Introduction

Telecoms strategy, design and procurement are increasingly important parts of any IT strategy and telecommunications costs are often one of the largest items in an IT budget, yet achieving improved outcomes through the procurement process is getting ever more difficult

Through working with The Network Collective, our customers have a trusted partner to help them understand the market, make the right technical choices and ultimately achieve an enhanced telecoms solution that supports their business needs and fits their budget.

When you go to a restaurant, do you always check the bill before paying? If you’ve had a simple meal for two, this is not a difficult task. You can easily tell if a side salad has been added that you did not receive, or you have been charged for three steaks when you had two. All the same, it’s tempting to just pay up without taking the time to read the bill carefully.

This is like telecoms billing, apart from instead of a meal for two in a restaurant your business might be comparable to feeding two thousand people at a series of restaurants around the country. How can you tell what people ordered and if the price on the bill matches that on the menu?

It should be straightforward to check you are getting good value from your telecoms vendor, but in practice it can be complex and challenging. Most companies don’t even have a clear picture of their estate inventory and usage, so how can they tell if the bill is accurate and reasonable? This is where Telecoms Expense Management (TEM) can introduce greater control, efficiencies and cost savings.

The problem:
Unclear data and excessive cost

TEM is based on practical principles. In order to get value from a telecoms contract, you need to know what your estate consists of, how it is used, then put in place the best charging model for your individual needs.

The first step is to build an inventory of current services. This includes fixed voice, mobile telephony, WAN, LAN, hosting, hardware maintenance and any other relevant services. For large businesses with diverse estates, such as retailers, this data can take time to collate.

Once it is clear which services are provided to each site, the next step is to add in detail about how those services are used in practice. Providers can be called on to provide this data. This will identify underused and redundant services, as well as flag up areas where out-of-date equipment is in use.

The data about what you have and how you use it can often produce surprises and obvious ways to reduce costs. For example, it might be that you are paying for numerous PSTN lines that are no longer used. Alternatively, it might be that one particular service has been fixed on an inappropriate tariff, or that discounts and credits agreed under the contract have not been applied correctly.

The full picture also puts you in a more empowered position. It may be that you want to consolidate and change your estate, for example by adopting new technologies that reduce cost and increase flexibility. At the very least, you should find several ways to reduce costs. Many businesses, for example, are surprised by how many premium-rate calls are made by staff, which are usually not business-related; blocking calls to these numbers can save considerable amounts.

TEM Management Strategies

A TEM provider will manage the initial inventory, but the service does not end there. No inventory stays the same forever, so an on-going TEM service will continually review the inventory to ensure it is still accurate.

An ongoing TEM service will also provide validation and verification against each new set off invoices that are received. This means before bills are paid, the TEM contractor will check that the amounts claimed have been correctly processed according to the agreed terms.

Ideally, contracts should also be managed centrally. The full picture given by the inventory will soon become more muddled if separate sites begin to agree additional contracts or contract annexes. The more streamlined the system for agreeing, managing and reviewing contracts, the easier it is to avoid overspend and inefficiency.

One-off TEM audit or
on-going contract?

There are a number of different ways of delivering a TEM service and it is important that you understand the advantages and disadvantages of each before contracting with a supplier.

There is also a choice in payment model. A shared risk/reward model means the TEM supplier receives a percentage of savings found, or a fixed fee plus this percentage. This means the customer only pays for results, although if the savings are considerable it can mean payment is also very generous.

The service can also be paid for by fixed fee, paid either upfront or by instalments. This is easier to budget for, but there is a risk that the fee will exceed savings made. On the other hand, this model encourages a more wide-ranging review of the estate, whereas risk/reward payments incentivise finding ‘quick wins’.

Many TEM providers offer a one-off audit approach, in which billing and inventory data is gathered so that overpayments and inefficiencies can be identified. An error report is then produced showing where savings could be made, leaving the business to effect these.

Although a one-off audit can deliver savings, the downside of this approach is that it overlooks a key part of the problem. If telecoms contracts become inefficient because businesses are unable to find the time and resource to monitor them carefully, the same businesses probably lack the time and resource to implement changes and then carry out regular reviews. As a result, one-off audits tend to focus on ‘quick win’ strategies rather than tackling some of the more entrenched issues.

An alternative is to engage a TEM provider on a longer-term contract, typically 1-3 years. This means that following the initial audit, the TEM service will help to enact the action plan, deliver savings and maintain the estate.

Is TEM right for you?

There is no guarantee that a TEM service will reduce the cost or increase the efficiency of your telecoms estate, but the likelihood is that your inventory will produce some surprising or even startling results. Some organisations find they can save very significant amounts – as much as 40%. In general, those with unwieldy, loosely managed ‘dirty’ estates stand to save more than those with well-managed, ‘clean’ estates that have been reviewed regularly. Each organisation can decide for themselves which pricing structure best reflects their individual circumstances.

The best time to engage a TEM service is prior to or at the start of a new contract, although there are also benefits for engaging a provider mid-way through a contract. In particular, a TEM process midway through a contract can provide invaluable information that then prepares the way for a highly successful, well-informed contract negotiation when renewal time comes.

TEM aims to simplify a complex telecoms situation: audit the current estate to produce a clean inventory of services, analyse how services could be consolidated or optimised to save cost, then maintain the cleansed estate on a continual basis. The final step is to ensure that the ongoing billing matches this picture.

Can you afford not to use a TEM service?

Disclaimer

Other than matters relating to The Network Collective, this research is based on current public information that we consider reliable. Opinions expressed may change without notice and may differ from views set out in other documents created by The Network Collective. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.

This research does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Network Collective Limited © 2017

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