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Managing Enterprise Telecom Expense

In most companies telecom services account for one of the five largest operating expenses. With the increasing use of data, wireless, internet access and web conferencing, telecom expenses continue to rise. The average enterprise spends 2-4% of its revenues on telecom expenses and overpays telecom bills by 5 to 10% due to poor managing and billing errors. Using an Enterprise Telecom Expense Management (TEM) tool can reduce the overall annual telecom costs between 10 and 30%.


Enterprise Challenges

There are many challenges in trying to manage, maintain, and allocate expenses for telecom and wireless services. Many businesses utilize manual methods (spreadsheets) instead of software to manage telecom expenses, only to realize that they are limited to what they can do with telecom reporting, inventory managing, and cost allocation.

Typical obstacles faced by Enterprises:

  • Multiple departments (Finance, IT, Procurement, Operations, Facilities Management, Human Resources) are involved in managing telecom expenses
  • Invoices may originate from several telecom providers
  • Invoices may be sent to regional offices not equipped to validate them
  • Telecom invoices are highly complex with items that are time-sensitive, have volume-sensitive pricing, and include taxes
  • Providers use varied billing formats, making processing difficult
  • Providers change the way they deliver or bundle their services
  • Volume and frequency of data requires automating processes to ensure consistency and accuracy

TEM Requirements

A basic TEM system must provide an accurate, centralized inventory and order system with effective change control (known as MACD – Move, Add, Change, and Disconnect). Without a validated inventory, it is virtually impossible to accurately track, audit, or report a company’s telecom expenses, budget, or renegotiate supplier contracts. Substantial billing errors can occur when disconnected circuits, departed employees, incorrect additions and changes are not identified.

Cost Savings

Most companies try to reduce costs by conducting annual audits and reducing rates. This approach does not generate significant savings.

Real cost savings are achieved by implementing efficient telecom management processes:

  • Setting up centralized ordering and provisioning
  • Establishing and maintaining a real-time, centralized inventory of assets (circuits and equipment) and services (long distance, local, internet, wireless)
  • Validating invoices against inventory and contracts to identify billing errors and implementing tight change control (MACD)
  • Optimization: adjusting network configuration and sizing service needs to meet changing business needs
  • Consolidating all services onto a Master Service Agreement
  • Eliminating late payment charges (1.5%)

TEM Options

TEM is available from providers in several forms:

Hosted: The provider uses a web-based tool to manage all or parts of the Enterprise’s TEM process. This approach requires no capital costs and can be implemented with fixed term SLA contracts. Hosted partially-managed service is popular as it minimizes implementation time and training, while allowing staff to focus on business-related tasks.

Business Process Outsourcing (BPO): The provider manages the entire TEM process of ordering services and auditing expenses with online reporting. Typically, a BPO provider will manage the TEM program for much less than the Enterprise’s internal costs.

Licensed Software: The software is purchased including some level of contracted staff training. This solution is often selected by larger companies that  have integration and security concerns.

TEM offerings also vary by service type – wireline, wireless, and international. These three different services use different providers and consequently the tariffs, billing platforms, rules and regulations differ. With the latest new software technology, all the service types can be integrated into a single system.


Deployment

Basic Tasks for Implementation:

  • Establish accurate inventory: Install a web-based system which uses service orders with help desk inputs to track all circuits and equipment
  • Data Capture:  Identify all circuits and confirm information is accurate
  • Inventory Analysis:  Validate inventory – by verifying reports agree with invoices
  • Financial Audit:  Identify circuits in inventory are being billed correctly

Selecting a TEM Supplier

One of the difficulties in evaluating TEM suppliers is the lack of existing standards for TEM.  It is essential that the Enterprise prepares a detailed scope of work and establishes (with supplier involvement) the goals and objectives for the TEM program prior to formal evaluation.

The following approach is recommended for selecting a TEM supplier: 

  • Prepare a Needs Analysis
  • Identify three potential TEM suppliers and issue RFPs
  • Evaluate each supplier’s response to the RFP
  • Visit each potential supplier to view a live demo of the TEM software and  meet the supplier’s TEM staff
  • Prepare contract and make award 

The Needs Analysis needs to include information on:

  • TEM objectives and goals
  • Overview of current TEM environment
  • Needs of various company departments
  • Call Accounting Process
  • Order and inventory methodology
  • Current auditing process

The TEM objective should be to decrease the amount of time and effort required to:

  • Process, allocate, pay and archive invoices
  • Track equipment
  • Manage suppliers and contracts
  • Audit, optimize, and design telecom infrastructures
  • Manage implementations
  • Manage frequent changes

Rating TEM Suppliers

As part of the evaluation process, potential TEM suppliers should be ranked using the following categories:

  • Industry expertise
  • Relevant experience
  • Financial stability
  • Service offerings
  • Data visibility
  • Reporting capabilities
  • Technology and software capabilities
  • Feedback from client references
  • Price and contract terms

TEM Supplier Evaluation

The questions below are some examples that can be used in the evaluation, but Enterprises must create questions that address their specific needs.

TEM Supplier Qualification & Experience

  • How many clients do you have for projects similar to our proposed program?
  • What distinguishes you from the competition?

Implementation and Ongoing Program Management

  • Provide a detailed implementation plan including dependencies and time to complete for items that are listed.
  • What resources will be required from the Enterprise team to help with the implementation?
  • Describe your future vision and provide a detailed TEM roadmap outlining future plans and timing.

Validating Technical Capabilities

Inventory Validation and Change Control

  • If an integrated inventory of voice, data, conferencing and wireless is going to be created, how will it be created and what fields will be created?

Service Ordering

  • Which telecom service providers do you currently have direct interfaces that your customers are currently using?
  • Describe you process for managing service ordering

Invoice Processing

  • How is paper billing and electronic data (EDI, web HTML) entered into the system? How do you ensure it is mapped properly?
  • For billing, what level of detail will be entered into the system?
  • What triggers audit activities? (new service installs and disconnects, new contract, or are audits performed based on present time period?)

Reporting Analysis

  • What are the top 10 standard reports utilized by customers and why?
  • Demonstrate how your system allows enterprise users to create customized reports.

Data Security

  • Where and how will TEM data be stored?
  • What levels of security are provided?

Summary

Through TEM programs, enterprises can gain increased visibility of telecom expenses (equipment, services, charges and usage). This enables enterprises to effectively monitor costs and identify cost savings opportunities.


Sources

AOTMP Industry Research Report, October 2007
AOTMP SMB Research Report, January  2007

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