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6 Reasons Companies Still Overspend on Telecom


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Your telecom costs have decreased over the years and this has made you look like a hero. So, reducing them must be easy, right? If that’s correct, then why? I’ve often asked myself this question because when I see a new client, I can find this client 20-40% savings…90% of the time. But why is that? How is this possible? Is it because your enterprise doesn’t have the latest technology? Is it because you’re not using a second-tier carrier? Is it because you don’t have a telecom expense management (TEM) system in place? No. It’s for none of these reasons.
First, let me clarify my background. I’ve been examining the whole telecom situation at many companies for a very long time – with 31 years of experience in telecom – seven with AT&T and 24 years as an independent consultant. I’m more than an invoice auditor looking for billing inaccuracies. As an experienced telecom consultant, I do things like: evaluate voice and data networks, client operations, call centers, and select phone systems. I also write strategic plans, negotiate contracts, consider alternative vendors, and technologies. Yes, I also audit phone bills. I also understand the big picture.
It’s this perspective that allows me to step back and see what’s happening organizationally that leads to higher than necessary telecom expenses. So, where’s the savings? Better technology? Better design? Accurate billing? Lowest possible pricing or paying for unused items? Yes, all of these things, and a few more. But why is it that 90% of the time, when companies are well managed, with good people, or not, there’s still lots of savings to be found?
Here are the top 6 reasons:
  1. Busy, Busy, Busy - Let’s face it, IT has bigger priorities than to worry about telecom billing, which includes network security, business critical needs, IT systems, new technology evaluation, and end user support.
    • Disconnected from the marketplace – Because IT is busy with other priorities, and they sign long term contracts every three years or so, it’s hard to keep up with the latest technologies, price points, the new vendor alternatives, etc.
    • Engineering expertise is hardware-focused – These include Cisco administrators, PBX administrators, data networking engineers, all kinds of hardware-based expertise. But no real understanding of the telecom services products, billing, technology options, carrier options. Therefore, these hardware experts give it their best effort and often don’t know the keys to getting the right vendor, service, price, and terms, when it comes to finding a voice, data, or wireless network services solution.
  2. Telecom Billing and the Network Engineers are Disconnected - When it comes to the telecom bill, an IT clerk or admin reviews it, a network engineer orders and disconnects services, an IT manager approves the bill, and accounting makes the payment. Because the left-hand doesn’t always know what the right hand is doing, that causes companies to pay for telecom services that they haven’t used in years. It still happens almost every time I visit a new client. Five, ten, even 20 years later, the reason being that there isn’t enough communication, no process in place to ensure that it doesn’t happen
  3. Best Efforts aren’t the Best Processes - To keep your company costs down - manage billing accuracy, telecom services inventory, contracts, and vendors. Many organizations give their “best-effort” in keeping up with all of these responsibilities. However, most don’t have a comprehensive plan to manage all of these things as one cohesive process… and therefore, they fall short. This shortcoming leads to automatic contract renewals (at the same high rates), month to month contract expirations (leading to higher-rates), paying for services that aren’t in use, missing out on savings opportunities, and yes, incorrect billing rates.
  4. Vendor Comfort Levels - There are some good sales teams out there. So good, that IT departments disregard their due diligence, don’t give a serious look at the competition, and don’t negotiate the rates effectively. This comfort level leads to higher prices, weak terms, and long commitments that ultimately keep costs higher than they should be.
  5. Telecom Negotiation Expertise - Many companies have a good telecom engineer, CFO, or IT director who can negotiate. But very few have someone who understands the telecom services industry and also negotiation skills. Organizations must understand who its top voice, data, and wireless services providers are as well as its most feared competitors. Are there better technologies out there? What market price points and terms are available to customers? If they don’t, the results will be an aggressively negotiated contract from the right carrier with the wrong provider, terms, and much higher long-term expenses or the right services but with the wrong terms at faulty prices.
  6. Complex Invoices - It’s amazing to me that carriers still get away with “non-descript” descriptions on invoices, as well as no service addresses, no clear pricing, and multiple invoices to deliver a single service. I think sometimes customers give up on trying to understand all of this and aim to do the best they can to clean up the mess every three years. A few will hire some detailed clerical types, but even they are overmatched by the terminology, and lack of invoice detail. Even with the online tools that are now available (good and bad), it’s still difficult to figure out exactly what you’re paying for. Some move to telecom expense management systems with automation and reporting, which can be a wise decision. But a bazooka rifle in the hands of a commoner isn’t always so powerful. In fact, it might be less effective than a solid invoice management process with an experienced telecom billing analyst at the wheel.
So, what can you do? Here are some recommendations:
  • Hire the Right Expertise
    • Telecom Billing Expert - Find someone who knows telecom invoices inside and out. Depending on the size of your organization, find someone with an experienced telecom service billing background, give them some of your more complex invoices, and test them to see what they can do with it. Mid and large-sized enterprises still spend a lot of money on telecom services, but isn’t it worth investing a small percentage to make sure that your hundreds of thousands, or millions of dollars is managed well? Of course, if you can’t find the right person, then consider a consultant or TEM provider who will manage this competently for your business.
    • Telecom Services Expert - Remember, a hardware focused network engineer who doesn’t speak the language of telecom services is only half effective and you’ll pay for this missing expertise. Finding someone who understands TDM (old) and IP (new) services well is a real asset. If they have worked with multiple vendors before, especially your current vendors, that would be a plus. Make sure they aren’t one dimensional.
  • Develop and Document Solid Processes – If a change is going to happen, everyone must know about it. Email communications should always include the billing and engineering folks. Regular weekly or monthly meetings (or minutes) should also include the billing person. Incorporate billing strategy into your change control procedures. That way, when you disconnect a circuit or negotiate a better price, the billing person verifies the pricing or the circuit disconnect, in a formal, procedural manner. When it comes to document processes, the billing analyst should have a written process for each invoice in terms of how it’s verified and managed. In terms of inventory management, decide how this will be maintained and how it will tie back to the invoices. In terms of contract management – determine how this is going to be managed, when and who should negotiate contracts, and verify that the new pricing is correct, going forward.
  • Utilize the Right Tools – At a minimum, learn how to use the vendor-provided online billing tools. Take your time to understand them. If they don’t do what you require of them, ask questions, and see if the vendor supplies internal reports that can get you the necessary information. Worst case, consider an automated TEM tool. These can be helpful in managing invoices, inventories, and contracts. But remember, a tool is never a good substitute for an experienced telecom billing expert.
  • Hire a Third Party to Ensure Things are Working Well – Even when you think you have it all covered; you will miss things. There will be gaps and areas for improvement. The only way to find these is to hire an outside, third party to verify that you’re doing things right and that you have it all covered. Many telecom experts will work on a contingency basis, so if they don’t find anything, you don’t pay anything. Just like you have an internal accounting department that’s audited by an external auditor, you should have an outside third party reviewing your telecom expenses, at least, every three years.
Keeping your telecom expenses to a minimum isn’t easy. But with the right personnel, strong processes, durable tools, and regular third-party evaluation, you can keep your service costs low, and spend that money elsewhere to help your business meet other key objectives.
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