Telecom Expense Management (TEM) – what is it and what can it do for your organisation?

Telecom Expense Management (TEM) is defined by Gartner as “a set of processes implemented by a company’s IT and finance departments to manage and optimize enterprise communication services. It comprises [of] both wired and mobile services, including data and voice usage. These solutions are designed to manage the telecom expenses efficiently and make it easier for a company to manage complex telecom setups.”

To put it another way, TEM helps large organisations budget for, manage and reduce their telecom spend, and increase cost visibility and control of all their telecom assets and usage. Companies that implement a TEM solution can generally save in the region of 10 – 30% of their annual telecom spend in year one.

For most companies, telecom spend is in the top 3 of IT budgets. In a climate of perpetual cost reduction and budget cutting, telecoms is clearly an area ripe for picking, yet it is one which is often left “under-managed” due to scale, complexity and caution over carrier relationship sensitivities.

A Solution for Improving Visibility of spend

A good Telecom Expense Management (TEM) solution gives an organisation a fuller understanding of where its telecom costs are coming from, identifies where efficiencies and savings can be made and highlights areas for optimisation and improved ongoing management.

The first part of the process is to create a full, detailed Inventory of all the telecom devices, lines, WAN, LAN, mobiles, routers, equipment in the estate, and specify where they are located, along with all their related contracts, usage and tariff information. The detail and accuracy of the inventory is what underpins the whole solution. And because the information is captured in a centralised application, you can see a comprehensive view of what is going on in your estate on a single dashboard. By analysing and interrogating this rich data in multiple ways, it is possible to verify whether the carriers’ bills are correct (or not), and identify where savings and cost reduction can be made. This process is far more efficient and accurate than having to spend time and effort reviewing various spreadsheets that are usually out of date.

Ensuring Cost Tracking Accuracy

Carrier billing is not always accurate. It is claimed that around 75% of companies are incorrectly billed by their various providers. Forrester Research estimates that “billing errors average 5% to 12% of telecom services budgets”. It has to be said that these mistakes are not made on purpose; they occur because carriers tend to have multiple billing systems which are old, unintegrated, inefficient and overloaded.

Without a Telecom Expense Management solution, it is extremely hard to know what your monthly telecom bill actually covers, and more to the point, whether it is correct. It’s not surprising then, that when many companies receive their bill, they simply compare it to the previous month’s bill and if it is about the same, it will be authorised for payment. Some telecom, finance, or procurement employees might be tasked with reducing the company telecoms bill, and might successfully negotiate lower rates for the subsequent period by perhaps threatening to move to another supplier. Whilst this is a somewhat positive outcome for the customer, it isn’t a genuine ‘win’, as it still doesn’t give the customer visibility or true understanding of what the costs are, and where they are coming from, and thus doesn’t enable them to manage their costs effectively. Only once you understand what you are being charged for can you start to look at how to reduce the costs and optimise your telecom estate to work more efficiently for your business.

Ongoing Cost Management Made Easy

With a TEM solution, you can understand where your current telecoms costs are coming from, and then start to manage those costs better. For example, you will be able to see where you have ceased lines that you’re still being billed for – this happens often and can make up a significant sum that needs to be refunded. And you can see where you have lines with zero usage that you don’t need and which can be switched off. Using a TEM platform, you can automatically compare invoices against the rates of use that were agreed in the contract – if there is a mismatch, then rebates can be identified and applied for.

Financial Summary screen on a tablet

Detailed billing analysis can be carried out by a TEM system which will notify clients of unusual calling patterns that may signal misuse of devices by employees. This process can also report on any devices that are no longer in use. You can further identify where employees have exceeded their tariff rates on their mobiles when roaming. If there is a pattern to this inadvertent overspend then a better roaming rate can be found. [add screen shot] See Personal Cost Manager solution.

Industry Benchmarking and Supplier Sourcing

A TEM portal provides analysis of proposals to evaluate which is the best supplier to choose. When it comes to (re-)negotiating contracts with suppliers, it’s not easy to transparently compare the information that each potential supplier provides as their various products and services tend to be packaged in different ways. A sophisticated TEM solution will ‘normalise’ the data from various suppliers so that you can make accurate evaluation of the options. This valuable information will enable you to identify the best deal and negotiate a new contract from a strong, well-informed position.

Budgeting and forecasting

By analysing the data about your inventory during a given period, it will be possible to forecast and budget accurately for the charges and costs in the subsequent term and then report and manage this tightly. If you don’t do this, how do you know that the sourcing cost reduction you just renegotiated is being applied correctly – especially if the inventory has since changed via a disposal, an acquisition or closing of facilities for example? Furthermore, if you changed suppliers, there might also be a cost overlap where the incumbent is still billing you for the services you are now getting from your new supplier. Without a TEM solution to make findings, you could be left in the dark and continue paying an incorrect bill.

Mergers, Acquisitions and Transformation

For organisations that are going through a merger or acquisition process, or a transformation, having an accurate and up-to-date inventory of the telecom estates in question will help with the transition programme. Understanding what assets you have, what they are costing you and where they are located will enable you to make informed decisions about what products and services to remove, keep, take on, upgrade etc. Without this knowledge, you could end up paying for inherited kit and usage that you weren’t aware of, as the monthly bill will likely not contain a breakdown of precisely what you are being billed for. And these “invisible” payments can run on unnoticed for many years, racking up significant cost.

Managing Staff Usage and Inventory

Trying to manage a large telecom estate in-house with people and spreadsheets is an arduous, time-consuming practice that is not as accurate as using software to perform the job for you. Automating the process gets better results and frees up time for personnel to perform other, more worthwhile tasks for the business. Indeed, the time freed up by using a TEM tool will enable staff to work on delivering the savings identified by the tool and as such driving greater value.

Telecom Expense Management provides businesses with a powerful tool to help reduce their telecom costs. But it goes further than simple cost reduction; improved visibility of the telecom estate enables you to manage all telecom assets and their usage more effectively and efficiently.