Experts advise how to reduce telecom costs

With 90 TEM vendors worldwide, here are tips to consider.

Experts offer advice for reducing telecom costs.

Tips for TEM What you need to know before you dive into a telecom expense

management deployment.

Executive buy-in — Be sure you have the right CXO on board before you start the RFP process.
Consider how TEM needs to gel with compliance regulations or internal policies.
Benchmark everything from how many lines and routers you have to how long it takes to process invoices and receive credits.
Success monitoring should be tracked, which is impossible without benchmarking.
Know what you want from TEM deployment, so you can stay on track when talking to vendors.
Consider centralizing your telecom management organization from bill payment to ordering.
Know your expected ROI and use that in determining the TEM route you will take.

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.

Give policies more weight

Policies will need to be drafted and enforced. When new policies come from higher-ups, they're usually more widely accepted and followed. For example, if cell phones were originally purchased individually by employees, and now all purchases must go through one centralized department, those policy changes have to be endorsed by higher-ups for them to be followed.

TEM touches many parts of a business - not just telecom or IT, Colwell says. With that in mind, he recommends telecom managers go to finance, human resources and accounts receivable and gather information from all of those departments before making policy changes. Having them on board can help in drafting realistic new policies and also help ease employees into a new TEM world, he says.

Users say getting executives to sign off on TEM can be difficult. One user from a food-service company who asked not to be named says he started analyzing, performing rate reviews and pointing out cost savings on his boss's wireless invoice to demonstrate the benefits of a wide-scale TEM deployment. He says showing how he could reduce expenses on a single invoice helped his superior see how the practice could be applied throughout the company.

Centralization has advantages

Several industry watchers also say organizations should consider centralizing their telecom-management organizations from an invoice, payment and ordering perspective.

"Centralizing puts all processing in one place and will give businesses a head start controlling their telecom spend," while communicating to their company that telecom will be processed out of one location rather than all over the country, says Larry Van Etten, senior telecom manager at IKON Office Solutions in Malvern, Pa.

"We've run into situations where a company has 10 different organizations doing the same telecom tasks and doing it differently," says Kevin Dunetz, CTO at TEM vendor Rivermine Software. Centralizing eliminates pockets of telecom throughout a company and lets all telecom managers work from the same set of instructions, he says.

It's not unusual to sit down with a company that's decentralized and ask how many locations they have. "When the process starts they say 600 locations, and by the end of the process they find out it's 800," he says. "Discoveries like that aren't uncommon."

Experts also say you should know your expected ROI and use that in determining the TEM route you will take.

If total annual telecom spending is $700,000 then paying $7,000 per month on an outsourcing engagement to reduce your monthly expenses by $1,000 is probably not the most economical route.

Once you've established how much you spend on telecom, you can calculate an acceptable ROI before sitting down with a vendor.

Don't leave anyone out

Finally, realize that TEM affects many departments.

"Do not take for granted the need to thoroughly know and understand your current environment," says JoAnn White, a telecom manager at pharmaceuticals company Caremark in Nashville. She says it's important to develop the relationships with the correct people and departments that will have to be on board with the changes.

"The world of [TEM] is a labyrinth of detail and copious data that includes a sensitive web of relationships [internal and external] that all impact each other. It is important to know how all of the pieces fit together," she says.

IKON's Van Etten agrees. "What happens is you're taking away someone's fiefdom, so you sometimes don't get a lot of support from accounts payable [for example], but finance likes you a lot," he says.

Copyright © 2006 IDG Communications, Inc.

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