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:
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:
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:
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.”
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: