A PUSH IS ON IN THEindustry to reference “telecom expense management” (TEM) as “telecom environment management.” The argument goes that “expense” is too narrow a descriptor, making the term a misnomer. So, if vendors, channel partners and end users all start viewing TEM as a rounded, ongoing service — as opposed to a finite, one-time fix — they all will better understand and embrace the service.
The originator of the phrase “telecom environment management” and its most vocal proponent is Scott Levy, director of business development for Telecom Solution Center LLC, a private company that owns the inventory management business Teledge Group. Teledge’s database centers on inventory management, which the company considers the crux of a business’s telecom environment. “All I’m saying is, TEM is much, much more than just a software solution,” Levy explains. “TEM can be about best practices, policies or procedures; it doesn’t necessarily have to be a [software] package that’s costly.” Levy will emphasize those points this month at the Fall 2006 Channel Partners Conference & Expo in Washington, D.C., where he will lead a business development session on understanding TEM options and how to sell them.
Part of the problem with the term “telecom expense management” is it typically implies bill auditing, a temporary repair that does not address underlying problems, experts say.
“Auditing, I will never say, is a bad thing, because it finds big problems. But it’s just a temporary fix, there’s no long-range gain,” says Levy. Auditing is only a small piece of the puzzle, experts agree. This is because organizations are organic; they constantly are changing, with the addition of employees, new locations and new communications services. Just having an audit performed every few months is like “someone never brushing their teeth then going to the dentist and saying, ‘Just fill my cavities and I’ll be on my way,’” says Jacques Wagemaker, director of marketing for Tangoe Inc., maker of the Communications Management Platform that oversees telecom life cycle processes. Like Levy, Wagemaker contends effective “telecom environment management” includes ancillary services, such as helping end users renegotiate contracts with carriers or order new services, all adding up to a continuous management solution that levels out a company’s telecom spend.
Complicating matters, TEM experts also have another beef with the terminology. “The word ‘telecom’ is limiting,” points out Jeff Burke, executive vice president for carrier PAETEC Communications Inc., which developed PINNACLE software for TEM. “I’ve put a wrinkle on top of your wrinkle.” He explains that telecom departments are no longer limited to voice — they now are converging with data and must know all aspects of IT and telecom. In his mind, then, TEM means bringing together voice and data considerations, and being able to move freely between doing physical inventory of assets and services such as circuits, and employing automation to keep a company’s communications spend in check.
The list of vendors supporting the expanded view of TEM is growing. John Shea, vice president of marketing for Rivermine Software, developer of the eXPERT Solutions package built on the Clarity module, agrees that TEM means more than deploying software. “Our solution addresses the entire life cycle of telecom within the enterprise, everything from the front end of things — contracts being negotiated with carriers, provisioning of circuitry — through to invoice processing and tracking SLAs help automate the entire life cycle.”
Rivermine takes an inventory-centric approach to TEM; for example, the company’s database automatically updates inventory and assets as services or people are added or removed. That “helps ensure a customer is only paying for what they actually have purchased and what they’re actually using,” he says.
The opportunity for TEM appears to be growing, too. Research firm Gartner Group Inc. — which coined the term “telecom expense management” — predicts businesses will spend $500 million this year on TEM. If Gartner analyst Eric Goodness’ call volume is any indication, interest in the discipline is growing. He says he fielded 15 end-user calls about TEM issues and vendors in 2002, 500 in 2005, and 1,200 so far in 2006.
Gartner’s $500 million may be too low if it only counts TEM software, says Levy. Looking at it from the environmental standpoint, he says, “that number could go over a billion [dollars].”
And, when it extends beyond auditing, TEM provides channel partners with numerous long-term opportunities. For example, they can support the adds/moves/changes tasks within a company, offer full outsourcing and actually become a client’s telecom department, and perform invoice reconciliation and contract management.
Given the fluctuating state of the telecom industry most clients will cling to the value provided by a management solution, says Rich Morrison, vice president of global channel operations for Tangoe. The continued consolidation of carriers and vendors impacts not just pricing, but also end users’ databases and tracking.
“There is absolutely no reason for an enterprise to not adopt some kind of expense management product,” says CTI Group Inc.’s Sid Rao, chief technologist. “The reality is that most people underutilize their telecom resources.”
However, most TEM solutions are targeted to enterprises spending more than $1 million per year on telecom services. “If it’s below $1 million in spend per year, one could argue that doing it with spreadsheets or a less formalized process might be a better way to go,” says Shea. Rivermine’s ideal range — like most TEM companies’ — is annual spend in the hundreds of millions of dollars per year down to $1 million. The same goes for Tangoe and PAETEC. Teledge’s database hones in on the midmarket, or enterprises spending up to $12 million a year on telecom expenses. CTI Group is positioned similarly with its TEM products — Proteus for expense allocation, call accounting and traffic analysis, and Smart Bill for invoice management, inventory tracking and analysis. However, the company offers a la carte options that allow smaller businesses with a minimal number of phone lines to still keep track of crucial aspects, such as call accounting.
TeleBright Corp., however, has developed its software to be scalable to serve users spending less than $1 million annually. Of course, says Dan Hannah, director of sales and marketing, TeleBright wants in on the enterprises that have millions of dollars in annual spend, “but at the same time, there are masses and masses out there that are small that have exactly the same needs.” If a channel partner stockpiles enough of those clients, it can make sense to focus on little companies. TeleBright’s proprietary software puts its arms around all the facets of expense management, a term Hannah agrees is limiting. (“I’m certainly behind a name change ... but it’s become such an industry norm,” he says.) The platform ManageRight makes inventory the “heart and soul” of its functionality. It also provides mechanisms for matching inventory and pricing to contracts, handling disputes, budget tracking and allocations, and more. If partners target SMBs, though, Hannah cautions they need to make sure the customers have the “pain or complexity that demands a software solution.” Otherwise, he says, the threshold for success could be too low.
One good example is a law firm. “Who has more trouble allocating a cost than a law firm?” questions James Larsen, cofounder and COO of telecom agency NetGain Communications. Earlier this year, it rolled out iTEMize, software it created in-house just for the mid-market. “Our sweet spot would be anywhere from $10,000 a month in spend up to $250,000,” says Larsen. He says this is the first tool for that niche that provides a scalable Web platform, as opposed to a mere inventory module. NetGain developed iTEMize with the idea that “the entire life cycle of telecom is TEM,” says Larsen. That life cycle is made up of procurement, contract management, implementations, auditing, inventory, customer care and data entry, he adds. iTEMize is a subscription-based tool, as opposed to a service that end users license.
Master agency Intelisys Corp. has been creating a platform and set of services agents can deploy specifically to companies with less than $1 million in telecom spend, but was still putting the finishing touches on the program at press time in late June.
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Find out more about telecom environment management inthe session, “TEM: Separating Fact From Fiction,” 9-9:50a.m., Thursday, Aug. 24, at the Fall 2006 Channel Partners Conference & Expo. www.channelpartnersconference.com
Vendors specializing in the management of telecom environments also give channel partners incentives for rolling out their products. Most of them offer some form of revenue-sharing, usually depending on whether the channel partner deploys the products and services at the customer premise as a managed service or as a hosted service. When PAETEC partners sell PINNACLE as a managed service, for instance, they charge the customer, then pay PAETEC, but get to keep a portion of the profit. PAETEC also pays for leads, and pays a higher margin or percentage when channel partners do the bulk of selling. Tangoe operates the same way; the company’s channel program is only about a year old. CTI Group offers referral spiffs as well as onetime or recurring revenue-sharing. Rivermine is flexible, says Shea. The company offers partners a portion of the “gain share,” the savings it brings to the end user, or fixed payments. TeleBright also aims for flexibility. The company can host an end user’s telecom management, or partners can buy one license, roll out the software to multiple clients and pay TeleBright a fee. NetGain is not talking yet about its plans for working with channel partners beyond a few VARs, nor will executives disclose revenue-sharing options beyond saying iTEMize is rebrandable and there are several choices.“We have a plan, but we haven’t launched it yet,” Larsen says.
Reducing Waste With Total Telecom Cost Management
As a result of inefficient expense management processes, late payment penalties, carrier billing errors and inadequate visibility into spend, midmarket enterprises are forfeiting opportunities to reduce telecom expenses by an average of 3 percent to 10 percent, according to a new report from Aberdeen Group Inc.
- The July 2006 report,“The Challenge in Total Telecom Cost Management,” found:
- Inefficient manual invoice processing with 64 percent of bills received in paper format.
- Late payment penalties totaling 2 percent of telecom spend.
- Billing error rates of 7 percent to 12 percent due to complex carrier services, contracts and legacy billing systems.
- Eighty percent of the respondents have no formal program to audit for contract compliance.
Telecom costs are difficult to track, Aberdeen Group finds, because they include intangible services as well as tangible assets with decentralized inventory spread over multiple locations. In addition, it finds move/add/change/disconnect (MACD) activity creates a moving target that enterprises must reconcile.
All is not lost, however. The report goes on to identify characteristics of best-in-class enterprises, which have:
- A clear budget owner (either the CIO or CFO) with a mandate to act and support from senior management.
- Nearly 30 percent faster invoice processing and auditing cycles through use of electronic billing.
- More than 40 percent greater efficiency when sourcing a contract.
- Faster invoice processing cycles — 9.8 days versus 13.6 for other companies.
Enterprises must work toward a fully visible, integrated environment for sourcing, service orders and invoice processing, the report states, adding the goal is to find an approach that will enable the enterprise to collect critical information, organize the data, manage spend and reduce costs.
To download a complimentary copy of the report, visit www.aberdeen.com/link/source.asp?cid=3196&pid=PRJB071306. The research was underwritten by Avotus Corp., BroadSource Inc., Comstructure, Creative Cost Management and Symphony Services.
|AberdeenGroup Inc. www.aberdeen.com|
Avotus Corp. www.avotus.com
BroadSource Inc. www.broadsource.com
Channel Partners Conference & Expo www.channelpartnersconference.com
Creative Cost Management www.creativecostmanagement.com
CTI Group Inc. www.ctigroup.com
Gartner Group Inc. www.gartner.com
Intelisys Corp. www.intelisys.com
NetGain Communications www.netgaincom.com
PAETEC Communications Inc. www.paetec.com
Rivermine Software www.rivermine.com
Symphony Services www.symphonysms.com
Tangoe Inc. www.tangoe.com
TeleBright Corp. www.telebright.com
Telecom Solution Center LLC www.telecomsolutioncenter.com
Teledge Group www.teledgegroup.com