Experts advise how to reduce telecom costs

Despite the fact that Gartner says businesses will spend $500 million this year on telecom expense-management software and services, many companies continue to get by with nothing more than an Excel spreadsheet and some Post-it notes to track their costs.

But now that there are 90 TEM vendors worldwide to choose from, more organizations may be thinking about diving into the pool. What follows are tips enterprise customers should consider before getting started.

There are essentially three ways to bring TEM tools into your business: buy, host and manage software in house; buy software-as-a-service in which the software is hosted on servers at an external data center; or outsource the entire operation.

Costs only one factor

First, consider that TEM is not only about cost savings. Nearly every customer, vendor or analyst interviewed for this story mentioned this point.

Greenfield TEM deployments could reduce telecom costs from 5% to 40%, says Steve Mayfield, TEM lead for the Americas at Accenture, in New York. But it also is about improving bill payment and credit processes, and getting a better handle on a company's network and device inventory, he says.

"Don't look at this as a tactical move," Mayfield says. It's about better managing your budget, telecom assets and resources.

To get the most out of a TEM deployment, experts say, benchmark everything first. Customers need to know how many circuits they have, routers they manage and wireless devices are issued to employees.

Joe Basili, a research director at consulting firm Aberdeen Group, says there are a handful of facts telecom managers need to know. They include total expense per service provider/vendor, number of invoices processed, average time to process an invoice from receipt to payment, cost of late-payment penalties and average time it takes to receive a credit stemming from billing errors.

"Customers that have never taken their own inventory will pay the most for TEM software installations," says Dan Kopetsky, a senior manager at BearingPoint, in McLean, Va., where he negotiates, deploys and manages TEM environments for enterprise clients. If the vendor has to do that work, the customer pays, he says.

For users not ready for TEM, Kopetsky recommends keeping an inventory of everything while overhauling voice and data networks. Make it a practice while moving forward so benchmarking isn't an overwhelming task later on.

Benchmarking also lets customers identify the areas they really want to fix or address before sitting down with a vendor, Aberdeen's Basili says. If users don't know what they want to fix, "each time they meet with another vendor their evaluation criteria will change," he says. Keep vendors on track when you meet with them, so you can do an apples-to-apples comparison, he says.

Once you know how much time and money telecom is costing, it's probably time to get someone else to buy into the concept that TEM not only reduces telecom expense but strategically benefits your company overall.

TEM can be expensive, with software license fees close to $1 million at large Fortune 500 companies. And Aberdeen points out that a number of outsourcing vendors have minimum fees of $7,000 to $10,000 per month.

"Executive sponsorship should happen on two levels," says Tim Colwell, vice president of knowledge operations at the Association of Telecommunications Management Professionals. Telecom managers need executives to sign off on TEM from an economic standpoint but also from a business-processes standpoint, he says.