Telecom Lifecycle Management

Transcription

1 Telecom Lifecycle Management March 2009 Hyoun Park

2 Page 2 Executive Summary This report is designed to demonstrate how Telecom Lifecycle Management (TLM) has been used to reduce telecom and network costs within the enterprise. There is a specific emphasis on exploring the roles that executives (defined as C-level officers, vice presidents, and directors) perform in ensuring that organizations are able to maximize their cost management opportunities. Best-in-Class Performance Aberdeen used three key performance criteria to distinguish Best-in-Class companies, defined as the top 20% of performers among all respondents. Best-in-Class companies have realized the following achievements: 40% decrease in monthly landline network cost per user 38% decrease in monthly landline voice cost per user 40% decrease in monthly cellular services cost per user Competitive Maturity Assessment Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics. These companies are: 55% more likely than Laggards (the bottom 30% of performers) to have executive participation in purchasing a TLM solution Achieving a 109% year-over-year ROI on their TLM investments, over three-times more than all other companies Over three-times more likely to focus on improving executive visibility to telecom expenses compared to Laggards Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must: Ensure that both formal and informal communications channels exist between operational personnel and executives that are capable of instituting organizational change Understand the full extent of their telecom costs in context of their current revenues and profits Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations "Executive participation is absolutely required to ensure that telecom management is effective. Without executive support across the organization, reaping the benefits of well executed telecom management is not possible." ~ Greg Davidson, CIO, Active Aero Group

3 Page 3 Table of Contents Executive Summary...2 Best-in-Class Performance...2 Competitive Maturity Assessment...2 Required Actions...2 Chapter One: Benchmarking the Best-in-Class...5 Business Context...5 The Maturity Class Framework...6 The Best-in-Class PACE Model...7 The Need for Executive Leadership...8 The CEOs Role in Telecom Lifecycle Management...10 The CFOs Role in Telecom Lifecycle Management...11 The CIOs Role in Telecom Lifecycle Management...15 The CPOs Role in Telecom Lifecycle Management...18 Best-in-Class Strategies...19 Chapter Two: Benchmarking Requirements for Success...22 Competitive Assessment...22 Capabilities and Enablers...24 Chapter Three: Required Actions...30 Laggard Steps to Success...30 Industry Average Steps to Success...30 Best-in-Class Steps to Success...31 Appendix A: Research Methodology...33 Appendix B: Related Aberdeen Research...35 Figures Figure 1: C-level Participation in Telecom Cost Management...5 Figure 2: More C-Level Involvement Isn't Always Better!...9 Figure 3: CEO Involvement in TLM...11 Figure 4: CFO Interaction with Telecom Expenses...12 Figure 5: Non-CFO Financial Executive Interaction with TLM...13 Figure 6: Best-in-Class Functional Departments for Tracking Expenses...14 Figure 7: CIO Interaction with TLM...15 Figure 8: Non-CIO IT Executives' and TLM...16 Figure 9: Telecom Department Involvement in TLM...17 Figure 10: Non-Telecom IT Department Involvement in TLM...17 Figure 11: CPO Weaknesses in TLM Implementation...18 Figure 12: Procurement Departments in TLM...19 Figure 13: Best-in-Class Strategies...20 Figure 14: Best-in-Class TLM Employee-Executive Interaction...20 Figure 15: Best-in-Class TLM Processes...25

4 Page 4 Figure 16: Best-in-Class TLM Organizational Capabilities...25 Figure 17: Best-in-Class Knowledge Management Capabilities...26 Figure 18: Best-in-Class TLM Technologies...27 Figure 19: Best-in-Class TLM Performance Management...28 Figure 20: The Role of Security...29 Tables Table 1: Sampling of Telecom Lifecycle Management Capabilities...6 Table 2: Top Performers Earn Best-in-Class Status...7 Table 3: Telecom Savings Achieved through TLM...7 Table 4: The Best-in-Class PACE Framework...8 Table 5: Operational Departments Involved in TLM...10 Table 6: Best-in-Class Departments for TLM Implementations...12 Table 7: Executives Involved in TLM Implementations...15 Table 8: The Competitive Framework...23 Table 9: The PACE Framework Key...34 Table 10: The Competitive Framework Key...34 Table 11: The Relationship Between PACE and the Competitive Framework...34

5 Page 5 Chapter One: Benchmarking the Best-in-Class Business Context Over the past year, Aberdeen has published several benchmark reports demonstrating an increasing trend of C-level participation in telecom cost reduction efforts, especially among Best-in-Class companies. The Best-in- Class firms (representing the top 20% of our respondents) have consistently reduced their telecom costs by over 30% by gaining executive support to adopt the appropriate policies, capabilities, and technologies within their organizations (Figure 1). This has been documented through prior Aberdeen research in this field, including the following reports: Execute on Wireless Expense Management to Drive ROI, February 2008 Slashing Telecom Expenses in a Looming Recession, June 2008 Reducing the Cost of Freedom, January 2009 Fast Facts In 2007, the median household income in the United States was $50,233 The typical Laggard adopting Best-in-Class practices could have saved costs equivalent to over 300 household incomes by optimizing telecom and network expenses Figure 1: C-level Participation in Telecom Cost Management Percentage of Respondents 80% 70% 60% 50% 40% Best-in-Class 60% 47% 35% 35% All Respondents 77% 45% 30% Feb '08 June '08 Jan. '09 Month Consider that the Laggard companies in this study (representing the bottom 30% of all respondents) averaged $27 million per year in telecom and network expenses. Despite self-identifying themselves as companies that have deployed a Telecom Lifecycle Management (TLM) solution, these companies have not effectively reduced their telecom spend. These firms must stringently control their costs through adoption of Best-in-Class practices. Through a formal TLM installation, these Laggard companies can ensure that they are actively controlling their telecom spend both on a current and future-facing perspective.

6 Page 6 Telecom Lifecycle Management TLM represents an emerging set of capabilities that have traditionally been defined by terms such as Telecom Expense Management (TEM) and Telecom Cost Management (TCM). These solutions control the physical auditing, inventory management and invoicing of telecom and network expenses. These expense management solutions have typically been defined as software or a suite of managed services that centralize inventory, place service orders, process invoices, and dispute errors. Best-in-Class companies that have optimized the utilization of these capabilities have accomplished telecom savings of nearly 40%, which averages to over 16 million dollars per firm. However, the scope of telecom expense management solutions has increased over the past several years as a number of providers have evolved to provide technological and procurement lifecycle functionalities to corporate end users (Table 1). In deciding on a TLM solution, it is important to take into account the current structure of vital communications enablers, whether they be mobility, video, IM, web conferencing, holistic unified communication or simple landline voice and choose a solution accordingly. Table 1: Sampling of Telecom Lifecycle Management Capabilities Procurement Network Mobility Managed contract negotiations Telecom-specific reverse auctioning Customized electronic sourcing Electronic contract storage and contract terms Database of carrier rates, terms, and discounts Graphical Wide Area Network (WAN) mapping Converged Communications Inventory VoIP traffic management Network-based Project Management Tools ROI reporting for network transition or upgrades Managed mobile help desk Mobile device management Mobile application support Mobile device staging and kitting Mobile administration The Maturity Class Framework Aberdeen used three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations.

7 Page 7 Table 2: Top Performers Earn Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers Mean Class Performance 40% decrease in landline network expenses per user 38% decrease in landline voice expenses per user 40% decrease in mobility expenses per user 11% decrease in landline network expenses per user 12% decrease in landline voice expenses per user 11% decrease in mobility expenses per user 3% increase in landline network expenses per user 4% decrease in landline voice expenses per user 2% increase in mobility expenses per user Although Best-in-Class companies have optimized their telecom expenses, their success exceeds even the expectations that are originally promised by the vendor or developer (Table 3). Table 3: Telecom Savings Achieved through TLM Respondent Category Best-in-Class Industry Average Laggards Average Savings Promised 24% 14% 7% Actual Savings 39% 16% 0% Even though Best-in-Class companies are promised a high level of savings in their original presentations and business cases, they are able to exceed these estimations through additional implementation of polices and organized enterprise commitment to driving down costs. Industry Average companies achieved roughly what they were promised, but Laggards have not realized the savings that they were promised due to a lack of capabilities, technologies, and effective executive cooperation relative to their Industry Average and Best-in-Class counterparts. The Best-in-Class PACE Model Using TLM to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as shown in Table 4.

8 Page 8 Table 4: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Escalating cost of telecom assets and service plans Corporate demand to lower all operational expenses Centralize wireless, landline, and network expense management Improve executive visibility to telecom expenses Reducing Total Cost of Operations for telecom deployment Alerts for call fraud or excessive usage Employee feedback to communicate telecom best practices across the organization Enterprise-wide strategy to reduce telecom expenses Corporate policy to determine employee eligibility for telecom services Ability to short pay disputed bills Reports of billing disputes resulting in credits Reference website containing telecom policies and best practices (69% Best-in- Class adoption) Employee portal for service and equipment requests (56% Best-in-Class adoption) Role-based analytics for telecom expenses (47% Best-in-Class adoption) WAN network mapping (47% Best-in- Class adoption) Automated Business Intelligence (BI) dashboards / analytics for telecom expenses (44% Best-in-Class adoption) The Need for Executive Leadership At first glance, operational job roles dedicated to telecom, communications, or information technology support may seem to be the best personnel to deploy and maintain a TLM solution. However, there are several roles where high-level officers must provide additional guidance to ensure that TLM is fully integrated throughout the organization. One of the greatest problems that telecom and IT departments face in TLM is that they must centralize a set of payment processes and telecom usage behaviors that have been not been managed centrally as a commoditized utility. As a result, these organizations are unable to take advantage either of the economies of scale or the standardization of assets, services, and procurement policies that drive down operational costs. Best-in-Class companies have involved the executive team (defined as Directors, Vice Presidents, and C-level officers) in various aspects that differ from all other companies (Figure 2). "Regardless of whether the process is a formal TEM / WEM solution or an informal internal tracking system or spreadsheet, companies must start some type of process to begin to realize the amount of waste that is prevalent." ~ Stephen Jones, Telecommunications Manager, ACCO Brands

9 Page 9 Figure 2: More C-Level Involvement Isn't Always Better! All Others BIC Purchasing a Telecom Lifecycle Management solution? 56% 75% Regularly viewing Telecom Expenses? Implementing a Telecom Lifecycle Management solution? 25% 25% 28% 63% Tracking Telecom Expenses? 17% 33% 0% 20% 40% 60% 80% First and foremost, the results shown in Figure 2 demonstrate that there are certain aspects of the TLM process where executives provide value. For example, a formal and cross-departmental commitment to reducing telecom expenses is a perfect example of demonstrating executive leadership. Seventy-three percent (73%) of Best-in-Class companies made this commitment to their companies compared to only 56% of all others (Industry Average and Laggard companies combined). In addition, the purchase of a TLM solution should also involve the executive team. Both the price and scope of a TLM solution require a highlevel champion who is able to contextualize and approve this project in terms of directional corporate strategy (such as overseas expansion, increased customer contact, or implementation of other enterprise-level suites). In addition, presenting a strong business case demonstrating the ROI of a TLM solution can greatly aid the process of gaining executive sponsorship. However, there are several aspects of the TLM process where the executive team is generally not providing value. The bottom three points, which specify executives regularly viewing telecom expenses, implementing a solution, and tracking expenses, demonstrate that this work is best left to specialists. In this economic client, C-level officers need to worry about more strategic issues. Organizations should definitely have appropriate executive dashboards and analytics, which will be described in greater detail in Chapter Two, but Best-in-Class companies that have derived the greatest value from their TLM solutions tend to avoid executive participation in the day-to-day operations of the implementation. Although only 18% of Best-in-Class companies had executive input into a TLM implementation, this participation is highly dependent on the organizational capacity to implement software and conduct enterprise Fast Facts What is the expected yearover-year ROI for a TLM solution? Best-in-Class: 109% All others: 34%

10 Page 10 projects. Without dedicated project teams, organizations need an executive champion at this stage to ensure that all of the operational teams involved in a true TLM implementation are working together smoothly given the number of departments that are typically involved in a TLM implementation (Table 5). Table 5: Operational Departments Involved in TLM Department Involvement By All Respondents Telecom 71% IT (Excluding Telecom) 64% Finance 63% Procurement 53% Administrators / Office Managers 39% Operations 38% Legal / Governance, Risk Management, and Compliance (GRC) 18% Security 15% Other 10% Although this table shows a general description of how the executive team looked at their TLM implementations, there is significant variation that executives face based on their core functionalities and roles that differ from the executive team in general. To provide clarity on how each role differs, Aberdeen has provided a profile of interaction for four roles: Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Information Officer (CIO) Chief Procurement Officer (CPO) The CEOs Role in Telecom Lifecycle Management Thirty-four percent (34%) of respondents indicated that the CEO had some role in TLM at their company. Although telecom and procurement are rarely core strategic tasks, the difficulty of centralizing an expense that regularly constitutes 1% to 2% of an organization's gross revenue can be remedied with the help of a high-level champion. CEOs tend to be involved in smaller organizations that lack a formal CPO or project managementoriented process for enterprise purchases and implementations. In looking at the CEOs participation across several viewpoints, it becomes obvious to see where the CEO is most useful in handling telecom expenses (Figure 3).

11 Page 11 Figure 3: CEO Involvement in TLM 100% 80% 60% 40% 20% 0% BIC Industry Average Laggards 75% 80% 50% Purchase a Telecom Lifecycle Management Solution 42% 33% 33% 33% 25% Implement a Telecom Lifecycle Management Solution 0% Track Telecom Expenses 13% 60% 58% Regularly View Telecom Expenses Fast Facts The average corporate liability for telecom-related GRC infractions: Sarbanes-Oxley: $1.4 million dollars Global privacy regulations: $1.6 million dollars IRS use of listed property: $1.3 million dollars For companies that received CEO involvement, 75% of the Best-in-Class companies and 80% of the Industry Average companies utilized it in the purchasing phase. In comparison, only 50% of Laggards did the same, demonstrating that the CEO can provide guidance in the purchasing process. By inference, half of Laggards involved the CEO in telecom processes that were unrelated to evaluating the purchase of the TLM solution, which was a much shakier proposition. As Figure 1 demonstrates, Best-in-Class companies are less likely to engage the CEO for implementation, expense tracking, or expense viewing than all other companies. Although there should be a dashboard or report in place for executive viewing, telecom expenses tend to be very granular in nature, which has been part of the reason they have escaped corporate oversight for so long. When the CEO gets too intimately involved in operational minutiae, the attention tends to be counterproductive. Although the CEO can be helpful in providing strategic insight and evaluating vendor companies, Best-in-Class companies effectively wean the CEO off the need to check these expenses at the expense of the organization. The CFOs Role in Telecom Lifecycle Management In contrast to the CEO, the CFO does have a direct role in tracking telecom expenses and all other operational expenses that the company incurs. In our respondent base, 40% of companies involved the CFO in some fashion for TLM. Based on core responsibilities, the CFO has a radically different profile of interaction in terms of guaranteeing telecom savings compared to the CEO (Figure 4).

12 Page 12 Figure 4: CFO Interaction with Telecom Expenses BIC All Others 60% 56% 48% 44% 56% 52% 52% 40% 36% 20% 11% 0% Purchase a Telecom Lifecycle Management Solution Implement a Telecom Lifecycle Management Solution Track Telecom Expenses Regularly View Telecom Expenses For three of these tasks, Best-in-Class actions do not differ considerably from all other companies. For purchasing, tracking expenses, and regularly viewing telecom expenses, CFO review is necessary, but not sufficient to guarantee results. This makes sense in light of the CFOs role. All major purchases and investments should be presented to the CFO and all major expenses should be tracked by the CFO. Given this, it makes sense that roughly half of CFOs involved in TLM would be involved in these tasks, based on the size of telecom and network spend in the organization. However, one data point is obviously negative in this figure; Best-in-Class companies do not involve their CFO in the implementation of a TLM solution. Although TLM has a significant financial component, Best-in-Class companies tend to use a number of other departments in implementing their solutions. Because this implementation tends to be highly technical in nature, based on interactivity between human resources systems, financial systems, invoices, and telecom carriers, the core operations for this stage are technical. In contrast to Table 2, which demonstrates how the general respondent base treats TLM, Table 6 specifically shows that Best-in-Class companies prefer IT departments in a TLM implementation. Table 6: Best-in-Class Departments for TLM Implementations Department Percentage Telecom 100% IT (Excluding Telecom) 92% Security 80%

13 Page 13 Department Percentage Operations 50% Procurement 38% The CFOs Team How does the CFOs performance compare to other finance executives that are involved in the TLM process? Twenty-seven percent (27%) of respondents indicated that a VP or director of finance was involved in their TLM deployment. In contrast to the CFOs perspective, there were a couple of significant changes when a lower level financial executive (defined as a director or vice president reporting to the CFO) was involved (Figure 5). Figure 5: Non-CFO Financial Executive Interaction with TLM BIC All Others 100% 80% 60% 40% 20% 0% 20% 39% Purchase a Telecom Lifecycle Management Solution 40% 87% Track Telecom Expenses In comparison to CFO-based purchases, non-cfo-based purchases had lesser correlation with Best-in-Class performance. Much like the CFO, non- CFO financial executives had relatively poor performance in implementing a TLM solution. However, they also performed more poorly than their CFO superiors when they were involved in purchasing a solution, since their companies were less likely to be Best-in-Class when the purchasing decision was made below the CFO level. Only 20% of Best-in-Class companies involved these non-cfo officers in the purchase process compared to 39% of all other companies. Finance executives below the CFO level lack the overall responsibility that CFOs have over the entire organization. This limits their ability to successfully purchase, implement, and evangelize the solution since even minor enterprise-wide changes often require executive support. In viewing telecom expenses, over 80% of all respondents had a finance executive who regularly viewed telecom expenses. Since this occurred for both Best-in-Class and other companies, non-cfo viewing of telecom

14 Page 14 expenses is simply a task that specific finance executives are expected to do, rather than a differentiator. In contrast, although 40% of Best-in-Class companies used financial executives to track telecom expenses, 87% of all other companies do this as well and do not realize the same results. Companies that effectively track and manage telecom expenses are more likely to involve top officers in the telecom environment. Although finance officers and executives are definitely capable of having telecom domain knowledge, most finance executives have not developed a strong telecom background. The value of domain knowledge is best displayed through operational departments that achieved Best-in-Class performance in tracking telecom charges (Figure 6). Figure 6: Best-in-Class Functional Departments for Tracking Expenses BIC Others Percentage of Respondents 100% 80% 60% 40% 20% 0% 85% 69% 69% 71% 63% 47% 46% 32% Telecom Finance Operations Procurement Department Tracking Expenses Telecom departments and operational departments are most commonly responsible for the deployment and maintenance of telecom environments. This core responsibility provides them with deep domain knowledge of the service orders, features, functionalities, assets, applications, and business usage that are part of each telecom invoice. By applying this expertise, these departments increase their firm s ability to achieve Best-in-Class results.

15 Page 15 The CIOs Role in Telecom Lifecycle Management Of the C-level officers, the CIO is most associated with the departments that provide Best-in-Class TLM: telecom, general IT, and security. As a result, the CIO has the greatest involvement in TLM out of all the members of the C-level suite (Table 7). Table 7: Executives Involved in TLM Implementations Executive Percentage Involvement Chief Information Officer (CIO) 48% Chief Financial Officer (CFO) 40% Chief Executive Officer (CEO) 34% Chief Procurement Officer (CPO) 22% Chief Operations Officer (COO) 18% Unlike all other executives, the CIO ends up having direct or indirect responsibility over the entire TLM process from vendor vetting to ongoing support. As a result, the CIOs role tends to be necessary in supporting the TLM solution during purchase, implementation, and operational support. However, CIO support in and of itself is not sufficient to reaching Best-in- Class status. This is displayed through the relatively high participation of the CIO in all steps of the process and the narrow gaps between the Best-in- Class and all other respondents (Figure 7). Figure 7: CIO Interaction with TLM BIC All Others 100% 80% 60% 40% 20% 0% 67% 68% 67% 57% Purchase a Telecom Lifecycle Management Solution Implement a Telecom Lifecycle Management Solution 51% 42% Track Telecom Expenses 59% 50% Regularly View Telecom Expenses

16 Page 16 The CIOs Team Thirty-nine percent (39%) of non-cio IT executives are tasked with supporting a TLM deployment. In general, their profile is much like the CIO, where their interactions with TLM are generally expected and can potentially be aligned with Best-in-Class practices. However, much like the story seen with the CFO, there is a significant drop-off in performance when non-cio IT executives replace the CIO in the purchasing decision (Figure 8). Figure 8: Non-CIO IT Executives' and TLM 60% BIC Others 59% 40% 33% 20% 0% Purchase a Telecom Lifecycle Management Solution In companies where a non-cio IT executive takes the lead in purchasing a TLM solution, it is less likely to accomplish Best-in-Class status for reasons similar to the non-cfo financial executive. Without enterprise-wide influence, the purchase is less likely to result in Best-in-Class results. From an operational perspective, the telecom department supported 71% of all respondents' TLM solutions and the IT department excluding telecom was engaged in 64% of all solutions. These departments should be included in all stages of a TLM project from the Request for Proposal (RFP) to fulfillment. Although this seems like an obvious suggestion, our research found that 26% of Laggards did not utilize their telecom department in implementing a TLM solution or in tracking telecom expenses (Figure 9).

17 Page 17 Figure 9: Telecom Department Involvement in TLM 100% 80% 60% 40% BIC Industry Average Laggards 100% 92% 85% 74% 77% 72% 63% 67% 74% 20% 0% Implement a Telecom Lifecycle Management Solution Regularly View Telecom Expenses Track Telecom Expenses For the rest of the IT department, excluding telecom, the numbers tell a different story. From an implementation perspective, a complete IT effort is required to ensure that a TLM solution is properly interconnected to the enterprise resource planning or human capital management software needed to track employees and other IT policies for enterprise software. As a result, 92% of the Best-in-Class had IT staff involved in implementing a solution. However, a different story appears in regularly viewing telecom expenses and tracking and managing telecom expenses. In these cases, IT staff underperforms with only 31% of Best-in-Class using IT to regularly view telecom expenses and 38% to track telecom expenses (Figure 10). Figure 10: Non-Telecom IT Department Involvement in TLM BIC Industry Average Laggards 100% 92% 80% 60% 40% 66% 65% 31% 54% 59% 38% 46% 71% 20% 0% Implement a Telecom Lifecycle Management Solution Regularly View Telecom Expenses Track Telecom Expenses The problem here is that IT personnel are being asked to specifically manage telecom expenses. On the surface, this may seem like a match, but in reality, it makes no more sense than assigning a telecom analyst to

18 Page 18 manage a data center or asking a security manager to start designing applications. In controlling telecom expenses and allocating talent, it is important not to underestimate the specificity of knowledge needed to effectively manage telecom expenses and the millions of dollars that a large enterprise can potentially save by properly managing these costs. The CPOs Role in Telecom Lifecycle Management Twenty-two percent (22%) of respondents involved their CPO in the TLM process. This strategic role is well positioned to purchase enterprise solutions for managing large expenses. Accordingly, over 70% of CPOs involved in TLM held primary roles in purchasing a solution, although there was no Best-in-Class preference. Similarly, 30% of CPOs track expenses with no specific Best-in-Class preference. These findings demonstrate that CPO participation in these practices can be helpful, but are not associated with best practices in and of themselves. However, there were two functionalities where CPO influence showed a conflict with achieving Best-in-Class results (Figure 11). Figure 11: CPO Weaknesses in TLM Implementation 60% BIC All Others 50% 50% 40% 29% 29% 20% 0% Regularly View Telecom Expenses Implement a Telecom Lifecycle Management Solution Similar to the CFOs dilemma, the CPO is not well positioned for the technical project management that is associated with TLM implementation. Both CPOs and non-cpo procurement executives were more likely to be involved in TLM implementation processes that were not Best-in-Class. In addition, the regular viewing and invoice management of telecom expenses is not core to the CPOs role, so it should not be surprising that this executive viewing is not necessarily associated with best practices in managing the telecom lifecycle. The CPOs Team Procurement executives below the CPO level show a slight performance gap purchasing solutions because they lack of corporate leverage. However, their other TLM traits are similar to the CPO.

19 Page 19 As for procurement managers and staff, this operational level demonstrates Best-in-Class preferences in terms of both viewing and analyzing telecom bills and expenses. For example, 46% of Best-in-Class companies that involved their procurement departments in TLM used them to track telecom expenses compared to only 32% of all other companies (Figure 12). Figure 12: Procurement Departments in TLM 60% 40% 38% BIC All Others 46% 34% 32% 20% 0% Regularly View Telecom Expenses Track Telecom Expenses Best-in-Class Strategies There are two top pressures that Best-in-Class companies face in their TLM deployments. First, they are challenged by the escalating cost of telecom assets and services plans. Despite the increasing commoditization of voice and bandwidth, this pressure is being driven by the rapidly evolving telecommunications services that employees are increasingly demanding. These requests include, but are not limited to, remote access accounts, unified communications, video collaboration, mobile data, or new mobile devices. To afford the increasing cost of collaboration, organizations are forced to actively manage and centralize their telecom costs. In addition, Best-in-Class companies are also facing the demand to lower all operational expenses. It is not simply a telecom-specific or IT-specific trend, but a holistic operational trend based on the current economy. However, telecom and network spend needs to be a large target for these demands considering that it consistently shows up as an expense totaling 1% to 2% of all corporate revenues. To meet those challenges of these pressures, there are three top strategies that Best-in-Class companies have pursued (Figure 13): Centralize wireless, landline, and network expense management Improve executive visibility to telecom expenses Reducing total cost of operations for telecom deployment

20 Page 20 Figure 13: Best-in-Class Strategies Laggards Industry Average BIC Centralize wireless, landline, and network expense management 33% 30% 47% Improve executive visibility to telecom expenses 13% 26% 41% Reduce Total Cost of Operations (TCO) for telecom deployment 41% 33% 30% 0% 20% 40% 60% Percentage of Respondents Aberdeen Insights Approaching the C-Suite Although appropriate C-suite participation in TLM is conducive to Best-in- Class performance that can potentially save millions of dollars, it can be a challenge to gain executive attention to TLM. How did executives first find out about their organization's need for TLM (Figure 14)? Figure 14: Best-in-Class TLM Employee-Executive Interaction Others BIC Executive directly approached by staff or manager-level employee 30% 47% Formal process to filter employee concerns to C-Level 7% 14% 0% 20% 40% 60% continued

21 Page 21 Aberdeen Insights Approaching the C-Suite When the executive suite was not already aware of telecom expenses within their organization, Best-in-Class companies achieved executive participation through direct interaction with staff or manager-level employees who identified this expense as having potential for savings. To contrast, more formal processes to "talk to the boss" were much less successful, with only 7% of Best-in-Class companies successfully gaining executive attention through this communications channel. Anonymous s and suggestion boxes can only go so far to enact meaningful change. In the case of telecom, which tends to be a deeply operational expense, direct contact with appropriate executives was necessary to start a process that reduced the organization's telecom expenses by an average of 16 million dollars. In today's economic environment, it is necessary for companies to open up the internal communications channels and receive helpful ideas from all areas of the enterprise. In the next chapter, we will see what the top performers are doing to achieve these gains.

22 Page 22 Chapter Two: Benchmarking Requirements for Success The selection of TLM technologies and implementation of the appropriate internal capabilities play a crucial role in the ability to turn these strategies into profit. Case Study ACCO Brands Acco Brands is a company based in East Texas, PA that is best known for its Daytimer brand of time management products. However, it faced a serious problem in its corporate TLM. There was no centralized and auditable billing process. Employees were expensing telecom bills to individual cost centers, providing no centralized transparency for telecom spend. And despite this complete lack of control, the IT department was expected to support a panoply of new and emerging telecom services. To solve these problems, ACCO first developed a number of polices designed to gain control over their telecom environment. Detailed policies were instituted regarding the types of service plans and equipment that would be supported. These decisions were made based on the corporate need for each asset and service and eliminated requests made solely based on personal preferences. In addition, reimbursements for personal services were cut off if business usage was not itemized. From a technological perspective, ACCO also developed a number of home-grown inventory and expense tracking solutions designed to enforce these policies. Before these changes were implemented, a detailed cost benefit analysis was presented to the executive team to show how ACCO could save at least 25% off their current monthly spend by standardizing plan offerings and consolidating plan minutes while providing updated equipment and services. This combination of cost control and added service value provided executive support to this effort. "Even with the prospect of saving money, getting C-level buy-in is difficult at best, primarily because of policy adherence requirements," noted Stephen Jones, North American Telecommunications Manager for ACCO Brands. "Once they understand the actual dollar cost of exceptions, they are more appreciative of the reasons for implementing policies and supporting them." As a result of this effort, ACCO netted 34% annual savings in its initial year while increasing the number of mobile units in service by 15%. New policies defined appropriate behavior for the use of company provided equipment to reduce unnecessary usage. In addition, there were substantial improvements in breakage and loss of corporate mobile devices. Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each Fast Facts Respondents plan to lower their overall network and telecom budget by 7% for 2009, but increase their footprint by 1% On average, respondents plan to reduce their mobility budget by 6%, but increase the number of mobile users by 3%

23 Page 23 class also shared characteristics in five key categories: (1) process (the approaches they take to execute their daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of appropriate tools and effective deployment of those tools); and (5) performance management (the ability of the organization to measure their results to improve their business). These characteristics (identified in Table 8) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics. Table 8: The Competitive Framework Process Organization Knowledge Technology Performance Best-in-Class Average Laggards Corporate policy to determine employee eligibility for telecom services 80% 58% 56% Scheduled telecom inventory and billing audits 80% 77% 65% Ability to short pay disputed bills 73% 63% 50% Enterprise-wide, cross-departmental strategy to reduce telecom expenses 76% 48% 46% Employee feedback to communicate telecom best practices across the organization 67% 35% 16% Corporate training of best practices in cutting telecom expenses 44% 23% 16% Alerts for call fraud or excessive usage 69% 57% 28% Trouble tickets for disputed charges 46% 41% 32% Reference website containing telecom policies and best practices 69% 42% 35% Role-based analytics for telecom expenses 47% 19% 8% Automated BI dashboards / analytics for telecom expenses 44% 21% 0% Exception reports showing telecom invoice billing errors 54% 51% 28% Guaranteed telecom savings written into TLM solution contract or agreement 50% 28% 20% SLA monitoring for TLM solution 43% 42% 27%

24 Page 24 Capabilities and Enablers Based on the findings of the competitive framework and interviews with end users, Aberdeen s analysis of the Best-in-Class demonstrates key capabilities and enablers that are associated with solutions that have reduced telecom spend by nearly 40%. Process There are three process-oriented capabilities that Best-in-Class respondents achieved to a greater extent than their counterparts: Scheduled telecom inventory and billing audits Corporate policy to determine employee eligibility for telecom services Ability to short pay disputed bills Each of these processes requires its own skill set to be effectively practiced. Scheduled telecom inventory and billing audits require a centralized inventory and a standardized billing and invoicing workflow to be effective. Without these prior processes in place, each audit becomes a lengthy process where the company chases down a decentralized inventory or a neutered exercise where only a portion of the entire telecom environment is audited. However, if companies already have an organized and centralized inventory in place, regular audits become much easier to practice. A corporate policy to determine the propriety of enterprise telecom services is practiced by 80% of Best-in-Class companies. This policy provides for the alignment between business and technology by determining how telecom and communications services are providing business value to employees. Organizations can provide assets and services that are more effective while reducing the total cost of procurement and support. Finally, the ability to short pay disputed bills requires granular tracking of the disputes in question. Without a ticketing or reporting capability, organizations put their services at risk if carriers misinterpret a disputed short payment as non-payment of services. Organizations that short pay must also demonstrate the specific line items being disputed and follow up regularly with the provider to ensure that service uptime will not be compromised (Figure 15). On a monthly basis, telecom expense reports go to all VP level department heads that are held accountable for their telecom expenses. ~ CIO, Retail

25 Page 25 Figure 15: Best-in-Class TLM Processes Scheduled telecom inventory and billing audits Laggards Industry Average BIC 80% 77% 65% Corporate policy to determine employee eligibility for telecom services 58% 56% 80% Ability to short pay disputed bills 50% 73% 63% 0% 20% 40% 60% 80% Percentage of Respondents Organization As demonstrated in Chapter One, there are a number of executive traits associated with Best-in-Class TLM implementations and support. However, there are additional organizational traits that are also associated with achieving success in controlling telecom expenses (Figure 16). Figure 16: Best-in-Class TLM Organizational Capabilities Laggards Industry Average BIC Enterprise-wide strategy to reduce telecom expenses 48% 46% 76% Formal executive commitment to telecom expense reduction 73% 51% 63% Employee feedback to communicate telecom best practices across the organization 16% 35% 67% Corporate training of best practices in cutting telecom expenses 23% 16% 44% 0% 20% 40% 60% 80% Percentage of Respondents

26 Page 26 An enterprise-wide strategy to reduce telecom expenses separates the Best-in-Class from all other companies, with 76% of the Best-in-Class adopting this organizational change versus 47% of all other respondents. To spread enterprise-wide change, there must be a commitment to TLM that goes beyond operational IT. In addition, it is also important to gain feedback from the entire organization. Only 16% of Laggards had employee feedback that ended up communicating telecom best practices despite the fact that these practitioners are best positioned to understand exactly how employees are using telecom assets and services. Finally, formal corporate training of best practices is seen most often in Best-in-Class companies, but only 44% of Best-in-Class companies provide this to employees. In this case, the majority of companies have room to provide additional clarity to employees and potentially improve their telecom savings performance. Fast Facts 40% of Laggards have no plans to institute employee feedback for communicating best practices in telecom 27% of Laggards have no plans to implement a reference website containing telecom policies and best practices Knowledge Management Organizations that lack knowledge regarding their own telecom usage are unnecessarily handicapping themselves in the quest to control their costs. It is surprising to see how many executives are unable to access corporate inventory information. For example, 64% of all respondents possessed centralized inventory management for assets and services, making it the most commonly possessed knowledge management capability. However, this is just a start for companies that seek Best-in-Class results (Figure 17). Figure 17: Best-in-Class Knowledge Management Capabilities Laggards Industry Average BIC Trouble tickets for disputed charges 32% 46% 41% Alerts for call fraud or excessive usage 28% 57% 69% 0% 20% 40% 60% 80% Percentage of Respondents A minority of companies possess trouble tickets for disputed charges. Without this tracking tool, organizations place their own billing disputes in danger if they lack adequate documentation and history to substantiate claims throughout the life of the dispute.

27 Page 27 In addition, 69% of Best-in-Class companies have alerts for call fraud or excessive usage. These alerts can happen proactively through the use of call accounting or mobile device management-based call polling. By gaining realtime access to improper usage, the organization can quickly enforce corporate usage policies. These alerts can also occur on a reactive basis by looking at usage records that are included on a monthly bill. However, by waiting a full month before seeing these usage alerts, organizations place themselves at additional risk to accumulate inappropriate costs. Technology Although it is important to have technological modules that can portray network, landline voice, and wireless spending, these technologies are no longer sufficient to ensure Best-in-Class performance in TLM (Figure 18). Figure 18: Best-in-Class TLM Technologies Laggards Industry Average BIC Reference website containing telecom policies and best practices 42% 35% 69% Role-based analytics for telecom expenses 8% 19% 47% Automated Business Intelligence dashboards/analytics for telecom expenses 0 21% 44% 0% 20% 40% 60% 80% Percentage of Respondents A reference website containing best practices and corporate policies was a clear Best-in-Class practice. By providing employees with a clear source of information, Best-in-Class companies find it easier to manage and change organizational behavior even without executive interaction. In addition, employees find this information useful as it can be leveraged for their own personal phone, cellular, and internet bills. From an analytical perspective, there are two keys to providing useful telecom expense tools. First, the tools provided must be role-based. For example, from an executive perspective, granular call detail breakdowns are less appropriate than monthly trending reports that provide predictive and directional data. Ideally, telecom expense data can also be linked to appropriate business process metrics, such as outbound sales or customer service goals, the efficacy of the communications deployment or identifying

28 Page 28 potential savings. Forty-seven percent (47%) of Best-in-Class companies currently provide these role-based analytics. In addition, these dashboards and metrics must be automated. If this BI source requires significant manual work from a telecom manager or procurement analyst, then these reports become less timely and less actionable. Ideally, key telecom trending reports should always be available in real-time. It is telling that Laggards represent 30% of our respondents, but none of them had automated BI in place for their telecom expenses compared to 44% of Best-in-Class organizations. Even the Best-in-Class have potential for improvement and potential savings. Performance Management There are several capabilities that Best-in-Class companies use to measure the performance of their TLM solution (Figure 19). Figure 19: Best-in-Class TLM Performance Management Laggards Industry Average BIC Reports of billing disputes resulting in credits 54% 60% 77% Exception reports showing telecom invoice billing errors 28% 54% 51% Guaranteed telecom savings written into TLM solution contract or agreement 28% 20% 50% 0% 20% 40% 60% 80% Percentage of Respondents Best-in-Class companies have roughly a 20% greater adoption rate of billing dispute reports resulting in credits. Companies that lack this basic knowledge are unable to create accurate scorecards either regarding their own abilities to effectively dispute telecom charges or their carriers' responsiveness to incorrect bills. In addition, both a slim majority of Best-in-Class and Industry Average companies have exception reports that show telecom billing errors. This capability separates the Laggards from all other respondents, since the bottom 30% of respondents lack current and historical knowledge into seeing if errors even exist. Without this level of visibility, telecom contracts cannot be fully enforced.

29 Page 29 Half of Best-in-Class companies ask for guaranteed savings in their negotiations with TLM vendors or in their internal development of TLM solutions. As previously demonstrated in the Maturity Class Framework, these Best-in-Class companies were promised an average of 24% savings in their total telecom environment, but actually overachieved by realizing an average of 39% savings. Aberdeen Insights The Role of Security In considering the various roles needed to properly implement and support a TLM solution, security is usually not the first role to come to mind. Only 15% of respondents described the participation of security in TLM. However, the results showed a definite prescribed role for security in this process (Figure 20). Figure 20: The Role of Security BIC Industry Average Laggards 100% 80% 80% 71% 80% 60% 40% 20% 0% 0% Implement a Telecom Lifecycle Management Solution 20% 43% Regularly View Telecom Expenses 0% 40% 29% Track Telecom Expenses Looking at all companies that implemented a TLM solution and involved security, none of them were Laggards. This represents a level of thought and consideration for the full extent of the TLM solution that Best-in- Class and Industry Average companies have considered while Laggard companies have failed to understand. On the other hand, it is apparent that security is not the correct department to either view or track telecom expenses. Although there can be some value to looking at the call records and telecom records from a security and compliance perspective, it is more helpful for these personnel to possess the combination of telecom and procurement knowledge that is ideally suited to viewing and tracking telecom expenses.

30 Page 30 Chapter Three: Required Actions Whether a company is trying to move its performance in TLM from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements: Laggard Steps to Success Leverage appropriate functional groups. During TLM implementation, 0% of Laggards used their security department and 10% used their operations department compared to 71% and 64% for Industry Average companies, respectively. TLM is a crossfunctional effort and Laggards must bring all stakeholders to the table during the implementation, development, and policy processes. Develop or acquire exception reports that show invoice billing errors. The organization cannot dispute or track errors when there are no records. These records are the foundation for understanding the carrier's billing error rate and organizational disputes. Without these records, the organization is compromised in its ability to enforce service provider contracts and agreements. Only 28% of Laggards have these reports compared to 51% of Industry Average companies. Install a specific solution for wireless expense management. Forty-eight percent (48%) of Laggards have a wireless expense management solution compared to 60% of all other companies. Wireless and cellular bills are rapidly evolving with the appearance of advanced mobile functionalities such as Location Based Services (LBS) and data services, the increased use of mobile applications, and the myriad of options that exist for calling and data plans. Solutions that are specialized to handle the rate plan optimization and device management needs unique to mobile devices will provide organizations with additional opportunities to realize savings. Fast Facts For Best-in-Class companies, wireless / cellular constituted 37% of their total network and telecom spend For Laggard companies, wireless / cellular only made up 27% of total network and telecom spend Industry Average Steps to Success Develop an employee portal for service and equipment requests. Forty-two percent (42%) of Industry Average companies had a specialized portal for employees. This portal can reduce the workload of overburdened help desk analysts, leaving them free to pursue higher-value tasks such as maintaining service agreements with end users. In addition, these portals can be used to enforce telecom policies by limiting or assigning specific devices and services based both on an employee's role, geography, or access to alternative communications resources. Enforce an enterprise-wide strategy to reduce telecom expenses. Currently, 48% of Industry Average companies have this