Reprinted from TechSpend.com - April 24, 2006

Telecommunications are a massive expense for enterprises. Here’s a look at how two companies reined in their billing costs and new ways to manage wireless spending and optimize lifecycle telecom strategies.

By Kathleen Goolsby
Think your phone bill is complex and expensive? Consider the case of Tickets.com.

Facilitating the sale of tickets for major league baseball, international soccer, auto racing and many other entertainment events, Tickets.com’s infrastructure includes more than 3,000 data and voice lines, 200 accounts, plus a call center for inbound calls.

Its telecom spend - a seven-figure number - is the company’s number-two highest cost after labor.

Shane Miller, vice president of Central Services at Tickets.com, recalls, “We needed to better understand our telecom exposure. We were writing a big monthly check; had a lot of service disconnections; and since we are eight previously merged companies, our billing was all over the place.”

Many companies are realizing that the challenge of managing their communications spend and the environment that generates that spend is not their core competency and that it cannot be easily managed internally without negatively impacting their bottom lines.

Tickets.com turned to service provider Symphony Spend Management Solutions to manage its telecommunications expenses. A standard in-house accounts payable function can’t handle the complexities of understanding whether a company is being charged correctly when the bill is 1,000 pages, Miller comments. Symphony Services provides a one- or two–page report that helps Tickets.com understand its spend. The technology enables the reports to be sorted as spend per vendor, variances, or line item details per week. There are also monthly reports for accrual purposes.

The solution paid for itself in six months. According to Miller, utilizing Symphony Spend Management Solutions along with aggressive contract negotiations with telecom providers has allowed the Ticket.com’s telecom spend to be reduced by more than 50 percent. “Outsourcing is an opportunity to reign in expenses. But the most important aspect is that this solution allows me to hire people to do networking for our operations, rather than hiring people to handle the billing,” he says.

Cathy Lilli, director of Infrastructure Services at Konica Minolta Business Solutions U.S.A. Inc., says Konica Minolta faced similar challenges to managing telecom spend in house. “We were processing a lot of bills, and all we had was an Excel spreadsheet to give us the information. We had lost our telecom administrator through a downsizing. Additionally, we were being asked to re-look at the budget about every three months, and that re-calculation was taking a long time.”

Konica Minolta is using Avotus Corp’s hosted ICM Expense Management solution. Avotus hosts the software on its servers and Konica Minolta gets all the benefits without the hardware investment.

Electronic processing of the bills and inventory is the best solution, says Lilli. “It’s impossible to mange the expenses any other way. Because of the size of the bills, you can’t catch mistakes in a paper bill. The electronic solution quickly verifies rates and, over the years, we have realized tens of thousands of dollars worth of credits.”

During implementation of the solution, they also found circuits and other inventory items no longer in use, so there was a one-time saving realized up front associated with taking unused equipment offline. Lilli appreciates the Avotus relational database that reveals how an inventory item is related to moves/adds/changes. The database can be sorted by carrier, invoices over a particular dollar amount, frame relay ports, etc.—in relation to the dollars it costs to manage it.

Konica Minolta and Tickets.com are two companies that rank as best in class in that they stand out from others in adopting world-class solutions for their telecom expense management. Alan Harlan, president, Spend Management Solutions at Symphony Services, says, “Most companies have manual processes for approving carrier invoices and no automated or centralized reporting structures; they just don’t have processes in place to get a handle on their spend.”

In such cases, implementing a third-party expert’s best-practice processes and systems can reduce the telecommunications spend by 15-20 percent, states Harlan. Going to the next level and implementing procedures and technology to track and monitor the usage data can bring the possibility of additional savings. “The best solution is a consolidated Telecom Expense Management (TEM) tool that systematically manages assets to maintain an accurate inventory. This allows carrier invoices to be automatically reconciled, with exceptions routed via an automated workflow process and ERP integration. When this occurs there is yet another 7.5-10 percent savings opportunity,” he says.

Wireless and Mobile Management
Alan Gold, chief marketing officer, Avotus Corp, warns that the situation is even more dramatic when it comes to wireless and mobile spend. “It’s the fastest-growing area of spend, and most companies do not have a clue what they are spending,” he says.

“Wireless costs and usage are more difficult to capture and manage, and enterprises must pay a particularly keen focus on wireless devices and services as part of their approaches to Total Telecom Cost Management (TTCM),” states Sudy Bharadwaj, vice president and practice director at research and advisory firm, Aberdeen Group Inc.

Aberdeen Group’s March 2006 “Wireless Costs and Performance Benchmark Report: Enterprises Begin to Grapple with a Growing Telecom Necessity,” revealed that only half of the companies surveyed have wireless cost-management programs in place, and 73 percent have not had the plans in place for more than a year.

“Most wireless and mobile expenses are buried outside the control of the monitoring and tracking of any of the normal internal financial reporting mechanisms, ’ explains Gold. “Most of it comes up through time-and-expense reports for reimbursements. The issue of corporate-liable phones versus employee-liable phones is really a hot potato now.”

The issue is at the heart of visibility into the spend, which is a major factor in being able to manage it. According to Rick Saia, Research Analyst and author of the Aberdeen Group report, “Forty-one percent of survey respondents cited lack of visibility into wireless device inventory and usage as a top challenge.”

Gold says the return on investment for implementing wireless and mobile spend management—including cost-optimization tools and sourcing auctions—can be as high as 70 percent.

Lifecycle Management
In addition to the growing problem of managing wireless and mobile spend, trying to transition to converged technologies like MPLS and VoIP is often a trigger that raises the visibility within companies about needing to manage telecom spend in a much more systematic way.

Gold and Harlan have found that companies are discovering that telecom expense management is not just about looking at invoices and making sure they are correct. Leading companies now take a lifecycle management approach to communications spend and realign the way they handle the rest of their operations around it.

They also agree that the decision to outsource these solutions is no longer just cost driven. “It’s driven by process improvement, but they know that with process improvement will come dramatic savings,” says Gold.

“The biggest driver is that they want service level agreements (SLAs) to improve customer satisfaction with efficiencies around things like A/P integration, wireless help desk and invoice processing,” states Harlan.

To that end, both providers have added new components to their lifecycle management service offerings. Symphony Services performs break-fix functions on its clients’ telecommunications switches.

Avotus now has the market’s only automated sourcing process for selecting telecom carriers. The Web-based tool helps client build a Request for Proposal (RFP) based on a database of best practices, SLAs and rates. The RFP is built in a couple of weeks and rolls over to a reverse auction, which drives down to a true market rate.

According to Gold, the solution cuts the usual six-18-month RFP process down to 8-12 weeks and results in a reduction of spend greater than 50 percent. He adds that “Companies stay with their incumbent carrier 85 percent of the time, but this auction solution ensures they get market rates as opposed to the inflated, historical rates.”

There is no question that in today’s competitive business environment, corporations will continue to leverage technology and services which maximize telecommunications investments.