How to Manage Telecom Expenses: Six Things Every CIO Should Know

By Kevin Donoghue  |  Posted 2010-09-26

How to Manage Telecom Expenses: Six Things Every CIO Should Know

You're wasting millions. The truth is that most enterprises waste millions of dollars annually by not managing their telecom spend in a standardized, centralized, more accurate way. Having ballooned up to a top four overall expense of an entire company, telecom is something that you, as CIO, should put on your radar ASAP. Action is required.

And as CIO, the ball is in your court. Telecom and related network services account for almost four percent of company revenue. Up to 26 percent of your telecom spend is erroneous or could have been avoided. Without a proactive approach to Telecom Expense Management (TEM), you are wasting money.

TEM is a boardroom issue

Telecom spending for voice, data and information services merits boardroom discussion by the sheer fact that it's one of the top line-item expenses for most organizations. So, as you develop your TEM strategy and solution-and defend it in the boardroom-you will need to be prepared to address the following six challenges:

Challenge No. 1: Telecom expenses are the most complicated to manage

To effectively manage the full life cycle of a telecom expense, enterprises need resources (people with free time to do the work), knowledge and automation. Few enterprises have resources that can be shifted from other tasks for TEM. Managing telecom expenses requires a special blend of knowledge of IT, telecom services, corporate finance, and service providers' billing procedures and their internal processes.

Managing telecom expenses also requires the ability to interpret contracts, de-escalate disputes and negotiate resolution of claims. Finally, technology is needed to manage everything, including telecom inventory and assets, contracts for telecom services, telecom service order activity and telecom invoice processing. Technology is also needed to manage expense validation and dispute resolution, rate plan optimization, mobile help desk support, usage management, cost allocation chargebacks and reporting, and business intelligence.

Telecom Spend Is Rising Despite Decreasing Fixed Telecom Costs

Challenge No. 2: Telecom spend is rising despite decreasing fixed telecom costs

In a competitive market in which technology is continually replaced with new, leading-edge technology, prices are expected to continually decline. Why, then, do most CIOs find that their spending for network services does not decline?

One reason that the projected procurement savings are not realized centers on the fact that contracts are negotiated on old technology and past consumption needs. Despite best efforts to forecast the future, new innovations impact network services, bandwidth needs and consumption patterns. Multiprotocol Label Switching (MPLS) over IP has become the backbone network technology used by service providers to deliver voice over IP (VOIP), VPNs and video. These new technologies promise savings and convenience over old technology used for calls, data transport and video conferencing, but the new technology also requires new quality of service (QOS) agreements.

Challenge No. 3: Billing errors will continue to occur

Billing errors occur because telecom services include some of the most complex charges of all invoices the enterprise receives. The charges include tangible assets (lines and circuits, with decentralized inventory spread over multiple locations) and intangible services. To billing elements (peak versus off-peak and volume-based discounts), add another layer of potential confusion: Move, Add, Change, Disconnect (MACD) service order activity-which creates a moving target that carriers must reconcile with billing.

Wireless Costs Will Surpass Fixed Telecom Costs

Challenge No. 4: Wireless costs will surpass fixed telecom costs

Once, mobility was thought to be an investment in personal productivity. Today, organizations use mobile devices as an investment in corporate competitiveness. Employees need to do more than simply talk on the phone with their peers, customers, partners and suppliers. They need to be able to collaborate from anywhere while having real-time access to back-end application data.

Challenge No. 5: The CIO's role in TEM

Your telecom network is likely decentralized, which makes it incredibly difficult to manage. Decentralized purchase decisions and limited oversight of these expenses can result in spending 10 to 25 percent more than you need to on telecom expenses. Breakdowns in internal processes present yet another challenge. Organizations rarely have effective systems for recording telecom contracts, service order move, MACD activity, bill validation and detailed expense reporting.

CIOs should take a lead role in centralizing management of telecom expenses, leveraging economies of scale for purchasing decisions, procurement processes and the operational costs to manage these expenses. While you can delegate some of the work of evaluating TEM suppliers, CIOs play a key role in ensuring true apples-to-apples comparisons. TEM solutions are difficult to evaluate; your experience and expertise are needed to find the one that best supports your unique environment.

Once you select a solution, be sure to set milestones in the implementation process. With TEM solutions, the issues center less on getting the technology to work and more on getting the information needed to implement. As CIO, you can help clear obstacles in locating these information sources. You'll also help set the standards for how systems will interface, how dashboard reporting will monitor savings results, and what business intelligence will drive improved decision making.

The Costs of Ignoring Telecom Expense Management

Challenge No. 6: The Costs of ignoring TEM

You're all too familiar with the struggle to articulate the value and cost justification of new programs. This is not the case with TEM programs. TEM programs deliver savings. Savings from these programs come from four core areas: improved decision making, expense validation and recovery of billing errors, cost avoidance, and automation of manual processes such as automated invoice processing.

Automated invoice processing helps organizations manage a wide range of billing formats from telecom service providers-formats from electronic data interchange (EDI) to HTML to CD-ROM. The complexity and range of telecom services make it challenging for most enterprises to manage these expenses internally. You can save on labor by automating data gathering, report creation and usage chargebacks.

Kevin Donoghue is President of Telesoft. Kevin has over 20 years of extensive sales and management experience and a proven track record of building successful companies in the enterprise software industry. Kevin is responsible for leading company strategy and operations at Telesoft. Prior to joining Telesoft, Kevin served as vice president of sales for NetPro Computing, where he grew company revenue 200 percent over a four-year period (ultimately resulting in an acquisition by Quest Software in 2008).

Kevin's previous positions include senior vice president of sales and marketing at Intesource, vice president of Americas Operations at Viasoft, and Sales Executive, IBM Corporation. Kevin holds dual degrees in both Accounting and Marketing from Drexel University. He can be reached at

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