Telecom Expense Management: Ain't Life Fun?

By Allen Bernard

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On the one hand, the massive mergers of voice and data carriers (traditional telecom providers) and wireless providers over the past five years have been a boon to overstressed IT managers trying to make sense of ever increasing service offerings from suppliers.

On the other, the demand for more and better, faster and cheaper never lets up so telecom expense managers (usually some poor guy down in IT with too few staff and too many performance expectations) means telecom is becoming ever more pervasive throughout businesses of all sizes.

Who could imagine trying to run a company today with email, a cell phone, and a land line? Those would be the basics. Add to that smart phone data-crunching capabilities, WiFi enabled laptops, Blackberries, pagers (yes, they still exist); how about video conferencing, teleconferencing services, etc., etc. and suddenly the list of services to manage and pay for gets pretty overwhelming.

Don't forget routers and switches on the network, data pipes, WANs, LANs—they are all part of telecom, too.

M&A in the telecom space has made life easier for many. You can now buy bundled services at flat rates for many of the services you used to pay for by line item. But that is just in the U.S. Add the international component many companies great and small have to deal with and all your carefully negotiated contracts go out the window—unless you can get similar deals overseas.

"It used to be when people paid for every call … it was a material cost to the corporation," said Craig Haught, VP and CIO of Cymer, a mid-sized supplier of lithograph machines to the semiconductor industry. "Now that the cost of even long distance is almost free or mobile-to-mobile with the same carrier is virtually unlimited for a fixed cost … all of these cost get a lot easier to manage from a budgeting point of view."

For Haught, convergence is also serving to lessen the load. Since voice and data lines are now synonymous, it easier to gain transparency into your telecom spend and find savings—if you want to put in the effort. For Cymer's 1,000 employees, 40% of whom work overseas, it is worth the effort but Haught still employs a telecom expense management company called Avotus to make his life easier.

By using Avotus' tools he can negotiate better deals, have them deal with inaccuracies in billing (up to 14% by some estimates) and track his assets.

But, when your company has 10s-of-1,000s of employees in over 50 countries consuming over $100M in telecom services per year, the case is not so cut and dried.

That's what Peter Tarhanidis's job is. Tarhanidis is the telecom manager for a large Fortune 50 company. For the most part, he has visibility and control over about 70% of the company's telecom spend: voice and data services, switches and routers, access points, WiFi, etc.

Where he spends most of his time with pouring over analytics to see where he can do a better job at getting into the 30% he can't see or control.

"What we do have is very strong procurement capability," said Tarhanidis. "We get best-in-class rates; we do a fantastic job with that and we definitely have strong relationship practices. And now when it becomes an issue of auditing or validating those contract rates or discount plans that you have, that's where we have challenges."

In other words, getting what you paid for. For this he uses Avotus as well to make sure the company's bill are accurate and they are getting the services they signed up for.

He could develop this expertise in house, of course, but he doesn't want to when it's easier to outsource the function.

Interesting, it would logical to think that with telecom meaning more things, costing billions per year and having a more important impact than ever on how, when and where companies conduct business, this segment of the outsourcing world would be taking off … right? Not necessarily, said puzzled industry analyst Jeff Kagan.

"It's seems as though there's a big opportunity that's been out there and getting bigger for the last five, ten, fifteen years and there seems to be a real need, but there just doesn't to have been an explosion of interest from the customers," said Kagan.

Convergence and fewer carriers is definitely part of the answer but, ultimately companies may not care enough at this point to do more than they are. After all, the No.1 concern for most managers is keeping people connected, he said.

"The issue is telecommunications is getting bigger and more important and more pervasive and companies have more bills and more services to manage," said Kagan. "There's just bill after bill after bill and the manager of the company who handles this is typically overwhelmed trying to keep the services running and doesn't really have the time to manage the costs."

Of course, that will probably change as new services become old hat and more reliable. At least that is the hope of Avotus' Chief Marketing Officer Alan Gold.

"It's one thing if you've got five cell phones and two offices and Betsy down in accounting; she can spend half a week when the bill comes in to get it all sorted out," he said. It's another if you've got a 100 times those numbers.