The Big TEM Issues

IF you think your bills are out of control, that’s just the beginning of the story.

Would you be surprised if your telecom services were actually costing you a multiple of what you pay your carriers? Research indicates that this is areality for most organizations and that the actual costs can more than double. Before you say “that’s not happening here,” you might want consider the elements that contribute to the telecom total cost of ownership (TCO) and assess your organization’s competencies.

To arrive at an accurate assessment of telecom TCO, a holistic approach is necessary. It must incorporate all contributing touch points with a focus on IT, Procurement and Finance. The tasks, business rules and shared processes that enable information flow between these entities define the ecosystem that influencestelecom TCO.  The figure above defines a model that addresses the key contributors.If all these elements are implemented and coordinated, yourorganization can claim governance over telecom and a total cost of ownership that is optimized.

The challenge is that most organizations have implemented some elements of the modelsuch as policies or strategic sourcing principles but are missing other key elements. For example, policies may be defined but there is no mechanism to monitor and enforce them; great contracts are negotiated but limited invoice validation occurs to ensure the cost structure; preferred vendors are selected but each IT project procures services tactically from any available source. This lack of cohesion feeds inefficiencies and an increase in telecom TCO. The key items to consider are:

Telecom procurement strategy includes the implementation of strategic sourcing principles thatselect preferred vendors to maximize scale; benchmarkingagainst industry metrics to ensure maximum cost concessions; and the implementation of service configuration standards per location, user profileor solution set for subsequent operational efficiencies.

Policy includes the definition, posting, monitoring and enforcement of business rules for various services including wireless, home user programs, acceptable use, etc.  Of particular concern is the impact of increasingly intelligent wireless solutions that are replacing traditional landline services. Not only are corporate policies not keeping pace with emerging technologies, but internal monitoring and enforcement are nearlynon-existent. Every IT manager has a story of a wireless user who has pleaded ignorance when faced with thousands of dollars of roaming charges. This issue first needs to be addressed at the policy level.

Invoice management puts structure around the way services are billed.  The average internal cost of processing one invoice from its arrival to paymentis $75 per invoice.   If hundreds or thousands of invoices are processed monthly for telecom alone, the cost impact is significant. Invoice management consolidates services logically by service, location, allocation or other logical structureand ensures adherence over time.

Asset management ensures that only assets that are in use are billed.  Most organizations do not have a mechanism to detect if MAC orders are correctly executed by the service providers. The quantity of unused assets that continue to bill end up materially impacting telecom TCO.

Payment processing is the telecom TCO silent killer and a major contributor to runaway telecom costs. Up to 10% of telecom payments are mis-posted.  In other words, the payment is made, the funds are transferred to the carrier but the account is not credited. Accounts payable modules of most ERP systems are unable to detect and reconcile missing payments for recurring services like telecom due in part to the lack of traditional PO, packing slip and invoice matching. The impact is an accumulating account liability that is exacerbated by late payment fees (LPCs).  Some company’s refuse to pay the LPCs but do not work with the carriers to have them credited. These too accumulate on the account creating a vicious circle and reconciliation nightmare.

Optimizing telecom TCO requires the implantation of a governance solution that addresses all aspects of the telecom TCO model.  The good news is that some telecom expense management (TEM) providers can provide comprehensive solutions to address these issues with an ROI that makes perfect financial sense and enables your organization to achieve the intended cost structure for telecom services.