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Steps to Shift Your Organizational Focus from Basic Control and Compliance to Spend Optimization

Sep 11, 2019

Let’s think big.

A multi-national company operating in about 1,000 locations spread among more than 25 countries will likely require 30,000 telecom circuits of varying kinds to support perhaps 400,000 phone extensions costing about $150,000,000 per year. Each month anywhere from 3% to 5% of those circuits and phone extensions get added, disconnected, upgraded, downgraded or otherwise changed.

12,900 to 21,500 changes. Who is keeping track of all that? How? And how many mistakes may be made each month? Overcharges, undercharges, charges for disconnected services, services that should have been disconnected but weren’t.

There was a time when telecom expense management (TEM) involved having someone go through all the telecom bills when they arrived and did their best to identify errors. When they did, they saved the company money. When they didn’t, frankly, nobody was the wiser.

Telecom has grown over the past several decades from local phone lines to include sophisticated global wide area networks. So now try to imagine managing all these telecom services on a 430,000-line spreadsheet.

If you could simply create a formula to check for errors it might actually be viable, but that’s just not how TEM really works. It isn’t an empirical science where algorithms can handle it all due to the antiquated billing systems of the telecom vendors and pricing nuances seen in many contracts. TEM is, instead, a combination of software technology to do the repetitive tasks and numeric heavy lifting, followed by human judgement and expertise, all rooted in adherence to well-established best practices. In other words, the right people with the right skills and tools can keep track of what is becoming a complex and fast changing business environment.

To put this into your own context simply scale the numbers to match your environment. In our example, an error rate of 1% turns into about $1,500,000 in unnecessary expense every year. That’s just a 1% estimate. Actual error rates vary widely.

It Gets Worse

If all that went wrong were improper billings, this would simply be a bookkeeping exercise and a periodic review of the bills would be enough, but they are just the tip of this proverbial iceberg.

The bigger challenge is that most organizations don’t have strong processes for de-activating or disconnecting telecom services that are no longer needed. By their very nature, project managers installing new systems or implementing new locations are under pressure to “get-it-done”. Get everything working fast so that a new store or a new office location can open for business. Often, the old system or location will need to stay connected for a few more months so nobody is concerned about “get-it-undone”. Turn off the circuits at the old location you’re moving out of. Shut down the services that were used by a now-defunct system. Reduce the number of trunks servicing a location you’ve just downsized. It happens with startling regularity.

Historically, nobody lived at the intersection of IT operations and Finance. That is rapidly changing. IT Finance titles at large enterprises are seen with increasing frequency to combat rogue spending and maximize savings opportunities. It’s no longer an option and must be someone’s responsibility.

It Doesn’t Stay Fixed

Traditionally, audit engagements with TEM experts were a periodic event. Sometimes it was annual. Sometimes it was any time someone suspected that they were paying for unused services. The problem with this approach was that the 3% to 5% churn rate continued to occur, creating new unnecessary expenses every month.

Also, unless you’re a telecom carrier, you’re probably not equipped or staffed to be in the business of maintaining the lifecycle of telecom circuits, so every new order or change is an opportunity for another disaster to start growing.

Spend Optimization

If someone is tasked with staying on top of your telecom inventory, every contract, every circuit, every line, every user, it is likely that the savings realized would exceed whatever you spend on that someone. As much as 20-30% of spend in most instances. Especially if that someone whose primary expertise is optimizing telecom expenses.

That is why MDSL offers telecom spend optimization services. We start with a comprehensive audit of your telecom inventory to ensure you only pay for the circuits and bandwidth you need and not more. We then benchmark your contracts and help you negotiate better rates in line with the market. To sustain the savings, we handle your telecom change processes so we’re always aware of everything going into your environment. We constantly poll your budget owners to assure that they still need the services they have spending on. Our software consumes all your telecom billing, collates, categorizes, and produces information that our expert staff can explore, investigate, and use to resolve billing inaccuracies and optimize inventory thus saving you significant amounts of money. (Think about that $1,500,000 per year and realizing over 20-30 times that with all the right software and expertise in place…)

For more information about MDSL's spend optimization services, contact us today.

Written by Felix Lau