– Michael Grillo, vice president of marketing at AnchorPoint (www.anchorpoint.com), says:
Telecom systems support all of a company’s mission critical functions whether it be sales, support centers, or remote workers. It’s no surprise that industry averages* put telecom spend (voice, data, and wireless costs) for small and medium sized companies at just under one percent of total revenue. For example a company with $500M in annual revenue might have between $4M to $5M in telecom spend. Larger companies with annual revenue greater than $1B may have telecom expenses closer to 0.6 percent.
Today’s remote worker and the increase in wireless devices and services plans continue to drive the increase in telecom costs. In general wireless expenses can make up to 30% of the total telecom budget.
Industry averages estimate 7% to 12% of telecom service expenses are in error and it is not unusual for an enterprise to overpay each month by 5%-10% on invoice billing issues alone.
AnchorPoint recently engaged in an historical audit with a large manufacturer in the Northeast. In auditing over $9M in annual voice, data, and wireless spend we found over $100K in invoice billing errors alone on one invoice. Additional errors and future cost avoidance facilitated saving over $1.2M in annual telecom spend—a reduction of 13% overall.
Often times savings from short-term TEM activities can be used to fund other IT/Telecom initiatives like hardware, software or infrastructure investments (i.e. Unified Communications, networking, etc.). Or savings can be used to fun long-term TEM initiatives.
TEM has evolved from the need for an efficient business process that can meet the challenges of managing diverse IT and telecom costs and expenses. TEM helps companies eliminate vendor over-billings; identify and remove unused internal telecom resources; create accountability across corporate departments for the telecom resources they consume; automate resource-intensive telecom invoice processing; and provide a database of information that offers enormous value in analyzing an organization’s changing needs.
With a TEM platform that integrates a robust database and business intelligence engine, information about IT/telecom resources, costs, vendors, assets, and more is readily available to finance, procurement, business unit managers, and telecom and network services personnel. Armed with this detailed information, they are able to understand the services they require, associated costs and a better understand of the ¬financial impact of their IT/Telecom related decisions. Consequently, costs and resource usage become more closely aligned with the actual needs of business units and costs are minimized.
Top Seven Tips:
1) Perform a baseline audit. Understanding which services you’re paying for is the first step in managing telecom expenses. A base audit should identify any billing service optimization opportunities, cost avoidance opportunities, and/or pricing opportunities by evaluating existing telecom contracts against current usage patterns. Through this process you’ll have a clear description of your telecom inventory and can more easily identify spending trends.
2) Evaluate your telecom contracts. Telecom contract negotiations can often yield the greatest and most immediate savings of all telecom cost reduction endeavors. However, the negotiation of telecom contracts is one of the most tedious and time consuming project that every company must perform on a routine basis and with little or no market intelligence. This area is often best managed by experienced TEM consultants. Contract negotiations result in a drastic decrease in telecom expenses – 35.6% average savings and can be realized in 60 to 90 days. Plus less than 5% of negotiations result in a carrier migration – which will have zero impact on business or infrastructure.
3) Automate processes wherever possible. Ask your telecom vendor to provide electronic invoices (vs. paper). This will ease in the automation of invoice management processes. Manually reviewing paper invoices is a time consuming, labor-intensive process. With paper invoices, enterprises barely scratch the surface in auditing the thousands of lines of data. Electronic invoices (CD, XML, EDI) at a minimum provide the ability to load data into a central repository and facilitate “normalizing” data through a TEM solution for consistent auditing protocols. TEM tools includes the automated ability for the validation, approval and exception processes of telecom invoices, along with charge allocation to cost centers and tracking key analytical information regarding vendors, users and contract data.
4) Create buy-in and align resources for your TEM engagement. Identify which groups are most affected in managing telecom assets, services and their related costs. While most assume IT/Telecom to be the primary constituents for the management of telecom, Accounting, Finance and Human Resources groups should also be aligned as they participate in the payment and reporting of telecom costs and maintain employee data relevant to enterprise personnel. In addition, an executive level sponsor will prove to be a valuable asset not only for approval of a TEM engagement but also to ensure the company is behind the initiative.
5) Centralize the management and reporting of your telecom data. Establishing a centralized telecom database as the single repository of information for all IT/telecom resources and costs improves an organization’s ability to make decisions regarding their voice, data, and wireless environments – including inventory and contracts. This centralized view provides access to telecom assets, services and related costs to the variety of enterprise telecom customers (i.e. management, business or department heads, IT/Telecom staff, etc,).
6) Adopt an activity-based reporting and/or chargeback approach. Organizations implementing complete IT/telecom chargeback systems to their users experience up to 30 percent lower costs than do organizations where the cost of service is perceived as free. Today, most organizations may provide some form of chargeback or cost allocation. But it is not usually activity based and they do not provide their users with easy access to information so they can manage telecom utilization, including constantly growing wireless costs. As a result, some users perceive the telecom services they receive as free. Visibility into telecom usage and spend promotes responsible usage and minimizes waste.
7) Consider outsourcing. Many enterprises do not have the knowledge or specialized expertise to manage the complicated aspects of the TEM lifecycle. TEM can provide a great opportunity for enterprises that have made the strategic decision to outsource non-core, back-office functions and focus on a core set of competencies. TEM knowledge is a specialty. This specialty is similar to the knowledge possessed by a tax accountant, whose experience in a certain industry or knowledge of certain complex tax laws produce a better result. TEM vendors bring expertise in performing network audits, resolving vendor billing problems, identifying the most cost effective service alternatives, negotiating vendor contracts, and redesigning business processes.