SMEs still slow to switch suppliers

23 Feb 2005

If you knew that one of the costs of your business could be reduced by going to a different supplier for the same service, wouldn’t you shop around for a better deal? Seems to make sense but the results of a Commission for Communications Regulation’s (ComReg) recent survey of Irish SMEs to telecommunications suggests Irish businesses are slow to shop around to reduce the cost of their bill. This is despite the fact that alternative carriers are investing millions in marketing to make people aware of their low costs.

The survey of 300 telecoms buyers in Irish SMEs, which was carried out last December, found that 71pc of respondents believed there was savings to be made by switching supplier, up from a mere 47pc back in 2001. However, a subsequent question found that only 16pc of companies had changed their supplier in the past 12 months. Of those who hadn’t changed 30pc said they were satisfied with their current level of service. Of those who had switched suppliers cost was cited as a factor by the vast majority, while 88pc said they had encountered no difficulties when switching.

Clearly it’s a frustrating situation for alternative carriers but also one that suggests that Irish businesses as a whole could be paying more than they need to. “The survey suggests that telecoms costs are not top of the list of priorities for SMEs and they adopt an attitude of ‘if it isn’t broke, don’t fix it’,” says Iain MacDonald, managing director of Perlico. “The challenge from our perspective is to educate the market that alternatives exist that are guaranteed less expensive and don’t require any change to their equipment.”

“The big thing is apathy,” says Paul Connell, managing director of Pure Telecom. “Telecoms is not a core function for a lot of businesses but it is a vital necessity — it’s very important for them that it works. As a result it is only when someone has time to look at it that he or she thinks about switching.”

Connell believes that much of the indifference in the market is due to the history of the industry in Ireland. The pricing structures of telecoms providers, which have traditionally included bundled minutes and volume discounts that make direct comparisons difficult and the historic requirement to have extra equipment installed in order to switch provider, have created inertia in the market.

Carrier pre-select (CPS) means that all SMEs can change provider without the need for any additional equipment — the change happens seamlessly at the local telephone exchange. According to the ComReg survey, awareness of CPS is high at 79pc but around one third of those that moved to CPS from another carrier moved back to Eircom. The main reasons cited were poor service and lack of reliability from the CPS provider (28pc) or a more favourable package being offered by Eircom (13pc).

Iain MacDonald also finds it disturbing that so many companies (22pc) are still using dial-up as their method of accessing the internet, even though DSL usage has grown significantly from 10pc of SMEs in 2003 to 28pc last year. “We find when we go into companies and look at their spend on dial-up internet access that DSL will save them money,” says MacDonald. “Most of them have heard of it but have never done anything. It’s only when you present it to them in black and white that they realise that they can get a better service and it will cost them less.”

Interestingly the survey suggests that the use of mobile phones by SMEs is on the decline — 22pc of respondents said they do not use mobiles, up from 16pc last year. MacDonald believes there is more awareness of the cost of mobile calls amongst users than that of fixed-line or internet costs. “It’s not uncommon for a salesperson to be given an allowance of cost spend on mobile calls a month, say €100 or whatever,” says MacDonald. “We have yet to see that in the fixed-line market.”

Certainly Irish SMEs seem quicker to move their mobile operator — 20pc said they had switched mobile operator in the past year and 94pc claimed to be aware of mobile number portability, which allows them to keep their full mobile number when switching operators. Clearly though the same focus on costs with regard to mobile costs is not being applied to those associated with fixed-line telecommunications.

By John Collins