Ben Porter
Consultant
Abilita Telecom Consultants
bporter@abilita.com

Managing Telecommunications Costs with TEM
by Ben Porter
Abilita

Not too many years ago, managing telecommunications for an organization consisted of selecting a local carrier and a long distance company. You may even be old enough to remember when there wasn't even a choice between the two. But in today's world, organizations are inundated by new technologies and new offerings. There are DSLs and T-1s; the Internet, intranets, and extranets; Voice Over Internet (VoIP) and wireless voice and wireless data; and lots of "packets" and "bandwidth." It seems like every month there is a new acronym to learn, whether it's "SIP" or "WI-FI" or "MPLS". It can be confusing and even intimidating.

Yet with all these choices, most organizations desire the same things - capability with ease of use. Employees want to pick up a phone, not a software manual. Management wants to operate with greater efficiency within a reasonable cost.

Telecom expense management provides valuable oversight.
Over the last decade there has been rapid growth in a new industry that helps organizations manage these various communications issues. It is called Telecom Expense Management or TEM. Fortune 500 companies have long benefited from the savings that this third-party telecommunications expertise can yield, but now TEM is available to almost any size business-and it can be a boon to those organizations that take advantage of the opportunity.

TEM comes in a variety of flavors, but in its purest form it is a management service that monitors all communications expenses and related physical inventories. It provides order management and makes sure the right costs are being paid for the right services. The benefits are noty only savings in money and time, but also a more efficient allocation of internal resources. Organizations can use a TEM service to free themselves from telecom administration while still maintaining control of their telecommunications services.

Step One: Spot the mistakes.
Between 50 and 90 percent of the communications bills that organizations pay are incorrect. (Estimates vary depending on which study is cited.) Some of these errors end up in the customer's favor, but most do not. Therefore, the first step in the process is to determine if there are any potential recoveries that can be identified. A well researched audit by a telecom expert can often uncover a significant monetary return, and on occasion, recoveries can go back years. In my own experience, I have frequently witnessed clients recovering more than 20 percent of their annual telecom expenditure in one recovery.

The errors that cause these incorrect bills can be from a variety of causes. Sometimes they begin with a simple miscalculation. Other times the rates that are invoiced are not consistent with the rates that have been contracted. Still other times, rates and fees can spontaneously change but are not detected.

Many companies are also the victims of "slamming," the controversial marketing practice of attaching useless services to an organization's telecom bills. Almost all errors however, share one common trait. Once made, they tend to repeat with each bill and, unfortunately, many are not recoverable. (That's a subject for another article.)

Needless to say, the communications companies do not invest many resources into correcting these errors. After all, they have no obligation and no incentive to perform internal audits on behalf of their customers. Instead, it is left up to the customer to get its own money refunded.

Complex fees and rates call for a detailed review.
The next step in implementing complete TEM is to reduce current expenditures - otherwise known as an "optimization"- with the goal of getting the best telecommunications rates and packages available.

A thorough analysis involves performing a line-by-line breakdown of communications usage and then comparing those expenses with optimum industry standards. Ideally, under a complete TEM package, this detailed breakdown should be performed on a monthly basis. Of course, for the uninitiated, this can be very time consuming. Most IT, HR, or accounting departments would probably find performing a monthly telecom analysis a cumbersome task. For this reason, it is usually not a practical use of limited resources.

Internal audits are made even more complicated by an ever-changing communications industry. It is not simply a matter of keeping up with changing technology. There are a multitude of evolving telecom businesses and offerings. As an example, a certain provider can become more aggressive in a particular market and start lowering prices or setting up incentive programs for new clients. But, if the new programs also apply to the entire user base, do you think the provider will call current clients just to lower their bills? As a practical matter, only someone who follows the industry closely, a telecom expert, would know about the savings opportunity.

Unfortunately, many organizations are forced to evaluate their bills by "trending." This means, they pay their telecom bills with only a cursory examination as long as the bill is, for example, within 10 percent of the perceived norm. However, if an error has been overlooked in the past, it can get "trended into the norm." One of my associates has a client that was paying for a number of office lines three years after they had been disconnected. Apparently, it was overlooked right from the beginning.

Changing needs can mean increased costs or cost savings.
Typically, an organization's needs evolve over time. We all know that an unanticipated spike in cell phone usage can easily cost hundreds of dollars more than it should, and thousands more if the packages are not promptly adjusted. However, more subtle changes can be just as costly over time. A steady, barely noticeable growth of just a few percentage points in long distance usage can result in significant missed opportunities. At the end of a medium growth year, a customer could easily be missing out on 15 to 20 percent savings or more by not addressing changing calling patterns as they occur.

One of Abilita's clients purchased a great long distance plan. The interstate rates were highly competitive and it worked well for them. But over the course of two years, they began to do more and more business in the northern part of the state. This was great for the company, but an audit revealed that their interlata rate (the long distance rate within the state) package was not the best. By accepting a slightly higher long distance package, they actually saved 23 percent on their total long distance bill.

Heading off the big problems.
Many organizations still view the management of "the phone bill" as a secondary task, reserved for an entry-level employee with no specific training. Perhaps at one time this was a workable practice. Today's organizations however, are much too dependent on a variety of communications. It is not just a phone bill anymore and poor management can result in significant and unnecessary expenses as well as lost productivity.
Utilizing a TEM service that provides regular analysis can help address problems as they occur, or prevent them entirely. TEM can immediately and significantly impact the bottom line, with savings often appearing in the first quarter of implementation. Because TEM can also free-up internal resources, it provides the opportunity to bring extraordinary value to any size organization.

Ben Porter is a Consultant at Abilita Telecom Consultants.
Ben can be reached at (310) 463-8400 or bporter@abilita.com.

Abilita is a full service telecom consulting firm helping clients across North America achieve greater cost efficiencies and improved performance for all of their telecommunications needs - voice, data and wireless.

Doug Meades
Managing Consultant
Abilita Telecom Consultants
dmeades@abilita.com

"When the economy is good, saving money is important;
when the economy is bad, it's imperative."

It’s true, saving money is important for any organization and for many small businesses, telecom cost reduction is often an untapped source of revenue. With the evolution of telecom technology and constant changes within the industry the opportunity for small business to do some ‘belt tightening’ in this area has never been better and the rewards have never been greater. Consider this:

• On average, 7–12% of total telecom invoices are in error (Aberdeen Group)
• 57 % of businesses do not compare their telecom contracts to industry benchmarks for best pricing (Aberdeen Group)
• Late payment penalties equal 2% of overall telecom spend (Aberdeen Group)
• On average, firms save 18% when they improve their invoice processing practice yet 80% of all telecom bills are not audited (Avotus)
  

What do your telecom services have in common with your car or your health? Regular maintenance has been proven to reduce the overall cost of ownership and extends the life and value of the automobile. Regular check-ups with your doctor translate into a better quality of life. The same principles apply to management of your telecom services and corresponding expense. Here are some things you can be doing to manage your telecom expenses:

1. Check Rates
   Billing systems for major telecom providers are often legacy systems that were never designed to accommodate today’s billing requirements, so it isn’t surprising that billing errors occur. Check invoices against telecom contracts and request credits for any billing discrepancies you find.
   
2. Do an Inventory
   Make sure you know what each line is being used for and what features are being used on these lines. Match this inventory against the ‘ER’ (equipment report) from your vendor. Any line or feature that cannot be identified is a red flag and a potential candidate for cancellation.
   
3. Data & Internet Services
   Understand the utilization of your data and internet services. You don’t want to be over subscribed for service and you don’t want to be paying a premium for ‘over usage’ charges applied for exceeding the limits of your subscribed service.
   
4. Cellular Services
   Review cell phone invoices to ensure the usage pattern and cell plans line up (minutes used, long distance & roaming charges etc). Pay particular attention to charges for data as this is the fastest growing segment of the cellular market. These costs can spin out of control easily as new features and applications are introduced. Also check to see that the features you are paying for are being used.
   

Implementing a cost reduction strategy for telecom is an ongoing task. It is important on an ongoing basis to monitor, track and measure costs, savings and changes. Your efforts will be rewarded with the dividends of cost savings and the knowledge that you are on top of telecom expenses.

Doug Meades is Managing Consultant at Abilita Telecom Consultants.
Doug can be reached at (519) 432-1556 or dmeades@abilita.com.

Abilita is a full service telecom consulting firm helping clients across North America achieve greater cost efficiencies and improved performance for all of their telecommunications needs - voice, data and wireless.