Executives in finance, IT, and operations often find themselves in a position where they need to closely evaluate the upside of a relationship with a telecom/technology expense management (TEM) provider.
It may be the first hundred days in a new role or simply a realization that change needs to occur.
Either way, there is a priority to strengthen the organization’s expense management efforts. The question often arises: Will a TEM provider save enough time and money to create the value necessary for the effort?
Some enterprise leaders have more familiarity with the TEM industry than others. Depending upon their prior experience, many may welcome the enlisting of outside third-party support to help strengthen their team. In contrast, others may hesitate if they’ve had a prior poor experience.
Those without prior experience will learn the pros and cons of a potential partnership with a TEM provider for the first time. Some common concerns are summarized below:
“We may be willing to pay for outside help, but we want a strong ROI.”
“We would at least hope that the service is cost neutral; generated savings should equal the cost.”
These are genuine concerns, especially within the technology sector, where it is not uncommon for companies to offer holy grail solutions that promise the moon, only to find that they can’t even get off the ground and out of their own way.
Before getting too far along in discussing a TEM partnership and the value of such a relationship, let’s highlight four essential items to keep in mind while evaluating different TEM providers.
These areas are central to the core concern, mitigating risk in the expense management discovery process.
TEM Savings Partner Checklist
1. ROI – Average TEM Savings – What does the TEM provider average for its customers?
2. Savings Guarantee – Does the TEM provider guarantee to help protect your organization if savings expectations are not met per the contract or service level agreement?
3. References | Customer Base – How happy is the customer base? What do references look like?
4. Industry Feedback – What do organizations such as Gartner say?
These checklist items are helpful to remember while evaluating the three broader TEM savings areas detailed below.
3 Key Areas for TEM Savings: Purpose | Audit | Optimization
1. Purpose focus: Does the organization have the right services and devices? For example, can services be eliminated that are not needed?
2. Rate Audit focus: Is the organization paying the right amounts for these services/devices and not being overcharged?
3. Optimization focus: Are there better ways to serve operational needs and increase throughput, i.e., utilize different services that may eliminate, say, certain circuits and lower costs? Or can the organization get better pricing even if currently billing correctly, certainly over the long term, if immediate operational adjustments and spending reductions are unavailable?
TEM Services Savings Overview
At Tellennium, we’ve found our distribution of savings to be approximately spread across these three main areas: 45% of savings are derived from purpose audits, i.e., do we need this service? Another 35% of savings are achieved via rate compliance audits, i.e., is the service being overbilled? And approximately 20% comes from optimization analyses, i.e., can we serve our operational needs more cost-effectively in the future?
The items noted above seem straightforward, and they are. But the challenge comes in having the right TEM technology platform, solid processes, and subject-matter expertise. All are needed for a healthy ongoing TEM program that addresses these three key TEM savings areas.
Suppose a sound business case for partnering with a TEM can be conveyed, and the program will generate a strong return on investment (ROI). In that case, it’s wise to consider moving forward with a TEM partnership.
It is worth mentioning that this is no knock on the internal team; there’s often so much involved that it makes it difficult for internal teams to manage entirely independently. And it isn’t easy to scale traditional hiring in today’s current market, which is experiencing an unpredictable and volatile labor market.
Also, scaling effectively over the long term is made easier via a TEM technology platform and the industry expertise that a TEM firm provides.
An internal expense management team will also be well served by the augmentation of a leading TEM platform to house, manipulate, and automate data processing and provide insightful expense management reporting visibility.
Internal expense management teams can reap the benefits of gaining up-to-date industry subject matter expertise to help navigate the myriad of billing challenges presented by an overwhelming number of telecom carriers and service vendors that each present with their unique billing practices and idiosyncrasies.
Overview Takeaway: When it’s time to present research findings to other team members, they will likely ask, “So, how much will these TEM services save the company? How will the TEM provider guarantee real value?”
TEM Savings Expectations - Strong ROI | Guaranteed Savings
A reputable TEM partner will be able to guarantee a strong ROI. It will be apparent that they are serious if they provide a TEM savings guarantee backed up within the contract. At Tellennium, for example, we guarantee that our audit and optimization work will offset our invoice management fee.
Clients can rest assured that they will not pay anything within their contract term over the actual realized savings – we average a 28% return on investment in the TEM program overall. The range of savings estimates can be broad, depending on which TEM provider or research organization you speak with. Each company’s situation is also quite different, with many factors to consider, making precise estimates difficult.
When speaking with TEM providers or research authorities such as Gartner, it’s best to be clear on how each defines and arrives at TEM program savings estimates, as each will often view this in their own unique way. For example, some may break out savings estimates by audit and optimization separately. Or they may project reductions in future spending.
If making side-by-side savings estimate comparisons, ensure they are apples to apples. If they are apples to oranges in nature, just be mindful of their differences. This area can easily lead to confusion, so be careful when discussing savings estimates with outside parties, as each may approach this topic slightly differently.
The important point here is that whatever TEM provider is determined as the best fit for the organization, sales talk needs to be backed up with contractual provisions that demonstrate their confidence in their ability to deliver in alignment with expectations.
It’s essential to inquire about the average return on investment with potential TEM vendors so there is a basis for comparison, a way to manage expectations, and enforce accountability. This said, there are instances where TEM savings will exceed the average.
For example, one of our healthcare clients realized over $50 million in TEM savings over ten years; this client’s average return on investment was well over our average of 28%.
Expectations Takeaway: When evaluating TEM vendors, seek multiple references and savings samples. The best indicator of competence is the satisfaction level of the customer base. A prospective TEM partner should be able to provide a strong return on investment.
No Prior TEM Partnership
Savings amounts realized vary between enterprises, given that they all bring unique situations. For example, this may be the first experience partnering with a TEM. In cases like this, there will be more audit and optimization opportunities.
This is so because their entire TEM inventory of services has had less intense scrutiny in audit and optimization reviews by an outside TEM firm specializing in this daily.
The internal expense management team may be good, but, again, they will most likely not possess the level of expertise that a TEM firm will because the TEM firm has day-to-day experience with all industry vendors and the issues they currently bring to the fore.
A reputable TEM firm will possess deep domain expertise around current industry trends and best practices that will not be readily accessible to internal expense management teams.
No Prior TEM Takeaway: A competent TEM will help the organization save money and scale more effectively over the long term.
Poor Prior TEM Partnership
The above said, it’s also possible that companies experienced poor support from their prior TEM firm, in which case large savings opportunities may still be available on the front end of the engagement.
It’s a common refrain from internal TEM management teams that they once believed there was more security in a more prominent firm due to brand recognition, only to be highly disappointed with its inability to deliver against its sales promises. Buyer beware: There is no guarantee of security in a TEM firm’s enormous size or brand recognition.
Industry feedback and due diligence are essential in evaluating TEM vendors. Consulting outside research organizations like Gartner when needing outside consultative help in TEM RFP or benchmarking work is wise.
Poor Prior TEM Takeaway: Do not blindly assume that a TEM firm’s size or degree of brand awareness are indicators of its ability to deliver savings results.
Other TEM Factors – Different Industries, Carriers, Services
Other factors will influence savings opportunities as well. For example, at Tellennium we work with many healthcare clients. Because the healthcare industry experiences more acquisitions and dispositions than most, there is inherently more chaos involved in managing their communications estate. Consequently, there are typically more savings opportunities, especially if no prior TEM provider partnership exists.
A large enterprise acquiring another company to scale more effectively over the long term and drive growth will introduce a large amount of operational and financial disruption into its business. Many operational and expense management adjustments will need to be made, and a full new assessment of all services and assets under management will need to be conducted.
In the acquisition process, mistakes will inevitably be made that must be corrected. For example, circuit disconnect orders may not be processed quickly enough due to massive organizational changes (e.g., within three business days). This can be costly, especially amid the murkiness in large-scale acquisition activities.
Conversely, the same errors can be expected during large organizational dispositions, where selling part of a business or specific assets creates just as many opportunities for miscommunication and management mistakes.
Many of these potentially costly errors will fall under purpose-related audits; there will be so much organizational change that the operational needs and corresponding services will almost certainly need to be adjusted to accommodate the new organizational direction.
Mistakes can be counted upon in the fog of all this chaos. Hence, there is a need for subsequent cleanup that a reputable TEM can assist with. (Again, we see a great deal of this within the healthcare sector at Tellennium due to all the rapid change this industry has seen over recent years.)
Other factors can also impact savings, such as services within the inventory. Some services provided by certain carriers are more prone to billing errors and associated fees that may be eligible for dispute.
For example, telecom carriers will sometimes try to disguise non-contractual binding charges by bucketing increased charges as “recovery fees” within the tax section of an invoice, which is a roundabout way to increase their margins; they can do this legally, but many of these fee increases are disputable if the carrier is engaged directly.
Another common area fertile for billing errors involves the interconnectedness between tariff directives related to pricing and contractual provisions tied to the tariff. For example, many carriers may offer a 25% discount on pricing for a service(s) to an enterprise. After some time, the company will subsequently realize that the discounting did not take effect because one or more “fine print” stipulations involving the triggering of the discounting were not satisfied (e.g., 30 days written notice and relevant paperwork may not have been properly filled out).
This often feels like a game, and it does, in a way, because it’s a game of cat and mouse. A reputable TEM provider can add value to your internal expense management team in intentionally murky and opaque business transactions. They have significantly more experience dealing with the sleight of hand fog and mirrors tactics that carriers will employ to keep billing rates higher for as long as possible.
Carriers are incentivized to do this because they know many of these billing oversites will not be caught by large companies, especially if they are decentralized and unorganized. Moreover, they also know that if caught in the future, they will not be required to issue retroactive credits beyond a certain point, such as six months (e.g., there will often be fine print language in tariff guides they leverage).
Another note on the value a reputable TEM provider can bring to your internal expense management team regarding audit work. The extensive experience and exposure to all telecom carriers, their billing practices, and TEM providers’ business tendencies make them much wiser to all “telecom billing games” played throughout the industry.
For example, let’s consider two common audits we perform for many of our customers at Tellennium. These involve SD-WAN and SIP services. We have performed these audits many times over the years, and for millions upon millions in spend, that we will know exactly where to look for errors and how to prioritize reviews. Internal expense management teams will not have the same experience level, making it more difficult.
Other Factors Takeaway: A competent TEM will know which fees to scrutinize, dispute, and realize savings against. They will ensure the organization has reduced exposure to “sleight of hand” vendor billing tactics.
Closing Thoughts on TEM Savings
When comparing TEM vendors, evaluating their projected savings average and contractual provisions such as those outlined are crucial.
At Tellennium, our clients average a return of 28% on the TEM investment and can rest assured that savings generated via the program will more than pay for its cost.
When comparing potential TEM providers, it’s worth including these three critical areas for evaluation and keeping the referenced TEM savings checklist within arm’s reach.
If you’d like to include Tellennium in your TEM/MMS vendor comparisons, contact us to schedule a brief demo of our solution.
Call now for a no-cost or obligation demo.(800) 939-9440
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