TEM - Take Two: What Agents Need to Know About Telecom Expense Management

By Joe Basili

It may seem counterintuitive for you as a channel partner who makes your living selling network services to sell telecommunications expense management (TEM), but there are at least six reasons why you should:

As long as network and network-related expenses remain among the top five expense items on the profit-and-loss statement, TEM will remain central to the profitability and success of the enterprise. These developments show promise for channel partners that are seeking to attract new customers and sell more services and functionality to existing clients.

Before you dive in, its important to understand what TEM is and how its delivered. TEM engagements vary considerably from one client to the next and one solutions provider to the next.

Scope of Work

Before recommending a TEM solution, it is important to consider the scope of work relating to the three areas of fixed, mobile and international telecom expenses. (Note: International telecom expenses are those from international carriers and overseas locations rather than just international calls from domestic locations.)

Managing each of these categories of telecom expenses offers some unique challenges: most telecom carriers use a variety of billing systems and formats for these services; charges for each of these services are different; carrier account teams have different compensation for selling these services; and government regulations vary for these services.

Today, wireless expense management (WEM) is the fastest growing part of the business. This reflects the challenges that organizations grappling with from rapidly rising costs for wireless services. Channel partners will find these deals close faster because customers need a solution for rising costs and management of inventory as more employees work outside the office using smartphones, tablets and laptops.

In addition to the growth in wireless expenses, recent moves by AT&T and Verizon to end unlimited mobile data plans for new customers will require enterprises to prepare for likely changes in their contracts and more complexity for enterprises seeking to manage these expenses.

Some programs include help desk support and mobile device management (MDM). MDM programs secure, monitor, manage and support mobile devices deployed across mobile operators, service providers and enterprises. MDM functionality typically includes over-the-air distribution of applications, data and configuration settings for all types of mobile devices, including mobile phones, smartphones, tablet computers and laptops. The intent of MDM is to optimize the functionality and security of a mobile communications network while minimizing downtime. An MDM program can focus solely on company-owned devices or it can also include employee-owned devices. Multinational enterprises may seek to expand the program to manage international telecom expenses.

The future vision for TEM calls for solutions providers to extend best practices beyond telecommunications to other areas of technology, helping companies to analyze and benchmark how technology investments are contributing to the top line and controlling the bottom line.

Service Delivery

After determining the scope of work, it is important to determine service delivery. The market includes many successful firms that offer software, outsourced or managed services, and professional services for TEM. These firms include small and nimble firms, larger and more established players, telecom carriers, systems integrators and other providers.

With business process outsourcing (BPO) or a managed service, the TEM solution provider handles the major service domains of inventory management and change control, invoice management, expense management (including validation and optimization), usage chargeback and reporting. Some customers separate sourcing, procurement and fulfillment, and bill payment, but increasingly they are buying the entire service.

With hosted software or software-as-a-service (SaaS), the TEM solutions provider hosts the software and both the supplier and the enterprise perform TEM. The primary difference between a hosted solution and a SaaS offering is that the latter is designed from the outset for hosting. SaaS applications usually have better response time and can offer more modular approaches to add functionality for channel partners. With licensed software, TEM software is installed onsite behind the enterprises firewall.

Finally, many TEM solutions providers offer professional services, such as one-time audits, sourcing, network assessments, optimization, process re-engineering and other client projects.

A customers preference for these service delivery methods depends on its own resources and its corporate culture. Many organizations do not have resources and special knowledge to dedicate to a TEM program. However, if the clients predisposition is toward managing things internally, it may be difficult to sell an outsourced program.

TEM Services

TEM programs manage the full life cycle of a telecom expense by focusing on eight major service domains: inventory management and change control, sourcing, procurement and fulfillment, invoice management, expense management (including validation and optimization), usage chargeback, bill payment and reporting.

Inventory Management and Change Control. A TEM inventory consists of inventory elements, which include any item that appears on a bill or customer service record (CSR) for a fixed line, circuit, mobile line or service provided by a telecom service provider. This is different from a comprehensive inventory, which includes items that do not appear on bills.

Inventory elements are used for sourcing and expense management functions of optimization and bill validation, and usage chargeback. Change control refers to the tracking of move/add/change/disconnect (MACD) activity. Tracking the MACD activity is critical because inventory is a moving target. Bills may contain disconnected items so enterprises must reconcile inventory with invoices to ensure billing accuracy.

CSRs do not include wireless devices and mobile services. Wireless inventories require additional information for optimization and other wireless expense management (WEM) functions. The inventory items should include:

Inventory savings from reconciliation of inventory and MACD activity to billing can produce savings of 2-14 percent depending on the amount of inventory change and billing discrepancies.

Sourcing. Sourcing includes negotiation of contract rates, special pricing, terms and conditions. A TEM solution should provide monitoring of contract performance and proactive notice of contract expirations at preset intervals. On average, TEM solutions drive reductions of 25-45 percent on rates and better contract terms and conditions.

Procurement and Fulfillment. Procurement and fulfillment enables enterprises to enter orders, manage workflow for approval of orders and place orders with carriers through a portal or service. Fulfillment of orders includes tracking order milestones and escalation if promised delivery dates are missed.  The service can also help to ensure that enterprises order from providers with the best prices and that the orders reference contracts and other special pricing arrangements.

Most organizations find there are labor savings from streamlining the order process and timely fulfillment of service requests. Placement of orders with providers that offer the best package of pricing can save 5-15 percent on expenses. Linking or integrating the procurement and fulfillment systems to inventory systems is critical to drive MACD savings cited above.

Invoice Management. Processing telecom bills is labor intensive for enterprises. Lack of standards for telecom service provider billing formats makes it difficult for organizations to process bills in electronic format without custom software. They are unable to process EDI and other forms of electronic billing media from carriers due to the complexity and continual changes in carrier billing platforms.

Automation and conversion of bills to electronic media reduces the costs of manually processing paper bills, avoids data entry errors and streamlines the time to process bills. The savings depend on how many people are processing bills and what roles they perform after TEM automates this function.

Expense Management (Expense Validation and Optimization). Ongoing expenses validation should include reconciliation of all charges on the bills to contracts, tariffs and inventory. MACD activity must also be reconciled with billing. This step includes identification of billing errors and overcharges, documentation, filing of claims with telecom service providers and tracking of claims until refunds are secured.  

Many programs also optimize enterprises communications infrastructure and network expenses. Savings come from reconciliation of usage and services with reduction from unused or underutilized lines and services; identification of services that do not have a contract or those that have uncompetitive contracts; finding inactive lines and circuits; analysis of equipment leases; and grooming of services to higher capacity/lower cost services. The savings from this category can range from 2-15 percent. Often the savings are dramatic in the first year or two of the program because there were no proactive measures to identify billing errors that may have accumulated over time.

Usage Chargeback. Unnecessary consumption and waste can be cut by improving visibility and accountability through usage chargebacks to cost centers and employees.  The level of detail for chargeback can range from summary level or department to call detail tracking. Savings can range from 2 percent to 7 percent.

Carrier Bill Payment. A number of TEM providers refer to the step of batching and submission of bills to the customer as payment” when the customer is actually making the payment to the service provider. In other cases, the supplier actually is referring to paying the bills on behalf of its customers.

This reduces late payment penalties and uncontrolled service disconnects which result from the failure to pay telecom bills on time. The elimination of late payment penalties being incurred on a monthly basis can produce savings of 18 percent of annualized phone expense.

Reporting. TEM reporting provides detailed information on telecom expenses and budgets. The data should be available in a usable format that is readily accessible to managers. Effective reporting will help provide dashboard information in a graphic format with trending for expenses. Organizations use can the information to make better decisions, manage cash flow and plan their communications networks.

TEM Pricing

The pricing structure for TEM programs can vary from offerings that are available at no cost to offerings that have fixed fees.  Some other pricing considerations include one-time charges, license fees, training fees, professional services fees, audit recovery fees, invoice processing fees, EDI fees, invoice payment fees and other charges. Some programs may have the costs paid from commissions or payments when enterprises buy services from a particular carrier. Wireless expense management offerings often involve a fixed fee per device for optimization and management of the inventory. Future increases and decreases in the volume of billing or devices may affect the cost of the program.

Joe Basili is managing director for TEMIA, the Telecom Expense Management Industry Association, which was founded in 2006 by the largest TEM providers. Basili is responsible for program management, recruiting new members and advocacy.  His previous experience includes working at a TEM company, developing TEM research at Aberdeen Group and AOTMP.