1. Initial - chaotic, ad hoc, requiring individual heroics with an undocumented process
2. Repeatable – minimal documentation makes it difficult to repeat and manage the telecom spending
3. Defined – the process is defined and confirmed as a standard business process
4. Managed – the process is quantitatively managed with common metrics
5. Optimizing – process management includes deliberate process optimization and improvement

While this process is written to reflect the capability of software and its applications, they can also be applied to TEM processes. The first stage speaks to organizations that have no effort or program to manage telecom spending. In this instance, telecom bills are not validated and there is a good chance that you are paying too much for telecom services. The second stage is reactive; and, knowledge sharing is incomplete among internal groups that manage aspects of telecom (procurement, sourcing, invoice processing and accounting).

Savings from a telecom audit and implementation of software or outsourcing of the expense management functions will range from 4% to 25% of the annual spending on expenses for organizations that are in the first two stages. The results depend upon contracts, move add change disconnect activity, availability of documentation to support billing claims, knowledge of carrier refund procedures and the ability to negotiate refunds.

At the third level, organizations are moving from reactive to becoming more proactive with thresholds for bill validation and analysis of spending trends. There is also some collaboration and knowledge sharing among individuals. Often at this stage, a TEM program has been implemented in a limited region, country or just for one area like voice, data or wireless services. With the fourth level, organizations are proactively using software to manage telecom expenses; they could also be outsourcing the program to specialists with TEM knowledge and expertise. Different functional groups that manage aspects of the lifecycle of a telecom expense are now identified from the second stage above and are working together as a team.

The fifth stage is ideal with programs that get to the root issue of billing errors and overspending from inefficient procurement and sourcing. Organizations are using best practices and metrics to not only monitor annual savings, but also monitor the performance of the TEM program. Continuous efforts reduce telecom expenses and ensure that the organization is achieving optimal savings on a global basis.

Knowing what level of maturity you have with your TEM program can help you decide what steps you need to take to save money. A balanced approach of focusing on short-term tactical efforts for savings and long-term goals for the program will ensure that you proactively manage operational performance and telecom costs.

2. Stop Making Mobility More Complicated Than It Should Be. Most organizations have a fierce debate going on between employees that want to bring their own mobile devices to work and the managers in IT, security and wireless expense management functions. If employees do not have sensitive data in their e-mails, it may be possible to allow a bring your own device (BYOD) policy for secure mobile operating systems and devices that have secure applications to flag malware. However, after a review, most employers will find that employees do have sensitive data in their e-mails that must be secured and BYOD programs will probably only work for a small group of workers. Acknowledge this challenge, and develop a policy with executive support that avoids making mobility more complicated than it has to be.

3. Stop Creating Custom Reports for Telecom Expenses. Departments, such as finance or procurement may come to you once a year for a special report on telecom expenses. Do they really need the information in this particular format? If you have a good TEM program, it will have several reports that will speak to all audiences of the organization in an automated fashion; saving you from the report you are trying to manufacture. In addition, drag-and-drop functionality will enable you to create multiple custom reports on-the-fly that will have the information much quicker than a custom report from a corporate ERP or financial applications.

4. Stop Overspending on Telecom Services. Many organizations simply procure telecom services from incumbent suppliers. Savings can be substantial when carriers compete for your business. This approach integrates the competitive dynamics of sourcing, in which carriers submit competitive price quotes, with a steady persistent approach to costs savings that TEM programs provide. A good system to manage quotes from carriers will pay for itself through cost savings and automation of the process of requesting new prices, sending reminders, adding new vendors, tracking vendor responses, comparing pricing, converting accepted quotes into work orders, and tracking historical performance.

• Raising prices by and eliminating unlimited data plans
• Adding more customers that pay to use their mobile data network
• Throttle users that consume too much bandwidth
• Offload customers to Wi-Fi networks and hotspots

Enticing More Subscribers to Use the Network with Data Pooling

Verizon CEO Lowell McAdam comments at the UBS Global Media and Communications Conference, confirm that Verizon will offer data plans for multiple devices in 2012. In June, AT&T CEO Ralph de la Vega also confirmed that they are developing a shared data plan. And, Sprint CEO Dan Hesse believes that shared data plans are the next trend in wireless and are looking to add them as well.

Having one bill for each customer is more efficient, and carriers ultimately have relationships with customers rather than devices. However, the main reason carriers are doing this is that they want more revenue from customers that use their mobile data network. Carriers may lose some revenue from customers that consolidate multiple plans, but will need to switch to plans with larger data allotments as they consume more bandwidth, which are more expensive and offset some of the carriers’ losses.

This will lead to increases in spending for wireless services at most organizations. Organizations must develop strategies and implement programs to address changes in mobile data plans. Most organizations do not have accurate information or reporting on employee data consumption due to data plans being unlimited until recent months. Many corporate contracts allow managers to have a false sense of complacency with protection from these changes.

When the contracts end, managers will face changes that require accurate information on employee mobile data usage. Determining if employees are abusing data plans or their devices and applications are data hogs requires accurate inventories of devices, knowledge of employees’ data plans, reporting on data usage and analysis; all things that good TEM program can provide. Wide variances in usage should lead managers to determine if the types of devices and applications that employees are using are causing spikes in usage for some employees. Change is coming for corporations’ mobile data plans. Be prepared.

These findings highlight the critical need for fixed and mobile Telecom Expense Management (TEM) programs to support massive change that is coming to networks and spending. Are you ready for these changes? Data and analytics from TEM reporting can help managers identify cost savings opportunities through consumption reporting. These reports can help identify services with low usage as employees switch from fixed voice calls to use of data and wireless services.

Once you identify opportunities to disconnect services, it will be critical to have systems in place to streamline your requests with carriers. TEM systems can archive disconnect requests and link the information with inventory. A good system will also automate reconciliation of inventory with bills to ensure removal of disconnected items from billing. If the carrier fails to disconnect a service, the TEM software can flag billing errors and provide documentation of disconnect requests to support billing claims. Carriers’ systems do not provide a reliable source for documenting claims.

Managers that seek to cut spending on telecom and network services can learn from Wayne Gretsky, one of the greatest hockey players of all time. He said, “A good hockey player skates to where the puck is. A great hockey player skates to where the puck will be.” In a similar way, for telecom expenses, it is critical to anticipate where the spending will be in the future. Without a good TEM program, expenses will be out of control as you pay expenses for fixed carrier services that employees no longer need, and new expenses grow for new mobile services.

Bill consolidation is the first step in reducing costs of processing bills and tracking payments for your accounts payable department. Enterprises report that the costs of processing an invoice can range from $75 to $125. This includes costs of receiving, transferring it from the mailroom to a manager that must approve it, payment, and storage/archiving.

Bill consolidation helps to minimize the likelihood of late payment penalties or uncontrolled service disconnects from missing or lost bills. Even more important, bill consolidation is a critical step to begin receiving bills electronically. Processing paper bills is not good for the environment with the paper and ink that to create the bill and the gas for delivery and transport within the organization. The benefit for carriers to providing an electronic offering is the cost savings. On average, an online bill costs a carrier approximately 20 cents to produce and process, which is considerably less than the cost of printing, mailing and processing a paper bill.

Why Bill Consolidation Is Not Easy

TEM outsource programs begin with bill consolidation. The problem is that carriers have many different products and they are often unable to consolidate bills from different products. This means that bill consolidation requires specialized knowledge and effort. In addition, carrier systems often revert to their old ways of billing items separately. If a customer makes any changes to its services or the carrier makes a change to the product or its pricing/billing system, it’s common to find three months later these items start to arrive on separate bills. This can present challenges because sometimes it is a duplicate bill and other times it is not. There is also risk unpaid charges that will lead to service disconnects. Automation can help flag these items and avoid duplicate payments or late payments.

Bill consolidation will save you money, and it is good for the environment. Unfortunately, rates of adoption for electronic bills are low because most organizations have a mountain of paper bills, and they do not have the time to initiate a bill consolidation project. However, it’s in your best interest to start now.

Instead of simply transferring the funds and having the telecom carriers change the line item for the fees that it collects, the FCC has approved a new fee that will start at $0.50 cents a month and go to $2.50 in the future for the Connect America Fund. This seems strange, but the FCC probably thinks that people are used to seeing the Universal Service Fund fee and that they will not notice a new line item for 50 cents on their phone bills. This new program seeks to spread access to broadband, for 18 million American households that the FCC thinks do not have high-speed Internet service.

A few days later on Tuesday, November 1 the House of Representatives passed the Wireless Tax Fairness Act of 2011. The legislation, (H.R. 1002), will place a five year freeze on any new state, local taxes, or other fees imposed on wireless consumers’ monthly bill. It is not clear if the federal government has the authority over 60,000 State and Local tax jurisdictions. The US Senate has not approved similar legislation so there is no timeline for this freeze on taxes for wireless bills.

According to TaxFoundation.org, the average U.S. wireless bill contains 16.26% in taxes and fees. Approximately, 11.21% is from state and local municipalities. Many states including Nebraska, Washington, New York, Florida, and Illinois, have between 20-24% in federal, state, and local taxes.

These taxes are confusing so make sure you have an automated Telecom Expense Management solution in place to validate your bills and flag any tax exemptions.

IT may have a large budget, but allocations of the funds are mostly for ongoing operational expenses. IT needs to find funds for projects that can help organizations drive innovation and competitive advantage. Cost savings from Telecom Expense Management (TEM) programs can help fund projects to drive innovation and competitive advantage.

Many organizations lack the robust systems or maintain separate databases for telecom assets, processing bills, and managing contracts. Some other reasons why organizations have poor visibility into telecom expenses include mergers and acquisitions, which create multiple telecom networks; decentralized, geographically dispersed operations; and business units with maverick buying of telecom services. This makes it difficult for managers to obtain detailed information on telecom costs, dashboards for resource usage, and other key reporting metrics.

To gain visibility into telecom spending, managers need to create a detailed inventory for all telecom spending, including expenses that individual business units are managing. Once that list is completed, managers should look for unnecessary spending, duplicate services and consolidate services among different carriers to get better pricing. In addition, there will be opportunities to secure refunds by comparing billing to contracts. The payoff from executing these two steps can be huge.

Telecom budgets provide a rich target for savings which can be redirected from the operational budget to fund new groundbreaking initiatives. Learn how Telesoft can help you can give IT what it needs by securing savings.

TEM breaks down the barriers between functional groups and business processes. In large organizations, sourcing, procurement, inventory management, expense management, and accounts payable lack integration and coordination. Each of these groups often fails to understand the downstream impact of their actions and the results from failing to their coordinate activities. This costs organizations time and money with duplicate efforts and use of costly competing technology.

There are other costs as well. Telecom and IT network managers, procurement professionals, expense managers, and accounts payable personnel often don’t have current contracts and pricing. Without this information, the gains from negotiating new lower prices on contracts are lost. This information is also critical to determine the best supplier to order a new service from and validate their bills.

Sourcing professionals may lack insight into the latest trends for consumption of services. Service quality and price are not the only considerations in selecting a telecom carrier. Factors like the accuracy of billing, responsiveness to billing errors, and timeliness for completing orders should also be part of the evaluation before selecting a carrier.

Increased automation for managing service order requests, tracking assets, validating bill and reporting from a TEM program can help improve coordination among functional groups and inter-related processes. This can help improve productivity freeing personnel to focus on areas where they can add more value. An effective TEM program can provide more timely and accurate information to improve management of cash and telecom communications assets.

The potential savings can quickly add up. For an organization that spends $50M a year on fixed and mobile voice and data services, a company can often save between 5% and 10% on telecom expenses every year. Using conservative figures, this $2.5M of savings goes to the bottom line or operating income before taxes. For many companies, $2.5M of savings in annual operating expense will have the same impact on profitability as $30M of hard won top-line growth in revenue.

The Future Is Uncertain

AT&T and T-Mobile have run advertisements and promotions highlighting the benefits of this combination and gained support for the deal from a number of key politicians unions. The deal seemed like it was going to happen, but now the future is uncertain. Sprint and other competitors, public interest groups and key lawmakers have voiced opposition to the deal. AT&T can still appeal the suit and ask for an expedited hearing to defend this acquisition in court.

What does it mean for enterprises?

T-Mobile’s two established enterprise offerings: low international-calling pricing (thanks to its current parent Deutsche Telekom) and voice over Wi-Fi services have seen a 26 percent increase in enterprise activations. Uncertainty about the acquisition may lead enterprises to worry that they will have to swap out their devices or face price increases from AT&T, but there are ways to address this uncertainty.

Enterprises that have contracts with T-Mobile may wish to use this period of uncertainty to extract better pricing and extend their deadlines to lock-in lower prices. While swapping out equipment can be a hassle, most mobile providers will provide enterprises with new equipment at little to new cost if they see new service activations. Any change with T-Mobile will not happen overnight and there will be time to port phone numbers, switch providers, and procure new equipment. Another issue to consider in contract negotiations is quality of service and service providers’ network capacity. Organizations should consider adding language to their contracts that allow for early termination, at their discretion, if carrier service is unreliable.

Sprint Increases its Early Termination Fees

Early termination fees (ETFs) are an issue for those that do not have T-Mobile as their service provider. Wireless providers subsidize their devices, at a cost to subscribers that cancel their contracts early. Now, Sprint is raising its ETFs to $350 from $200 for customers who purchase smartphones, tablets, notebooks and netbooks. This increase matches the ETFs that AT&T and Verizon Wireless have for breaking contracts before their expiration date.

• An increase of approximately 20% for some Analog Private Line elements in Connecticut effective August 15, 2011
• An increase of approximately 20% for some Analog Private Line elements, in Florida and Georgia and an increase of approximately 10% in Tennessee effective September 1, 2011
• Increases of 17.5% to 9% for Business Flat Rates for Local Exchange Service, Business Premium Flat Rate Trunks, Business E-911 Service Features, Business Measured Rate Local Exchange Service, Business Measured Rate Joint User Service, and Business Measure Rate Hinting and Rotary Service in Tennessee effective September 4, 2011
• DS1 and DS3 elements for Local Distribution Channel / Channel Termination, Channel Mileage, and Channel Mileage Termination billed in AT&T’s Midwest ACIS will increase in Illinois, Indiana, Ohio and Wisconsin effective September 1, 2011.
• The elimination of off peak rates for Legacy BSLD MTS customers that do not subscribe to an optional domestic price plan in the Southeast region on October 1, 2011.

These are some of the price increases which we are tracking for our clients and the changes are complex.  Do you think that the price increases will lead to more billing confusion and errors?

The large price increases also highlight the need to ask for competitive prices from other providers before procuring any new services. And, an effective TEM program can verify if you have special contracts that exempt you from these price increases. Where the higher charges do apply for your services, effective TEM programs will identify billing overcharges resulting from mistakes in implementing the increases.