Telecoms Expense Management – Should I be Interested?

Analyst Observations

Telecom costs equate to 3.6% of a typical company’s entire P&L spend which would explain why “telecommunications expenditure remains near the top of every CIO’s expense list” (Gartner) and why “Telecommunications cost management has become one of the hottest sectors in today’s business process automation marketplace.” (Aberdeen Group)

More than 50% of large enterprises don’t know what they are spending on telecom related services across the company. “In fact, this area is so wrought with inefficiency that most people don’t know how much they spend on telecom services, never mind how they can best manage those budgets.” (Aberdeen Group)

From our experience in this space Xceed has discovered that the difference between ‘average’ and ‘competitive’ rates is as much as 40%. Tellingly, only 5% of the contracts we’ve reviewed could be classed as ‘competitive’.

Historical Overbilling

However, telecoms expense management isn’t simply about negotiating the best contracts; it requires active management of the telecoms providers and a high level of scrutiny when it comes to checking bills.

A staggering 80% of telecoms bills include hidden charges or mis-billing. The traditional approach of “stare & compare” simply isn’t effective. Some global bluechips we know still rely on a plus or minus 10% approach when it comes to paying their telecoms bills – i.e. if it’s + or – 10% of last month’s bill then it gets paid automatically. When you understand your network provider has a large and eclectic collection of billing systems that aren’t always in sync you’ll appreciate that a more stringent approach always pays dividends.

Checking you’re receiving the correct tariff, whilst time consuming, is straight forward enough and can even be done manually – which will yield results. However, for large or even medium sized organisations it just isn’t practical to scrutinise every line of every bill for Mobile, Fixed Line and Data charges. This is where Software as a Service can help as there are tools which, correctly configured, can compare millions of lines of billing data against your contracted tariff in a matter of seconds. We’ve never seen this exercise fail to identify 10% overbilling, frequently much greater, irrespective of the supplier.

If your personal mobile or landline provider routinely added 10%-40% to your monthly bill we don’t think it would be long before you asked for a rebate. Surprisingly, very few businesses have identified this, despite the fact that for many, telecoms comes second or third to staff costs in terms of total spend.

One global blue-chip we know spends over £500m on their telecoms bills but until recently had never gone beyond “stare and compare” as a method of managing this cost

and challenging their suppliers to do better.

You’re legally entitled to recover overbilling and mis-billing for up to six years from your network provider. However, the most dramatic savings are realised when this is one element of a cohesive approach to telecoms and inventory management, as Giga Information Group so snappily states “Bill management should be part of a strategic plan, a step that will reduce enterprise costs and achieve savings in the short term, while creating the infrastructure for streamlining processes and systems and laying the foundations for a long-term solid solution for managing and optimising the provision of communications.”

Zero Usage & Inventory Management

TEM starts to get a little more complex when you look into the number of zero or low usage lines, closed locations, high usage, non-business related charges and other aspects of variable expenditure. There are two aspects to this area of TEM:

First is the inventory or telecoms asset management aspect. Between 15% and 35% of all fixed telecoms assets are surplus to requirements. The number of lines being paid for rarely matches the number you’re actually using, which goes across fixed line, mobile and data networks. Recently we came across a famous computer gaming company which was paying €18,000 per month for a high-speed pipe into its Madrid office. This had been paid for 18 months, without question; until we pointed out that it had never been used. Not once. Ever.

Changing Practices

So far nothing we’ve outlined carries any risk to the business when it comes to implementing the savings that are identified. The areas that do carry an element of risk are those which involve changing practices. This includes high-usage, non-business related calls and other aspects of variable cost.

A simple example is people frequently using 118 or 0870 numbers, usage of which is commonly covered by company policy or by simply making the numbers unavailable. But

how many times do your organisation’s landlines get routed externally for internal calls? How often are your Blackberrys calling other company Blackberrys but being charged at standard mobile rates? Not many Telecoms Managers let alone Executives can answer these questions but there are real savings to be made in this area.

There are also specialist tools and companies which can give you the answers or the tools to get the answers yourselves. The only slight risk is ensuring that any change in working practice doesn’t affect your business.

In short, good Telecoms Expense Management is as much about asset register or inventory management as it is about bill management.

We’ve found it is important to treat Telecoms Expense Management as a standalone project, covering the full breadth of Fixed Line, Mobile & Data Networks, from both a fixed and variable cost perspective. By combining the various elements mentioned in a comprehensive TEM project we’re sure you’ll identify at least 20% savings and in extreme cases you’ll save over 50% of your current spend.

Current Market

A number of companies are currently doing exactly this and in many ways it is the US leading the way. TEM is an established, billion dollar industry in the States. Major US corporations like American Express and Bank of America are rolling out comprehensive TEM solutions across their global estates. Both American Express and BoA have opted for one of the US market leaders, who offer a comprehensive TEM solution which includes installing TEM hardware on the client site.

By comparison the UK is significantly behind with no clear market leader for Telecoms Expense Management and very few organisations understand there’s more to TEM than the recovery of historical overbilling.

Search for TEM companies in the UK and you’ll predominantly find Procurement Consultancies which offer a bill checking and recovery service which is conducted manually. There are also air-time resellers who offer Telecoms Expense Management as a pre-cursor to selling you their telecoms services but there are also a few UK centric

companies and products that specialise in TEM and offer independent consultancy with the right software for the job.

The best approaches we’ve seen include a comprehensive review of the current inventory along with powerful software to eliminate or recover over-billing. For sustainable savings the ultimate solution lies in Software as a Service (SaaS) or a bureau / managed service which can manage your asset register at the same time as precisely checking each month’s itemized billing. This helps to ensure you maintain an up to date and accurate telecoms asset inventory (which in itself can be invaluable in managing office relocations and IT integrations) at the same time as driving year on year savings which are typically in the region of 10%-15% when using TEM specific software.

Conclusion

So should you be interested in Telecoms Expense Management?

Let’s put it this way; if you could save 1.44% of your entire P&L spend without impacting the performance, morale or service of your organisation, would you? Of course you would.

This is effectively the opportunity on offer from the leading Telecom Expense Management firms. We’ve seen an average of 40% savings on over 20 TEM projects which we’ve monitored. So with Telecoms costs equating to an average of 3.6% of a company’s entire P&L spend it’s reasonable to argue that 1.4% of your P&L spend can be removed with minimal risk.

So, should you be interested in Telecoms Expense Management?

Emphatically; Yes.