Why TEM is not a commodity buy

The past 10 years have witnessed the emergence of software tools known as Telecom Expense Management (TEM) solutions. A good TEM system can indeed tell you whether your telecoms vendor’s bill is accurate.

It does this by comparing the detail in the bill you receive against its own independent database of the services to which you’ve subscribed, and the rates at which you agreed to pay for them. In other words, you compare their invoice with the known information in your TEM inventory to get a true figure.

TEM systems have been an undoubted success, and there has never been an organization which hasn’t made huge savings using this technology correctly. However, a word of caution: there are different types of TEM solution, and you need to make sure you have the one that suits your need.

Just as you wouldn’t buy a Rolls Royce to off-road across your farm, you wouldn’t buy a TEM solution without ensuring that it was fit for the purpose for which you wanted it.

In the United States (where TEM was born), there is keen competition and, as expected, a competitive market works in favor of the user by driving down prices. But there are some important considerations you need to take into account before squeezing the last drop of blood from your suppliers.

Not all TEM systems are equal

Timothy C Colwell, Senior Vice President of Global Performance Management at independent information provider AOTMP, recently commented: “Crowding in the TEM market space has led to competition among suppliers.

“Enterprises pit suppliers against each other to reduce price points, and those focused only on price should be aware that TEM technology and services are not commodity offerings that perform equally across suppliers.

He continued: “Price is just one element of TEM supplier evaluation. Services offered, technical capabilities, support options and delivery performance must also be considered when comparing prices”.

This drive to force every vendor into a race to zero cost can have serious consequences — as happened, for example, in the UK, where the National Health Service pushed Accenture so hard in a pitch for a major IT programme that they ended up walking away. That was better than a project on which they knew they would lose money.

That’s fine, but can the NHS – which is responsible for a large proportion of the UK’s health – still guarantee they have the best supplier for their programme, from the remaining candidates?

If TEM suppliers have a fault, it’s that they don’t always clearly differentiate their capabilities. The result is a market perception that all TEM providers offer the same product, which leads in turn to direct price comparisons of dissimilar services and offerings – the classic comparing apples with pears.

For example, let’s match the cost of an in-house TEM software solution with a built-in invoice-processing module against the charges quoted by a TEM provider who specializes in Business Process Outsourcing and processes invoices as part of its Managed Service offering. Which do you think will be cheaper? Which do you think will bring greater benefit to the organization, in the long-term?

Look beyond the horizon

When comparing TEM solutions, companies need to make sure that they’re not just comparing product capabilities but are also carefully considering the environments and geographies in which they want to deploy these products and services.

For example: providing a mobility help desk service across North America, where English is predominantly the spoken language and the service capabilities are fairly consistent, is comparatively straightforward and the specification (and costs) won’t vary much between suppliers.

Compare that with the task of providing the same level of support across Europe, where English is only one of possibly 20 languages and not all services will apply in every country. Then consider expanding into Asia.

Similarly, providing Call Data Record (CDR) analysis is a key function of any TEM system, and is again fairly straightforward in the US, where the Data Protection laws are roughly the same in every state. Try that in countries like Germany, Switzerland or Austria without consulting the appropriate Workers’ Councils (each of whom has different requirements, backed up by law) and you could be in for a nasty shock.

Companies need to realize that truly multi-national deployments not only take longer but – inevitably –cost more. And that’s before we start the discussion on how to incorporate invoices from multiple vendors, all in different formats and lay-outs (some electronic, some paper-based) and – critically – in different currencies. Can your one-off, low up-front cost audit vendor incorporate that into their pricing proposal?

Recurring savings matter

It’s important also to realize that a good TEM system will introduce ongoing efficiencies which will continue to have an effect over time, bringing recurring savings well beyond the initial up-front costs in Year 1. If yours doesn’t, you may want to re-visit the specification.

These savings over the long term have to be factored into any Cost vs Benefit analysis, if you’re to form a true picture of the potential savings you could make for your organization with the right investment. Ask yourself this: the more your provider reduces their prices at RFP stage, how much scope do they have left to implement the savings over time on which you’ll be relying to validate the system 5 years from now?

Markets change

Finally, Telecoms is probably the most dynamic market in existence. New technologies, price plans, billing mechanisms and compliance requirements appear every day. One example: it’s great that you’ve implemented a VoIP system across the company to reduce Voice call charges – how do you plan to re-charge the off-net roaming costs, when you’ve no idea who initiated the call or to which cost-centre you should allocate them?

Another example: the EU has just suggested users roaming overseas should have the right to choose whichever cellphone network they want, as soon as they land – does your one-off contingency audit supplier have the capacity to investigate and incorporate every known price plan, from every known vendor in the region?

As they say in TEM, “your services inventory is only as good as its last update”: strip every last shred of profit from your provider and where’s the incentive (or the means) for them to invest in their own systems and support, to make sure they keep your system up to date and give you the level of service you require?

Back to the future

Think about installing a TEM solution for your company as you would about installing a critical component in your own home – like a burglar alarm, for example. Are you really doing the best by choosing the cheapest option?

Will your family (or insurance company) be reassured, knowing you can’t promise it will cover every kind of break-in or how long it will last, but you saved a fortune on having it fitted? Or would they feel better knowing it was properly installed, guaranteed to cover every eventuality, worked reliably in all weathers and was being properly maintained – for a very long time?

The cost of a high quality TEM system will be dwarfed by the ongoing savings, efficiencies and management benefits it returns over time. Perhaps it’s time to stop the race to see who can extract the lowest cost from their suppliers, and focus in future on the basics – namely the value a good TEM solution can bring to your organization, day in and day out, now and for many years to come.

Ben Mendoza founded MDSL in 1995 with a vision to provide financial trading organisations with the tools to drastically improve the management of their market data services costs down to an individual user level. Ben's technology career began in 1974 and has included telecommunications engineering with British Telecom, applied electronics design with Marconi Space and Defence Systems, data network design with Timeplex, and North Sea oil platform systems implementations with Marathon Oil UK. Ben founded his first company in 1984. Digital Networks International Limited (DNI) was an independent IT consultancy firm providing network design and implementation services to customers such as Lehman Brothers, BAII and The Target Group. In 1987 Ben turned his hand to software, creating a Help Desk system called HDE. HDE customers included British Telecom, BP Oil, Barclays Bank, Robert Fleming & Co. and Levi Strauss & Co.