Telecom Expense Management : A Costly Affair

Telecommunication is a large portion of any enterprise
expense budget, often ranging between 4-10%. Mobile workforce is increasingly
shifting towards smartphones for features such as mobile emails, web browsing,
etc. This means that telecommunications spend is also on the rise, resulting in
more mobile traffic. Inconsistent policies across internal units have made
management of telecom expenses complex, costly, and labor intensive.

As different types of telecom technologies and platforms
proliferate, and as companies continuously use them to enhance business
productivity and efficiency, telecom cost management space is evolving as an
effective tool to help enterprises manage their telecom expenses.

According to industry sources, the attractive telecom expense
management (TEM) market, valued at approximately $600 mn in 2007, is forecasted
to grow at a CAGR of around 15% between 2006-2011, reaching $1 bn in 2011. The
enterprise segment accounts for 70% of the TEM business, with the carriers
segment accounting for the remaining 30%.

Consistent errors in telecom bills, complexities in vendors
invoices, expense leakages, inconsistent data formats, SOX challenges, etc, have
forced enterprises to outsource their TEM function to specialized BPOs. Managing
the entire TEM lifecycle for clients is even more challenging in all
streams-namely voice, data, and wireless services without unique advance
technologies.

These days TEM has become an umbrella term for describing the
management of all communications related expenses of an enterprise, ranging from
fixed-line and wireless services to wireless broadband.

Business Model

The TEM BPO solution to enterprise consists of end-to-end telecom cost
management services. This includes, order & inventory management, ongoing
invoice and expense management, ongoing audits and cost optimization, usage
management, business intelligence and web reporting, wireless device management,
and end user support.

Talking about the model, Ranjit Narasimhan, president and
CEO, HCL Technologies BPO services says, "The model of TEM BPO solution works
for buyers as it effectively addresses the need for expense control to minimize
leakages, and help identify telecom devices that exist within the organization
due to frequent changes and multiple data formats."

"TEM BPO solutions eliminate problems related to rates and
charges that differ from those mentioned in the contract while also removing
burdens of receiving and responding to invoices. TEM solutions provided by BPOs
bring the needed visibility and transparency on enterprise telecom spends while
minimizing investments," he adds.

Telecom expense management solutions provided by BPOs bring the needed visibility and transparency on enterprise telecom spends, while minimizing investments Ranjit Narasimhan, president & CEO, HCL Technologies BPO Services	Irrespective of the scenario, cost management is always a challenge and it is more so in the downturn, all expenses are micro-managed and benefits are highlighted Subramanya C, global CTO, Hinduja Global Solutions	With the introduction of newer generation handheld devices, the scenario is all set to become even more complex Gopal Devanahalli, VP & head, CME, Infosys BPO

Key areas where telecom cost management space has evolved
include all forms of mobility, such as cellphones, smartphones, wireless
laptops, and other handheld devices. Other key areas include increasing usage of
audio and videoconferencing, VoIP, etc.

Slowdown and TEM

In the current economic environment, 'cost optimization' is the key focus
area for enterprises worldwide. Telecom related expenses contribute to
substantial chunk of a company's IT budgets. Gartner estimates that a proper TEM
exercise can bring 15-35% savings on an enterprise's telecom expenses.

Being a non-core function, TEM has rarely been a key concern
area for the top management of most enterprises. Enterprises are increasingly in
search of a partner which would rationalize and regularize the overall telecom
spend vis-à-vis usage and providers.

Commenting on the importance of TEM in the current downturn,
Subramanya C, global CTO, Hinduja Global Solutions says, "Irrespective of the
scenario, cost management is always a challenge, and it is more so in the
downturn. All expenses are micro-managed and benefits are highlighted."

This trend will continue in the economic upturn too. Even in
an upturn, enterprises' appetite for cost savings in telecom budgets won't
diminish. When the economy starts booming, enterprises will definitely expand
their business, and it will result in more mergers, acquisitions, physical
expansions of existing facilities or expanding into new locations. This will in
turn further increase telecom complexity and generate high telecom bills. Thus
increasing the demand for TEM to help keep these bills under control.

Latest Trends

TEM is moving beyond a national market to a global market, from a simple
bill audit to managing end-to-end telecom lifecycle and from fixed to mobile and
so on. Clients expect service providers to offer them a global solution that has
the capability to audit invoices and read bills from different countries that
they are present in, and also provide a common language reporting.

The market is steadily moving from a licensed model to
managed services. Organizations are increasingly looking at engaging in an
outcome based or gain share model with service providers, to fund the cost of
processing and realize benefits.

Commenting about the emerging trends and business models,
Gopal Devanahalli, VP and head communications media and entertainment (CME),
Infosys BPO says, "Earlier work in the telecom cost management was crowded by
niche players. But we increasingly see a trend of big BPOs and telecom service
providers offering TEM services to their clients."

"We have seen major telcos partnering with TEM solution
providers for these services. This is an interesting scenario where telecom
service providers are not only providing services to clients, but are also
providing cost management against competitive carriers. This provides customers
an outcome based engagement model that allows enterprises to realize tangible
and committed benefits ," he adds.

Key Benefits

The benefits and scope of telecom cost management is directly proportional
to the size of the organization, the geographies it operates in, also the number
of industry segments it services. By creating a standardized system across the
enterprise, telecom expense management sets in place an efficient procure-to-pay
process for telecom services across all levels and units within the enterprise.

Talking about the key benefits of telecom cost management,
Devanahalli, says, "With the introduction of newer generation of handheld
devices which are fast becoming the norm for corporate communications, the
scenario is all set to become even more complex. In many respects, TEM has now
evolved into supply chain management for telecom services."

Speed Breakers

Most enterprise, today, have a global presence and finding a telecom cost
management provider who can provide services to meet their needs, for all these
markets, is the biggest challenge. The telecom cost management provider, should
be able to handle and read the telecom nuances of all these markets.

"For an enterprise to manage and optimize their network, plan
the network strategy, and forecast spend-entails a lot of investment. "We are
seeing more and more enterprises choosing to partner with experienced providers
who can manage the entire requirements and provide them complete visibility to
their telecom spend," says Devenahalli.

Explaining the challenges, Narasimhan says, "There are four
major challenges associated with managing TEM. Firstly, the inventory and
invoice records are often scattered among multiple locations and it is difficult
for organizations to get it centralized. Secondly, telecom is a high change
environment that is constantly evolving technologies and changes in business
locations, tariffs, new VAS launch, and discount rates, etc. Therefore, it is
difficult for an organization to keep track of all the changes. Thirdly, data
from vendors' invoices is not normalized, making global review and analytics
difficult. Lastly, high volume of complex, detailed information requires
specific domain expertise to understand and manage it successfully, and telecom
is not the area of expertise for most enterprises."

Outlook

The Indian market is not yet as mature as the US and the UK in the TEM
space. Enterprises in India have started understanding the benefits of TEM
solutions. In the current economic situation, BPOs observe a potent demand for
end-to-end TEM which can truly support enterprises with global locations. Large
and mid-sized enterprises are increasingly considering it important to control
costs.

There would be a continued growth in the demand for TEM
solutions as hosted or managed service offerings. BPOs believe that with some
pioneering cases of cost-saving achieved, it will establish the actual need and
acceptance of TEM as a solution in the market. Overall, the awareness and
adoption of TEM in India is on the rise, and a substantial traction is expected
as we move forward.

Arpita Prem

arpitap@cybermedia.co.in