The Low-Risk Approach to Telecom Expense Management Four Ways to Test the Water Before Diving In. WhitePaper. We innovate. You benefit.

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1 The Low-Risk Approach to Telecom Expense Management Four Ways to Test the Water Before Diving In WhitePaper We innovate. You benefit.

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3 The Low-Risk Approach to Telecom Expense Management Four Ways to Test the Water Before Diving In Large-scale telecom expense management (TEM) solutions generate significant telecom savings and strong ROI. But even on a small scale, TEM can reduce spend and boost efficiencies. A targeted services approach allows you to explore the benefits of TEM with minimal investment. Telecom expense management solutions can generate significant ROI, so it s not surprising that organizations often expand their TEM investment beyond traditional service audits or entry-level invoice processing software to bring a greater amount of telecom spend under management and control. TEM providers have expanded their offerings to meet this growing market demand, providing more effective systems management capabilities and advanced business process methodologies. Enterprises grow their TEM solutions to take advantage of the strong value proposition that TEM offers on a large scale. But many of today s most successful companies with the largest investments in TEM started with small-scale solutions that evolved over time. For organizations new to TEM, there are multiple ways to test the waters with targeted programs that combine low financial risk with high potential return on investment. Why TEM? Why Now? Over the last decade, TEM has become a best practice for enterprises seeking to reduce operating expenses and improve the bottom line. The growth of TEM is a direct result of the rapid evolution of communications technology, fueled by insatiable consumer desire for faster, better, lower-cost services. The proliferation of wireless devices, smart phones, and internet-based services circumvent traditional methods of call accounting. Multiple providers and service plans create new challenges for efficiently managing invoices and tracking expenses. Limited visibility into the monthly telecom spend makes it difficult to verify service usage, hampering efforts to optimize service plans and negotiate favorable contract rates. Managing expenses in this complex environment can be extremely challenging. And while the cost per minute for voice communication may be lower than in the past, most enterprises are paying far more for their overall telecom network and services. Today, the cost of telecommunications ranks as one of the top five expenses for most companies. The rising cost of telecom makes it a high priority target for cost control efforts. How do companies hit the target? They implement lifecycle TEM solutions. There are many facets to TEM, including sourcing and contract management, inventory and usage management, ordering and provisioning, invoice management and dispute resolution. End-to-end TEM services provide visibility and control in each of these areas, enable best practices, streamline business processes with workflow automation, and integrate with other enterprise systems to create a true lifecycle expense management solution. Perception vs. Reality Due to the complexity of telecom technology and the sprawling nature of today s multi-location telecom networks, TEM offerings are extensive and the scale of these solutions can seem daunting, even to experienced network operations and telecom managers. For organizations that don t already have any of these TEM components in place or lack existing in-house expertise, the solution possibilities can be a bit overwhelming. To begin the process of embracing a TEM solution, it s imperative that network operations and telecom managers remind themselves that the benefits of proactivity and striving for complete operational and cost TEM has become a best practice for enterprises seeking to reduce operating expenses and improve the bottom line. There are multiple ways to test the waters of TEM with targeted programs that combine low financial risk with high potential return on investment. 1

4 The Low-Risk Approach to TEM control over their networks far outweigh the comfort and the false sense of security of the status quo. The risks of a TEM initiative are minimal and more often perceived than actual. For example, managers may feel they will lose control if they allow an outside firm to TEM services have influence over their network. Or they worry about may include potential losses in terms of time, energy, and money if the savings proposed solution does not work. In reality, any reputable guarantees that reduce the TEM provider would require solution recommendations to client s financial be approved internally by the client managing team. And exposure. A the client can reduce risk to almost nothing by choosing savings guarantee self-funding projects to initiate their relationship with TEM, ensures that a new partner, and a new way of managing their network. payment for services rendered If your organization is reluctant to embrace a will be equitable comprehensive TEM solution, there are many approaches and fair to both to TEM that minimize risk and up-front investment. the client and the consulting High Value, Low Risk TEM firm. A complete TEM solution has many moving parts and touches many business processes. While it may be extensive, it doesn t have to be monolithic. You can build your TEM solution incrementally, in a controlled, riskmanaged fashion that lets you wade rather than dive into a more comprehensive TEM solution. By risk managed, we mean TEM solutions meeting any or all of the following criteria: No software investment or long-term service contract Fee is fixed up-front or contingent based on the solution s realized savings Scope is limited by TEM process, corporate division, or location minimal disruption of business Limited management buy-in required Results can provide proof of concept for an expanded solution The approach to TEM that s right for your organization will depend on your particular business processes and pain points. In many cases, identifying these pain points is the first step. TEM providers offer a number of services to do just that. The following sections describe the more common success-based consulting projects, as well as a fixed-fee operational assessment, all of which provide low-risk approaches to TEM. 1 Inventory and Historical Audit TEM consultants audit your telecom invoices against your contracts, tariffs, and inventories to identify cost recovery and avoidance opportunities available through improved telecom policy management. Typically 1-3 months of invoices are reviewed to uncover billing issues for local, long distance, and wireless telecom services. In most cases, cost avoidance opportunities for both usage-based and data-driven services are identified. Deliverables usually include: An inventory of the most critical services throughout your organization s telecom network Your telecom organization s existing policies, capabilities and controls are reviewed and scored against TEM best practices A realizable savings report, including a detailed listing of dispute claims to be filed with vendors immediately and an outline of telecom network optimization and design opportunities Recommendations for telecom best practice improvements to existing processes and policies used to manage your organization s expenses In almost all cases, a telecom audit costs the client organization nothing up-front. The pricing model of preference for most clients is the success fee / contingency audit. Typically, clients are billed an agreed-upon percentage of realized savings. There is no up-front cost to the client because the TEM firm is compensated only after credits are received from the telecom service provider(s). Savings percentages vary between clients and projects depending upon many variables such as the size 2

5 Veramark Technologies, Inc. of the client s monthly telecom spend and overall network situation, professional services desired, scope of the project, etc. While the benefits of an audit might be short-lived, the combination of rapid value (savings can be realized in as little as three months) and percentage-of-savings pricing makes audit a very low-risk way to test drive a TEM lifecycle solution. 2 Sourcing and Contract Negotiation Sourcing services range from review and recommendation of sourcing strategies, to evaluation of contract and invoice data, to developing a strategic sourcing plan that will help you negotiate contracts that secure best-in-class rates, terms, and conditions. Sourcing services can be extremely effective at reducing telecom costs. In fact, sourcing activities generally account for the single greatest percentage of savings for all TEM initiatives. Even a limited engagement can result in vendor and contract changes with extended impact on the prices your organization pays for telecom services. Sourcing begins with an assessment of your current situation and may include any or all of the following: Benchmarking Most competitive sourcing exercises will yield better rates. Benchmarking helps you determine the best rates you can expect, so you don t settle for anything less. A benchmark study will establish best-in-market rate elements, terms, and conditions you should aim for when negotiating with telecom service providers. Sourcing methodologies Establishing targets is one thing. Hitting those targets is another. The sourcing process can be time consuming and difficult to manage. Your TEM provider may be able to provide you with consulting services to help you develop online applications and other tools to streamline the sourcing process. Well-designed sourcing methodologies can significantly reduce the time and resource requirements necessary to pre-screen and narrow down the eligible vendor pool, tailor RFIs, RFPs, and RFQs to your needs, rapidly evaluate responses, and conduct online bidding. Case in Point: Sourcing and Network Optimization For a National Service Firm Challenge Company faced expiration of its contracts for voice and data network services Wanted to reassess its processes relating to the engineering of the network, procurement of services and operational and cost management practices Specific goals: determine the most efficient network backbone architecture; implement a strong sourcing process to drive down the cost of services and improve the terms under which services are purchased; accelerate the company s ability to manage its network and vendor performance Solution Assessment indicated the need for more updated network architecture and sophisticated measurement tools in order to maximize and maintain optimal levels of network Quality of Service (QoS) Online RFP process to solicit/evaluate solution proposals and rank vendors Results Restoration of network operational efficiency and cost controls New sourcing solution reduced network costs by more than 60% How Billed Success fee basis with a price cap Contract negotiation You can do everything right, but still end up with a less-than-optimal contract. TEM providers will coach you in negotiation skills or negotiate on your behalf to help you secure not only best-in-market rates, but also obtain bullet-proof terms and conditions that give you the utmost flexibility in operations related to volume commitments, use of technologies, changes in financial condition of either party, adherence to service levels, etc. Implementation At the conclusion of the vendor negotiation process, seamless implementation across the organization is necessary to achieve desired operational and financial benefits. Sourcing services can include detailed 3

6 The Low-Risk Approach to TEM implementation planning, execution, and a managed hand-off to operational teams. Verification and resolution After a contract is signed, verifying that the service provider complies with negotiated rates as well as terms and conditions is an essential followup activity. This requires scrutiny of invoices and services, a service that many TEM providers provide al a carte. Because of existing relationships with all the major carriers, your TEM provider may also be best qualified to resolve any billing and performance issues found. It s critical to maintain a good relationship with your service provider even as you hold them to their contract commitments. The resolution process requires expert communication and a disciplined process to minimize the time invested and to help prevent the recurrence of these timeconsuming issues. Sourcing services may include savings guarantees to reduce the client s financial exposure and risk. Language for a savings guarantee may resemble, TEM firm ABC guarantees the annualized savings resulting from the negotiated contracts will be more than X times TEM firm ABC s fee. If the first year savings is not at least X times the consulting firm ABC s fee, the fee will be reduced proportionately relative to the expected savings, with a minimum fee of $N. A savings guarantee ensures that payment for services will be equitable and fair to both the client and the consulting TEM firm. 3 Network Optimization The performance of even the most well-run telecom networks can benefit from new technologies, improved configuration, or a complete overhaul. Network optimization will evaluate your networks, identify opportunities to align capacity and capabilities with your organization s requirements, and quantify the costs vs. benefits so you can make informed decisions about network investment. Because network investment often involves capital expenses, long-term total cost of ownership is an important component to look for in a network optimization service. The scope of these services can be as far-reaching as your entire telecom network environment. Case in Point: Audit and Operational Assessment For a Global Retailer Challenge Telecom network fragmented and decentralized Outsourced invoice processing performing poorly Not satisfied with telecom audit performed by consulting firm Solution Review and audit Focus on long-term process improvements and TEM best practices Vendors selected on basis of network spend prioritization Results Initial review and audit saved $3.5M Engagement grew to full service TEM for all recurring invoice management and audit functions Dispute and optimization efforts are generating millions of dollars each year through cost avoidance or elimination How Billed Success fee / contingency basis WAN backbone Typical optimization services for the WAN backbone include: Cost/benefit evaluations of new technologies such as MPLS and VoIP Recommendations on addressing voice usage issues such as long-duration data calls, unauthorized calling, loose traffic, and high-cost destinations for international usage Rightsizing studies designed to determine total utilization across key telecom access links, ports and PVCs as well as application usage within each portion of utilized bandwidth Analysis to determine the benefits of augmenting carriers used for the termination of your network calls (e.g., international, intrastate, directory assistance, etc.) with off-net carriers 4

7 Veramark Technologies, Inc. Access network Optimization services may include access trunk utilization analysis, access hub optimization, and access facility arbitrage analysis. Call centers Services that can identify cost savings include least cost call routing analysis and cost/benefit analysis of advanced call center capabilities, such as take back and transfer and network announcements. Premise-based networks Typical optimization services include IP telephony infrastructure assessments and maintenance contract optimization. Remote access Optimization services can provide cost/benefit analysis of broadband upgrades and the proactive management of employee-liable telecom expenses, and assess the value of outsourcing the management of complex remote access applications like VPN, VoIP, etc. Private and wireless networks Optimization services can help you determine if it s cost effective to invest in wireless and fiber networks and next-generation technologies to support your campus, metro, and long-haul communications requirements. Network optimization services require no up-front payments by the client. Like audits, optimization services are typically paid for out of realized savings. 4 Operational Assessments Operational assessments identify ways to reduce network costs and improve performance through a combination of best-in-class processes, current market data, and consulting expertise. For services of this kind, you want to work with a TEM provider that can draw on process and market data based on extensive experience across a broad spectrum of business verticals. The scope of an operations assessment typically includes cost, operations, supplier, and network management. Deliverables may include: A full-scale diagnostic of the current state of operations Identification of major opportunities for operational improvements and network ROI creation Quantification analysis of the value of implementing key improvements Detailed recommendations and plans to capture value Operational assessments are often priced on a fixed-fee basis. A company may want to know where they currently stand in terms of their operational performance and costs relative to market; a fee will be generated based upon the scope of the project. In many cases, half of the fee will be paid to initiate the engagement while the remaining half will be paid upon completion of the project and execution of all agreed-upon deliverables. The Bigger Payoff The TEM services described above audit, sourcing, optimization, and assessment offer quick ROI and some degree of lasting value. Because they are typically much narrower in scope than a full TEM solution and require fewer resources to implement, they are easier to sell internally and get approved. Moreover, the results of these services include analyses and recommendations that can point the way to much greater benefits of TEM applied on a larger scale. That s important, because unless a comprehensive and on-going TEM solution is in place, the gains of onetime consulting engagements, however cost-effective, are eventually eroded by lack of ongoing management, process automation, and policy enforcement all of which a lifecycle TEM solution provides. It may be that the single most valuable benefit of a TEM audit or other one-time consulting engagement is to convince the skeptics in your organization that a lifecycle solution is an idea they can get behind. Implementing an integrated, lifecycle TEM solution takes planning, collaboration, and an all hands on deck attitude. But it is, without a doubt, the most effective way to reduce telecom costs. Not just today and tomorrow but for the long term. Because targeted TEM services are narrower in scope than a full lifecycle solution, they are easier to sell internally and get approved. The results include analyses and recommendations that point the way to the greater benefits of TEM applied on a larger scale. 5

8 About Veramark Veramark is a leading provider of innovative enterprise solutions for telecom expense management and call accounting. Veramark solutions provide visibility into usage and spend and enable best practices for managing complex unified communications networks. Veramark technology and services help enterprises understand, manage, and control their fixed and mobile telecom assets, costs, and related business processes. For more information, visit us at or www. call-accounting-solutions.com, or call Veramark Technologies, Inc Jefferson Road, Suite 120 Rochester, NY Phone: Fax: info@veramark.com We innovate. You benefit. Copyright All rights reserved. Veramark is a registered trademark of Veramark Technologies, Inc. All other trademarks are the property of their respective owners. 1/11 50M19054A