hours of the cost increase to avoid losses.
How does this all work?
The carriers have a team of buyers who negotiate with their suppliers who are constantly getting new pricing schedules. The prices are loaded into software to calculate and compare termination costs. A route is chosen, fixing a cost-for-pricing, and new prices are issued based on the costs-for-pricing. The new routes are implemented onto the voice switch and finally the traffic volumes and margins are monitored through reports from the billing system. Any loss-making traffic and odd routings are investigated, and either the billing system has its data corrected or routing and pricing action is taken.
As an enterprise there are a few key aspects to deploying your own LCR solution.
- Understanding your traffic routes, and volumes is a key aspect to getting this all right.
All of the information is right there, you just need to tap into this beastly product and summarize it into manageable buckets. Your hardware device logs every call that is generated from your PBX or SBC to create Call Detail Records a.k.a CDR’s. The key here is to be able to get your hands on the call logs and push the logs into call logging software. There are some key players in this space like CTI Group’s software Proetus http://www.ctigroup.com/proteus-enterprise/ or CGRates http://cgrates.org that have the skill set and software to help enterprises fully understand their voice environments inside and out.
One of the goals of call logging software is to interpret the raw CDR data and produce graphical and summarizing reports.
- Cost Control – cost of calls, cost of trunk lines, costs by department or individual extension, number of unused extensions, etc. Call logging software can also discover instances of telephone fraud, which is REALLY important.
- Performance Management – looks at how long it is taking an organization to answer phone calls by operator, department or extension and demonstrates whether they meet acceptable target levels for that organization.
- Capacity Management – judges whether the system is being over or under utilized. It examines trunk usage and call patterns that show where extra capacity is required or where cost savings can be achieved.
- QoS Reporting – modern VoIP PBXs are able to output quality of service (QOS) data in addition to standard CDRs. An up to date call-logging package should be able to include this data along with its other reports to help monitor and improve system performance.
- Network design
We fully understand end users expect to be able to pick up their phone and for their phone to work 100% of the time. Therefore, as an IT manager your focus is on delivering a solid redundant solution. As a result of this expectation your network design and vendor selection might be limited to one or a maximum of two carriers either regionally or globally for that matter. From an LCR perspective obviously the more voice options that are available to choose from, the better leverage you have to achieve the best price. But let’s not get carried away here, we need to take into account the overhead of managing this from a network design perspective and we appreciate there are the limitations.
The awesome thing about LCR is you can cherry pick your voice traffic with as few as two providers. The catch here is to have your voice engineers on-board and ready to support a network voice design built around an LCR concept.
From a procurement perspective when negotiating with your carriers never commit to a set amount of usage per month or over the life of the contract and never lock yourself into obligations like guaranteeing specific call types, destinations or spend obligations otherwise you can kiss any LCR opportunities goodbye.
Conclusion
Keep your carriers on their toes because they surely are tap dancing on their side, daily monitoring their profits and losses on every single route. Then, when they’re moaning about losing the traffic or because they’ve bottomed out on their margin, you know that you’ve done your job and your LCR policies are working!
Want to know how to measure the ROI of TEM – don’t miss our post “The Top 4 Ways to Measure the ROI of TEM”.
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