It is common for companies to outsource telecom expense management (TEM) to a third party (think Tangoe, IBM Rivermine, MDSL). And, why not? These companies come with promises to reduce your telecom fees significantly. But, are you really getting the bang for the buck and would it be cheaper and more impactful to look to your internal procurement team to do it themselves? This article explains how we implemented a TEM team in the Procurement department at my company and saved millions.
First, do you have a problem?
If you don’t have a third party TEM provider, the following are common areas for concern:
Late Charges: A look at invoices may reveal that you are being systematically charged for late fees. Given the lengthy and confusing nature of telecom invoices, it is possible nobody has noticed. Management of these invoices may be scattered throughout the IT department, making it difficult to develop or maintain an inventory of services being purchased from telecom providers. Underutilized Capacity: Capacity should be regularly monitored to ensure you aren’t paying for circuits with access or port speeds greater than consumed for each location, fees per person for people who aren’t there, or data packages that nobody is using. Overbilling: It is important to compare current charges to an inventory to easily identify overcharges. If you don’t have an inventory, it is impossible to do this effectively.
Once you have a complete picture from the inventory of what your company is buying, you can build a strategy to consolidate providers globally and regionally.
But, what about the third party TEM Company? Isn’t this what they do?
If you have a third party TEM provider and you manage it correctly, you may be getting the most from your money. But, this really requires that you can do something with the information the third party is providing to you: you must understand the total landscape of the telecom services your company is consuming. You must have a baseline. Without this knowledge, the reports coming back from the third party provider are probably not delivering much value.
Depending on the size of your organization, a well-managed partnership with a TEM provider may be the best solution. Alternatively, for some organizations, a more junior level FTE on the procurement team might be able to do this more effectively and for less cost. Either way, where do you start to ensure you are managing the category well?
Build an inventory: This is necessary for invoice reconciliation and to understand the scope of what you are buying. Start from gathering invoices, having a lot of conversation with your telecom providers to understand services line by line, and compile the data along with line item charges, location, description, etc.
Control spend: Once you have a complete picture from the inventory of what your company is buying, you can build a strategy to control expense. Consolidate providers. Implement policy to limit who gets wireless devices, teleconference accounts or other services. Monitor bandwidth via bandwidth utilization reports quarterly to ensure you are not buying more than you need. Identify unused services and circuits. Last, negotiate best rates with your remaining providers via bidding and benchmarking.
Steady State: Once an inventory is built, incoming invoices should be easily matched to the inventory by the procurement associate as they come in. Inventory should be constantly updated to reflect any changes in fees or taxes.
My company fired its third party TEM provider and implemented an in-house solution by hiring a Procurement analyst to complete the process outlined above. Within 1.5 years, we cut $2M out of our Telecom spend by employing these tactics.