8 Metrics for TEM
It's critical to measure the success of your TEM efforts, and to publicize those results internally.
Telecom Expense Management (TEM) is not glamorous. It can however be very profitable to pursue as a telecom customer, whether as an enterprise or carrier that buys from another carrier. Measuring how well TEM works is very important.
There are many metrics worth considering. Metrics can show how well cost reduction is met, where time and labor costs can be minimized, and how well the device and facility inventories are controlled. Metrics can also be used to evaluate the effectiveness of the TEM vendor.
There are three costs for TEM. First there is the TEM product and its support by the TEM vendor. Next is the cost of labor and facilities within the enterprise. Finally, there are carrier costs. If the enterprise TEM effort did not exist, the carrier billing errors would go uncorrected, costing end users considerably more.
I recently attended the 2012 Telecom Expense Management National Summit in Washington, D.C. produced by CCMI. One of the speakers was Dave Whitney, the Manager of Telecom Expense and Analytics Management at U.S. Cellular. He has over 16 years of TEM experience on both the customer and TEM vendor sides. His presentation at the Summit was "TEM Performance: 8 Key Metrics".
Dave's metrics are those he has developed over the years, focusing on analyzing return on investment (ROI). He applies these metrics to the bills that U.S. Cellular receives from other carriers. The metrics equally apply to the enterprise. Here are Dave's 8 metrics for demonstrating ROI:
1. Measure the number of invoices processed. The real cost to process each invoice can range from $10 to $200. If you can reduce the number of invoices processed per month, you can save: For example, eliminating 20 invoices at $50 each for processing yields a savings of $1,000/month.
2. Measure the average time to process an invoice. Convert to electronic billing to speed the processing time. Ensure that accounts payable has adequate time to perform their function. The longer the processing time, the more likely it will be paid late, incurring late fees.
3. Avoid late payment charges. This alone could be enough savings to justify the expenditure for a TEM product. You need to include dispute wins for late payment charges in your analysis. Payment can be late due to complexity of analyzing billing errors, or the bill might be received up to 10 days after the billing date. Vendors should not be rewarded with late payment fees when they are the cause of the payment being late.
4. Pursue credits. This is a key justification for TEM. It is a very visible measurement of TEM success. Many studies have shown that 70%-80% of all invoices contain billing errors. Bills should be analyzed and erroneous charges disputed. These results should be published internally so that management sees the value of this metric.
5. Look for cost avoidance savings. This is not given enough attention nor is it tracked well. You can produce results by locating unused lines and circuits, re‐terming expired contracts, optimizing wireless costs, etc. Dave was able to show a reduction to the telecom budget for U.S. Cellular of 1.2% in a short period of time by tracking cost avoidance.
6. Determine the cost per wireless device. Wireless expense is one of fastest rising costs in most enterprises. As the wireless device market nears saturation, providers are relying on driving up the cost per device. Monitor the cost per device and work with the vendor to optimize the cost. Dave provided an example of a health care organization that averaged $72 per month per device. By eliminating unused devices, optimizing rate plans, and removing heavy users from pooled plans, a net savings of $21 per month per device was produced.
7. Increase your monthly billings disputes. If you are counting on dispute wins to defray the cost, you need to ensure you are creating enough disputes in your pipeline. Otherwise the effort will not produce the cost reduction expected. Dispute resolution time can be 3 months or more. Build the pipeline of disputes and monitor the progress of each one through to closure. Dave has found that dispute monitoring is essential. Vendors typically delay settlement as long as possible. Ensure that your pipeline times your win percentage is exceeding your expected results.
8. Push for a high dispute win percentage. Measure the quality of the disputes filed. Don't forget to budget resources to create and track the disputes. Dave presented an example where prior to focusing on the dispute tracking, there was a 71% win rate. The win rate increased to 88% and finally hit 94% when the dispute quality increased and the tracking was effective.
Dave emphasized that you need to publicize your TEM successes. Show the return on investment of having the TEM application and the people to support it. He typically looks for the savings to be 5‐10 times cost of supporting TEM.