Why Does Anyone Need a Telecom Expense Manager?

Introduction

The short answer is:

To do telecom expense management you need a manager.

This bring up three questions – why does one need telecom expense management, what is telecom expense management, and what is the role of the manager?

Our contention is that effective expense management implies lower spending for the same benefit, which implies your department has more money to spend on something else. For many CIOs who want to bring more resources to bear on growing the business, finding resources can?be a struggle, as feeding the existing infrastructure gobbles up the lion’s share of the budget, not to mention their best team members’ time and attention. Increasing the effectiveness of expense management of telecom services can permanently slash landline telecom budgets by as much 50%. This outcome of course implies the need for a manager as the CIO’s (and often their team’s) time and attention is already accounted for.

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Management:

Management is a system of interventions, things you do to get things done through others.

This implies that without a manager things won't get done. Systems can help a manager, making them very productive, but not replace them. Someone must use the system and validate its effectiveness. This implies that a stand-alone TEM system without a good manager will not result in?effective?management.

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Why Telecom Expense Management?

Telecom expense management is managing the expenses associated with telecom services. Companies have sophisticated network management systems, but many don’t have comparable systems for managing telecom expenses. People usually focus on the technical success of their vendors first, and then on the cost.

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So why would you want to manage telecom expenses?

The primary reason is monetary. Unmanaged expenses are much higher than tightly managed ones, and loosely managed expenses are somewhere in between. Everyone can probably recall someone who would spend money without managing it, and the disastrous results that would ensue. Minimized expenses are beneficial to every organization’s bottom line.

The second reason is more personal – employees at an organization with unmanaged expenses tend to lose their jobs. People at firms with well managed expenses tend to have more opportunities to invest the unspent money in fun and exciting projects. Managers with well managed expenses and departments tend to get promoted, and have more opportunities in general.

?We can probably agree every organization manages telecom to some degree, and sees the need for management, just like any other expense.

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What is Telecom Expense Management?

It is a system of interventions with your vendors to ensure that expenses are minimized. The three primary interventions are, removing billing errors, removing unused services, and negotiating lower rates.

For many firms the minimum set of interventions is comparing each vendor bill with the previous bills, looking for variances, and investigating the variances and determining if the vendor needs to fix something or not. Firms also periodically re-negotiate their rates.?

Clients we’ve worked with have found that this minimal system of management is very convenient, and the price they pay for this convenience is a landline voice and data telecom budget often twice as large as it needs to be. The short answer for why this convenient system is adopted, is that no manager is available who has the time and expertise to perform any additional management.

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What are the interventions that minimize telecom expenses?

To minimize telecom expenses vendors and the organization must be held to specific performance standards.

?Two key ones are creating:

• Visibility into the granular details of the telecom spend must be provided, down to the individual services and their usage.
• Documentation showing how?every?service relates to actual?current?business needs.

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The organizational decision makers must be regularly provided with lists or proposals showing all services that are:

• Billed incorrectly.
• Unused / unneeded.
• Underutilized and can be consolidated or otherwise rightsized.
• Above market price and off contract or otherwise open to negotiation or re-pricing. (This implies access to current market prices.)

Everything on these lists is an opportunity to save money. Deep discovery can often find 50% savings.

There must be a process to gain access to data that can be reviewed to verify that anything not on the above lists is in fact billed correctly, needed, cannot be somehow rightsized, and marked to market.

The organization must have a process to use the information to make decisions and to work with the vendors to implement the decisions. This includes the need for consistent follow up to verify vendors make all the desired changes.

For many organizations these above items are not available, or are only partially available. Fixing this is time consuming and may require at least some outside assistance.

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What is the role of the manager?

The manager or managers must make sure that the above interventions are performed. This means that:

1. Data from multiple vendors must be pulled and compiled to create visibility.
2. They must correlate the services purchased to current business needs.
3. They must get current market data.
4. They must get current contracts.
5. They must use this data to create the lists of proposed cost saving opportunities, and verify the costs of the remaining services are as optimized as possible.
6. Having done all the research, they must ensure decisions to save money are made and implemented.

?These measurements of a telecom expense manager’s success are not the things the manager does; it is the things your vendors do, the results. The manager must determine the vendor behavior needed, and explain the behavior needed to the vendors. The manager’s supervision is the things they do to guide, help, and support the success of the vendors in serving the business. Vendors don’t automatically know what to do, managers must focus on making sure the vendors know what to do. The manager must force themselves to be specific, and then communicate that direction and feedback.

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What expertise does the manager need?

The manager or managers must have the ability to:

1. Determine what the relevant data is that is required to achieve visibility.
2. Find it and request it – or validate current automatic data feeds are set up correctly.
3. Make sure it is properly integrated to achieve visibility.

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1. Understand contract terms.

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1. Understand what the services do and how they serve business needs in particular and in general.
2. Communicate with stakeholders to determine current business needs.

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1. Validate which services are:
2. Billed correctly or incorrectly
3. Can be contractually removed, changed, or re-negotiated in price.
4. Are appropriate or inappropriate to serve current business needs.
5. Are above market price.
6. Communicate a clear proposal for managing costs and get buy in from decision makers and stake holders.

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1. Communicate clearly to vendors the desired pricing and service changes.
2. Negotiate contracts for better pricing and improved service.

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1. Track changes to completion, validating vendor performance.

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Understanding services purchased and business needs is a key expertise.

It is essential to revisit assumptions about whether purchased services still serve current business needs.

?To give some examples:

1. It is often assumed that all lines were shut down at an old location, or moved to a new location. When the assumptions are verified it is sometimes discovered that the lines are still at on old location the firm moved out of, each incident costing the firm thousands or tens of thousands of dollars. Bills rarely tell customers where their lines are located, so this happens surprisingly often.
2. One firm had large numbers of phone lines which were needed for fax machines, however the fax machines had been replaced by a fax server. Most of the phone lines were eliminated. However many were kept, and the manager had the expertise to tell the difference.
3. An accountant was put in charge of getting rid of extra phone lines for a real estate office, and was unable to tell which lines were important and which were not. This lack of expertise led to the accountant canceling lines and the firm’s business suffering as customers couldn’t contact the firm through normal channels.

Doing this successfully means understanding what the individual services do in general, and how they’re serving the needs of your business in particular. Many experts in telecom, just by looking at vendor records and without having worked for your business, can tell a lot about how services are really being used to help your business, and can predict which services should be changed to minimize costs and maintain or increase service levels. By giving such experts, whether on staff or outside consultants, a database giving visibility in to costs, they can create easy to understand proposals allowing decision makers to rapidly understand how services can be better aligned with business needs for foreseeable future.

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Getting current market pricing data is a key expertise.

It is also essential to have access to current market data. It is hard to negotiate when you have no idea if your vendor is offering competitive pricing, or if they’re charging double what other customers pay.

Experts with access to current market data can tell where your pricing is among the best in the market, and where it is now overpriced and can be re-negotiated. Unfortunately such data isn’t yet freely available on the internet. It takes expertise to know the vendors and who to speak with to get access to market data. Such experts almost always come from the Telecom industry, and aren’t full time employees of IT departments. If they are employees your IT department, their knowledge will usually become out of date.

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If management is not available, what is to be done?

To do telecom expense management you need a manager. You and your colleagues may not have the time to fully manage telecom expenses. Research, especially creating visibility, is time consuming as is implementation. Employees qualified to do this are probably senior and busy on critical work. IT correctly tends to focus on the technical success of their vendors and IT infrastructure and then on the cost of telecom vendors.

If key parts of managing telecom expenses aren’t being done, here are some alternatives for your team:

Do the same – get the same result.

Do nothing – expenses may increase.

Spend more time on this – your team will have less time for other tasks, and your team may not have enough time to complete the work.

Delegate like a boss – give this to a telecom expense manager with the time and expertise to perform the additional tasks. While slightly less convenient than making no changes, it has been shown to reduce the costs of complex telecom spends by 50%.