Should we outsource telecom expense management?

Consolidating key back office services for large enterprises, and sharing those services across business divisions provides efficiencies, standardized processes and best practices across the enterprise. It also allows consolidated leverage in negotiating price and providing oversight that all units benefit from. This report examines how considering in-house or outsourced telecommunications expense management can dramatically reduce the administrative burden, streamline management across the enterprise, and bring significant labor and cost savings.

Telecommunications: The largest IT expense

According to Garter, the amount of total IT spending dedicated to communications is 43% (2014 world wide spending estimate; June 2015). Telecommunications are growing in importance as remote networks, mobile workforces and distance learning gain importance. Hidden fees and underlying billing complexity make this a ripe field for centralized management and transparency.

Feeling the Sting

According to Gartner, global IT spending will increase 14% in the next 3 years. Communications services (est. 37% by 2022), IT services (29% by 2022) and devices (19% by 2022) make up the largest share. Optimization and management of these shifts will require significant oversight. How much does that equate to for your organization?

Today’s networks span all circuits, landline phones, mobile phones, Internet and data services, wired and wireless networks and various related technologies. Different companies can bill each of these services separately, and the bills often include a bewildering list of taxes, fees and other charges beyond the simple monthly charge for services. Multi location enterprise systems pay hefty bills for telecommunications services, and they often do it with very little insight into where the money is spent or if it is compliant with negotiated rates.

“They (Tellennium) have a broader over all look at cost and what people are paying in general and they can relate it back in their recommendation to me. They know which vendor provides the best level of service at the best price in any one service category.”

Senior Director IT Infrastructure, Kindred Healthcare

To illustrate, let’s consider a hypothetical health care organization with 100 locations around the country:

It has a telecommunications infrastructure that includes data centers, backup systems for stored data, multiple networks, thousands of telephones each with a unique number, and probably thousands of mobile phones and hand held devices (such as iPads or Android tablets).
It spans dozens of different markets; so many different providers are involved, each with multiple billing systems.
Any single location of this health care organization generates five or more invoices a month for voice, data, wireless and other services. Multiply that by the system’s 100 locations, and you could have 700 to 800 bills a month just for communications.

Individual costs vary widely from a few thousand dollars
a month for a small physician practice to hundreds of thousands or millions for a large, multi-state hospital network. Big or small, they all face a bewildering array
of telecommunications service agreements and invoices. Oversight for these networks typically falls into two camps: IT (or engineering) for the infrastructure review and rate compliance, and accounting for the payables processing.

The IT department challenge

The IT department’s main task is to first keep every technological item operating, no small task within itself. They must additionally develop plans to satisfy any industry compliance and security requirements, acquisitions, moves, adds or changes, while researching and implementing new technologies without putting system security at risk and keeping 100% uptime. Add to that a critical shortage of IT professionals, and competing pay scales with other industries for that talent, and the challenge escalates.

If the answer to even one of these questions is “no,” building a solution in-house may not be wise. What frequently happens is the IT department manages by exception: if a bill does not cross a pre-set threshold of change, it rubber-stamps approvals and forwards to the AP department. The AP department then pays the bills without any further close examination. This can easily lead to hundreds of thousands of dollars in hidden over payments.

While IT is managing the hardware and software that connects to communications networks, the breadth of expertise in telecommunications, carriers, and pricing, is often minimal and most technical personnel really don’t like the administrative paperwork functions.

Before an organization decides to keep telecommunications expense management in house, consider these questions:

Do we have the necessary experienced staff to adequately analyze and research every telecom charge on every invoice, accurately allocate those charges, and pay the bills on time? If not, can we afford to hire the needed personnel?
Do we have an up-to-date inventory of all our telecommunications services – circuits, features, wireless devices, usage, service agreements, and now exactly how they are all used? If not, do we have the manpower to create such an inventory and keep it updated?
Do we have a process and centralized system to track and monitor the complete telecom management lifecycle? If not, can we create one?

Managing billing on the accounts payable side

A different set of challenges occurs on the AP side of the business. Without knowing the equipment and service requirements for the infrastructure, and often not in the loop for contract negotiations for carriers, the department is responsible for processing thousands of pages of bills. These bills are generally not in a standardized format, or clear in identifying what the charges are for. The result? Potential over payments on existing circuits and services, late payment (and cutoff fees) for billing at remote locations, and payment on non-used/non-critical circuits and services.

Hotel & Resorts

$900,000 in 2 years from recovery of incorrect telecom billing, optimization, and centralized billing management across one client’s prop-erties. Key to those ongoing savings is the fact that property staff is now properly and efficiently trained through Tellennium’s process, minimizing the ramifications of staff turnover rates.

In the hospitality industry, as an example, this is compounded by conventions or conferences that contract their own communications services, which are intended as short term, and not terminated properly. The provider assumes the hotel or resort contracted the services and simply bills the location directly. High turnover, common in the industry, amplifies the problem. New locations, acquisitions and divestitures also bring confusion to the accounting arena.

Outsourced TEM: Defining the value

While outsourcing your TEM functions takes the direct burden off of your shoulders, it is imperative to thoughtfully evaluate key considerations, specifically:

Telecom Expense Management can typically help an organization reduce telecom expenses 12 to 20 percent (up to 45 percent in some cases) and increase control over voice, data and wireless costs, in addition to including the AP functions. Typical payback ranges from 3 to 6 months.
The ROI, measured in dollar terms depends on the current state of your telecommunications infrastructure. If the current telecom system is poorly managed, a TEM provider may be able to bring substantial savings in a short time. If you already have a reasonably good handle on the situation, the savings may be more modest. But in either case, you will be shifting the burden from your organization to hired experts.
To make an informed decision between in-house work and TEM, an organization must fully evaluate the costs and return on investment of each and compare them side-by-side.
Some TEM providers offer guarantees to save your organization time and money. Of course investigate what is included in those guarantees, and get the guarantees.
Many TEM providers charge a setup fee to establish the initial database and inventory, others may waive the fee as they are looking to establish a longer-term relationship.

Healthcare

All organizations are paying for services they don’t use and being overcharged for some they do. “For example,” notes a manager, accounts payable, “in one instance, through Tellennium, we got back $100,000 (from one carrier). They weren’t charging us our con-tracted rates.”

Create an inventory: This is the crucial first step. Before you can manage your services, you must know what and where they are. A TEM provider has the Subject Matter Experts (SMEs) to track down every service, circuit, and mobile device and examine the contracts, billing history and other data that goes with each.
Gain up-to-date real-time inventory: This is the secret to ongoing management. TEM providers use sophisticated software to keep the inventory fresh, adding new services as they come in and removing old ones as they’re taken out of service. Make sure they verify inventory on an ongoing basis.
Reconcile Payments: The inventory makes it possible to match your charges to your agreements. Have your providers raised rates behind your back? Are you being billed for mysterious third-party fees or taxes that you can’t identify? Are you still paying bills for services you haven’t had in months?
Simplify payments: Most enterprises process hundreds even thousands- of telecom invoices each month. A good TEM provider will know what each are used for and can allocate them appropriately and upload or integrate the coding into your financial system.

Key takeaways

Core competencies for effectively managing telecommunications networks require specific expertise in infrastructure and payables. SME’s can create verified, granular and detailed systems and circuits inventories, reconcile payments, process payments and provide expertise in negotiating contracts. This frees up resources for focus-ing on core lines of business.

Consider binging on a telecommunications expense management partner to: