Carl Weinschenk spoke with Joe Basili, the managing director of the Telecom Expense Management Industry Association.
Weinschenk: Please describe telecommunication expense management.
Basili: TEM has evolved from simply auditing phone bills or call accounting into something that is a lot more significant. Now it is really concerned with managing the supply chain for telecom expenses. It starts with business intelligence and inventory management and change control. It includes strategic sourcing, risk order management and invoice management. Within invoice management, it includes things like validating billing, performing expense allocation, expense management, bill payment and reporting. We've got the idea of fixed, the idea of mobile, and we've also got international billing. TEM has evolved from a focus where it was mostly fixed services - wireline. As mobility entered the workplace and more and more organizations mobilized, TEM has evolved into managing mobile expenses and also evolved into managing international expenses. Each one of these today have different carriers providing services, different regulations. The billing in turn is different. Some [service providers] have both fixed and mobile, but today billing is still different.
Weinschenk: That's a lot of different elements.
Basili: The idea isn't necessarily that a company would need to do all of these things on their own. They can work with a third party, a TEM company to supply some of these. It might do some functions themselves, and some with a TEM supplier. There are a lot of different models.
Weinschenk: Telecom billing isn't simple.
Basili: I would make the argument that telecom billing is the most complex billing out there. You've got billing that is time-sensitive, calls made at peak versus off peak. There are services that are volume-sensitive, in that if the consumer uses enough, the pricing goes down. There are fixed and metered services. Some calls are based on distance or calling area. In addition, there is the whole notion of inventory. Telecom services and inventory are constantly changing. It's a moving target. An enterprise customer may open a facility and close another, or may no longer have the need for some services due to downsizing. There is a lot of complexity to getting the bill right. On top of this, there are layered the federal government regulations and taxation issues. The U.S. is a deregulated environment. Phone companies in the U.S. are competing against cable and other technologies. Then there is the whole notion that this is a very dynamic environment. The technology is changing radically.
Weinschenk: So what is TEM's value proposition?
Basili: We've established the fact that this is a very complex problem. What's the value proposition? One, there is a tendency to have billing errors because the billing is so complex. Some say mistakes are malicious. It's not that. The bigger issue is that there is such complexity they are dealing with. Some of it may be on the enterprise side where companies are not placing orders correctly. TEM can step in with expertise and understand where errors will be and have the technology to identify where they are proactively.
Weinschenk: Is getting the bill correct the only thing that TEM offers?
Basili: We've also got opportunities for cost avoidance via optimization. It could be a situation where an enterprise reduces headcount in the office because more work is done outside. They no longer need as many services as they used to, and there may be ways to optimize the opportunity from a technology standpoint. This could be things such as VoIP or video conferencing. It could be something as simple as taking a bunch of T1s and moving to a higher-capacity OC3 and getting a better deal on higher-capacity services. We call that network grooming. It sounds complex but it really isn't.
Weinschenk: Are there other complexities with which TEMs deals?
Basili: There is the whole notion that billing tends to come in many different formats. Processing the billing is a labor-intensive process for organizations. Bills may come into the organization in a decentralized format. Headquarters may get the long-distance bills and regional may get the local bills. There may be an opportunity to consolidate the bills as well as opportunities to migrate from paper-based to electronic media. There also are opportunities in reducing late payment penalties and uncontrolled service disconnects. If I fail to pay the bill because the company didn't receive it or process it on time, the company could have an uncontrolled service disconnect at a facility or location. There could also be late payment penalties. There also are opportunities from the standpoint of gaining better visibility and transparencies into telecommunication through the allocation of chargebacks. This can tie into compliance with Sarbanes-Oxley and other regulations. The Office of Management and Budget may have mandates in terms of responsibility and how expenses are managed.
Weinschenk: Does TEM have a means of following things over time?
Basili: There is the whole notion of strategic sourcing and contract negotiations. There is an opportunity to aggregate all expenses together and get better information. Networks [and the company's needs evolve] over time. The idea is to be prepared to negotiate contracts to where services will go in the future instead of looking back to where the services were in the past. For example, a company may be closing a data center. The folks who manage the data center know, but the [folks negotiating the contract] may not. A lot of different groups manage expenses in silos. They don't understand the downstream impact of what one group is doing can impact the other.
Weinschenk: So how big are the savings?
Basili: The savings can be quite significant. A lot depends on what was done in the past and how it was managed. What we've seen over time is savings tend to change. If a company is negotiating a new contract, in six or eight months you may find errors. So the bottom line savings is anywhere from 2 to 35 percent on annual spend on all these different areas where TEM provides value. A lot depends on how things were managed in the past. Over a period of time, you will move from recovering billing errors into more of a proactive stance where the recoveries are less significant. But the savings are still there because you are proactively avoiding billing errors. The company also is optimizing things. What happens is that people move into a steady state within two years of having a program It goes back to a reactive versus a proactive approach to managing expenses.
Weinschenk: The bottom line seems to be that TEM potentially impacts a great number of different things.
Basili: It is much more than auditing phones bills. It is managing the whole supply chain for telecom and communications services. The emphasis is that telecommunications is continually evolving and as a consequence TEM is continually evolving.