WHITEPAPER. Telecommunications Expense Management: Taking Control

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1 Telecommunications Expense Management: Taking Control Executive Summary In today s economy, all enterprises are under continuing pressure to increase profits while reducing costs. Reducing costs typically means cutting payroll expenses, lowering product quality or even moving production offshore. Few consider looking for savings from the operational expenses related to telecommunications. By taking telecommunications expenses into consideration as one of the top five business expenses, even minor savings can have huge benefits. So why do many companies consistently neglect to look at their telecommunications costs as a source of potential savings? The reason is that few would even know where to start. The telecommunications environment of most companies is a hodgepodge of vendors, technologies, billing cycles and equipment. For some, even trying to do a baseline audit on the equipment and services is an overwhelming task. These factors and more have made the management of telecommunications expenses increasingly complex. In addition, the absence of appropriate tools to manage telecommunications resources causes companies to underutilize assets and expend time and money on process errors. This is especially true if an enterprise: Has a sizable annual telecom spend Experienced fast growth or rapid downsizing over the past five years Was involved in merger, acquisition and/or divestiture activities Makes frequent network changes and has diverse network technologies Supports multiple locations and mobile employees Renegotiated supplier contracts within the past five years This paper explores key issues facing enterprises and discusses the need for a telecommunications expense management process that provides a sustainable model of visibility and control over telecommunications resources, and the resulting cost savings. Understanding the Telecommunications Management Cycle The greatest challenge is to implement cost saving measures while still maintaining the current level of communications without service reduction or worse, interruption. The Challenge Most managers struggle to keep up with constant, daily transaction-level demands, leaving policy development or strategic planning last on their to-do list. As a result, services are not routinely evaluated and remain operational even though they may no longer be necessary. Additionally, on an average, 85% of the invoices for telecom services are paid without review.

2 The Consequences As a result, your organization may be experiencing significant waste and overspending caused by: Billing errors Oversubscription of services or underutilization of network and telecom services Inefficient network design Increased overhead Overspending (due to lack of price details, service inventory visibility and price comparisons) The Telecommunications Expense Management Cycle: Plan - Align telecommunications infrastructure with overall business objectives Source - Optimize supplier agreements by minimizing costs and maximizing value Assemble - Manage and maintain all telecommunications activities effectively Deliver - Regulate and simplify the delivery of equipment and services The Typical Enterprise Telecommunications Process If yours is like the typical enterprise, your telecommunications supply chain is handled through a series of individual processes and systems. In order to keep all of them synchronized, manual, ad hoc processes are typically put in place. These piecemeal solutions greatly contribute to errors and process inefficiencies. However, if the process is managed in an integrated, end-to-end system, information can be recorded, managed and acted upon in a uniform manner. Utilizing this approach enables total control and visibility over the entire telecommunications expense management cycle. Figure 1 - The Telecommunications Management Cycle This is a continuous process and is illustrated in Figure 1. In order to effectively manage the entire process and resources, you need to understand the interdependencies across organizations, the activities that affect more than one organization and the information that needs to flow across the entire supply chain. Plan Manage supply & demand Align telecommunica tions plan with the financial plan Develop business rules Monitor telecommuni cations expenses Source Identify and select supply sources Assess supplier performance Manage supplier agreements Reconcile supplier invoices Authorize supplier payments Assemble Manage telecom components Define/manage workflow Manage supplier orders Maintain inventory of components Manage telecom product pricing Deliver Manage requests Schedule/assign installation Verify product delivery Invoice (chargeback) for end user/customer

3 An enterprise s current environment may provide visibility into portions of the TEM cycle, but as a result of legacy and home-grown systems, the telecommunications spend information exchange is usually managed manually often with duplicate data entry. Existing systems may face one or more of the following challenges: The communications services may not be owned and overseen by the same department. For example, voice and data services may be managed by the telecommunications and IT departments, but cell phones, pagers and PDAs may be managed within an individual s department budgets. This disparity provides no centralized view into the telecommunications spend. The company has satellite offices that control and manage their own telecommunications resources. Systems to support centralized oversight and tracking are non-existent. The key elements of the telecommunications management process: requesting, ordering, inventory management, invoice processing and reconciliation, cost allocation, and contract negotiations are managed and controlled by disparate internal groups. As a result, there is a need to manually share data between departments, which is inefficient and error-prone. The company does not have systems in place to automatically audit and review commitment levels within existing telecommunications contracts. Therefore, there is no ability to ensure that suppliers are fulfilling their contract terms or whether there is a baseline for requesting more competitive terms from competing suppliers. Addressing the Challenges To initiate even the most basic changes, it is important to address both the business processes and the systems involved. By removing inefficiencies from the business processes and automating basic management functions, a company can realize instant cost savings. Including a system for recognizing billing errors, oversubscription, and underutilization of your network resources will only increase the savings. Addressing the Processes Simply automating an existing process may not yield reduced costs. A review of existing process to identify any changes is also required. At a minimum, it makes sense to: Identify key organizations in the process (internal customers, provisioning, engineering and finance) and include them in defining objectives and requirements. Identify areas that are error-prone due to repetitive data entry, areas that need audits, areas for automation and unnecessary steps as candidates for elimination. Define a process that will satisfy the needs of all internal organizations and meet service level objectives. Define transition and implementation plans that prioritize areas with the highest opportunity for savings.

4 Internal Factors Lack of visibility and control over resources Complex and changing organizational structures Multiple, overlapping and/or inadequate processes and tools Ever-increasing network changes Complex multi-year custom contracts with no systemic monitoring process Demands for finer cost allocation and transfer Acceleration in user community expectations Addressing the systems A well-designed system should allow intelligent application of technology to support telecommunications expense management. The system should provide real-time status, allowing exchange of information between key organizations. It should support online data exchange, allowing users to manage and track complex data effectively. At a minimum, the solution should meet the following business requirements: Automate Telecommunications Expense Management Cycle: A system to automate and integrate the key elements of the cycle ordering, invoice management, inventory management and contract administration, while eliminating manual data entry, multiple data sources and integrity errors. Provide Complete Visibility into Inventory and Associated Costs: The system selected should enable inventory management on an ongoing basis and provide an accurate, real-time view of every item, its cost and which department/person is responsible for payment. Integrate across Organizations: The system should allow different organizations, from IT to Finance, to work on the same set of data, using role-based, contextual views that enable users to perform key business functions. Integrate with Internal Systems and Carrier Systems: The system should provide capabilities to electronically bond with internal systems as well as carrier systems, reducing the chance for errors. Provide Rapid User Acceptance and High In-Year ROI: The system should be user-friendly, support service level objectives and should increase productivity for a quick return on investment. The list of capabilities, shown in the left column, represents the process and system attributes contained in an ideal solution. Does Your Organization Address the Following Tools & Processes? Administration A set of user hierarchies, content controls and business rules for managing spending Process management Workflow tools for managing the creation and routing of requisitions

5 An Effective Telecommunications Management Solution will include: Tools to capture telecommunications spend, usage, sourcing, inventory, and purchasing data Processes for managing and optimizing telecommunications activities The infrastructure and industry expertise to best support these functions Conclusion Your company will immediately contain costs by implementing a unified telecommunications expense management solution based on the concepts mentioned above. You will realize savings as a result of reduced carrier errors, inventory reduction, enforcement and monitoring of contract rates and terms, and business process improvements. You will achieve: A bottom-line improvement in communications expenditures and control over your telecommunications expenses Total visibility and control over your telecommunications resources A win-win strategic relationship with suppliers About Avotus Corporation Avotus is an award-winning provider of Communication Lifecycle Management solutions. Avotus provides both wireline and wireless solutions that manage enterprise communications assets and services and tackle challenges, including planning and sourcing, procurement and provisioning, invoice and usage management, expense allocation, and asset decommissioning and asset disposal. In the business of providing excellence to clients for over 30 years, Avotus serves over 1000 customers across 41 global destinations, many of which are industry leading Fortune 2000 customers. For more information on Avotus products and services, visit or call AVOTUS-1. For Avotus news and updates, follow AvotusCorp on Twitter, and Avotus Corporation on LinkedIn and Facebook.

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