Telecom Expense Management

By KEVIN DUNETZ

 

Gaining control over telecom expenses, auditing invoices, enforcing service level agreements, performing business intelligence analytics, and reporting are all components of a solid Telecom Expense Management (TEM) process. For an organization to attain the greatest savings through TEM, three main data sources are required: Inventory, Invoices, and Contract/Tariff Information. 

 

Inventory is needed so you can understand what you should be paying for and how your services are configured.  Invoices are needed so you can understand what the carriers are billing you for. Contract/Tariff Information is needed so you can verify that the carriers are billing you correctly according to the contract/tariff.

 

Without all three of these pieces of information, you will be limited to what you can achieve in terms of savings. This article focuses on the value of the telecom inventory to your TEM initiative.

 

Many people tend to view TEM as a methodology to reduce telecom spending by identifying errors on your Telecom invoices. What some don’t understand is that the presence of an accurate inventory is critical to reducing telecom spending the most.  How can you pay the correct amount of money for your telecom services if you don’t know what you have and how it is configured? 

 

Most companies have experienced situations where they were paying for circuits that were at a closed location, or services for employees that left the company years ago. These problems happen because the organization doesn’t have an enterprise class inventory.

 

Industry analysts have quoted that on average, telecom invoices contain 7 percent to 12 percent errors. However, this statistic does not factor in the amount of errors that may exist in your inventory. After considering the opportunities for savings that exist in your inventory, you should be able to achieve an additional 5 percent or more of savings. If you add in the ability to easily reengineer and/or optimize your network, you will be able to save even more.

 

So what should organizations be doing to address this problem? To get started, the first thing that needs to happen is to collect all the raw data sources your organization currently uses for “inventory,” such as spreadsheets, databases, carrier info, Customer Service Records (CSR), and any other data source that has a record of what telecommunications assets you currently own. Step two is to determine the most important fields for your database. At a minimum, you will need the fields shown in the following table. 

 

 

Step three is to combine all the disparate databases into a single repository based on the fields shown above. If you can’t get every field filled, that’s fine, however please note that every bit of information lost could ultimately result in lowered TEM results. If possible, you should try to verify the inventory’s accuracy by doing site surveys. If you are a large company with thousands of locations, you might just choose to do the largest sites only. One benefit of doing the site survey is that you might find tons of circuits that are not connected to anything. 

 

Once your centralized inventory database is in place, the challenge is to be vigilant in keeping it accurate. The biggest reason databases lose their integrity is the lack of repeatable processes to keep the data accurate. Preferably, you will use an automated application to keep the database up-to-date…basically, a program that helps the provisioning person perform the MACD activity directly on your inventory database. 

 

If you don’t have an automated application, you will at least want to enforce a business process to keep it accurate. Best practices would suggest that any MACD activity with the carrier is started AFTER the provisioning person updates the inventory database.  Every time you need to move, add, change or disconnect a circuit/service, you should do so by noting the beginning of the process in your inventory database. Once the order is completed, the change to the inventory should be documented as well (i.e., the circuit is now in service, the circuit is now out of service, the circuit is now 1536K instead of 768K).

 

Suppose now you have a centralized, accurate inventory. You may be wondering how this is supposed to help control your expenses. Much of having the inventory is about cost avoidance.  If you have a great inventory, you will be much more likely to disconnect ALL the circuits in a location when that location is closing or disconnect an employee’s cell phone, pager, and calling cards when they leave the company.

 

Beyond that, you need to compare each invoice you receive against your inventory to make sure that what you’re being billed for on the invoice is actually something you own.  This is especially important when you perform disconnects. Just because you placed a disconnect order does NOT mean that the carrier will stop billing you. For every change order and disconnect order entered, you need to verify that the billing either changes correctly or disappears correctly.

 

The same benefit holds for new service. When you create a new inventory element in your database, you should capture the quoted amount, and validate that the circuit is properly billed on the first invoice that it appears on.  Again, never assume that the carrier will take care of the changes. We find mistakes all the time on our customer’s invoices.

 

Another way to control expenses is to leverage the inventory to optimize your network.  With a great inventory in place, you will now be able to look at all the circuits in a location and find ways to consolidate and optimize bandwidth. For example, one company actually had 13 PRIs coming into one of their facilities over T1s. Moving all of them to a T3 transport ended up saving thousands of dollars per year.

 

The final benefit of having a great inventory is that you will have all the information needed to negotiate your contracts.  It is a well documented fact that the more information you have about your network, the better your contract negotiation will go.

 

Achieving your best results for cost savings derived from a TEM initiative requires all three major components: Inventory, Invoices, and Contracts. The Inventory is a very critical piece. Take the time to build an accurate inventory today and you’ll ultimately save your company millions.