Telecom Expense Management – A Case Study in Reducing Spend

Looming on the horizon were pressures to prepare the telecom function for upcoming merger activity, streamline current processes, and meet Sarbanes-Oxley requirements. Acknowledging these concerns, but unsure of how to best address them, the not-for-profit HMO with over 1 million members turned to AnchorPoint to develop a solution that would net immediate cost-savings as well as to arm the company with a technology-enabled process that would ensure long term Telecom Expense Management (TEM) success.

Defining Telecom Expense Management (TEM)
According to Gartner1, Organizations can routinely save more than 10 percent of their annual telecommunication expenses by systematically checking their carrier bills against equipment and services in use. Best practices include implementing telecom expense management packages.

Telecom Expense Management (TEM) is the integration of knowledge and technology to create the tools and processes that manage, control and forecast the costs and expenses associated with enterprise voice, data and wireless networks.

In this context knowledge refers to a expertise in performing network audits, resolving vendor billing problems, identifying the most cost effective service alternatives, negotiating vendor contracts, and redesigning business processes.

TEM knowledge is a specialty. This specialty is similar to the knowledge possessed by a tax accountant, whose experience in a certain industry or knowledge of certain complex tax laws produce a better result – say, a lower tax bill, than someone without special knowledge of that industry or set of circumstances.

TEM technology refers to an integrated set of applications that creates streamlined, efficient processes for maintaining accurate inventory, processing vendor invoices, facilitating business analytical reporting and dashboards, providing complete chargeback information to end users and delivering cost trend analysis.

On average customers who implement TEM solutions can save an average of 10% - 40% of their annual spend when combining results from automation, chargeback visibility, and process improvements.

Where to Begin – An Approach to TEM
At AnchorPoint we strongly believe that a successful TEM solution begins with understanding a client’s specific business needs, and results in the development and implementation of an integrated people, process and technology solution that is aligned to those needs. Our approach ensures that our clients’ solutions are implemented in accordance with business priorities, maximize the use of internal and external (outsourced) resources, and yield maximum results.

During an initial on-site assessment at this leading health insurance provider, AnchorPoint focused on assessing the processes currently in place to manage telecom expenses. Existing documentation and analysis provided us with the information needed to effectively project cost savings and efficiency gains as well as benchmark this client against others in their industry.

AnchorPoint’s consulting methodology centered on defining the specific metrics associated with the customer’s goals and objectives so we could design a solution that enabled them to achieve their goals and easily measure progress along the way.

With facilitated input from a cross-section of internal staff, AnchorPoint and the organization determined we would focus on the following strategic goals:

• Implement a TEM solution that will enable the effective incorporation of other entities acquired through merger and acquisition activity.
• Assess and define the process improvement, contract audit and on-going cost savings potential that will result from solution implementation.

During this process specific, operational objectives were mutually developed that included reducing the overall cost of telecom services; establishing a common centralized technology platform for voice, data and wireless cost management; allowing staff to focus on core competencies and providing data-gathering/ business case analytics capability to objectively evaluate VoIP.

After setting and documenting strategic and operational objectives, our focus was two-fold. In a coordinated effort, we focused on the assessment of our client’s telecom management processes, and on auditing their current contracts.

With input from the “process operators” the current process was documented and benchmarked against best practices. The result was a future TEM -supported process that met or exceeded the client needs while optimizing process performance. At the same time, AnchorPoint’s Contract Audit Team focused on gathering current contract data and analyzing it against our database of contract market rates for companies of similar size and needs. The contract audit savings we found were significant and, as typically occurs, were used to self-fund the overall TEM solution purchase and implementation.

The efforts of both teams were later combined into a single, concise deliverable that calculated both financial and non-financial savings. AnchorPoint was able to project the client’s savings using data from our large customer base, external data sources including studies from Gartner and Aberdeen, and specific information gathered during the client’s initial discovery. These projected savings represented ongoing savings in addition to the more immediate savings that are typically found when a contract audit has been conducted.

Solid Improvement Opportunity Throughout the Organization

With TEM goals clearly defined and the required information gathered, AnchorPoint’s consultants conducted a thorough analysis of the organization’s infrastructure, contracts, resources and processes. Six areas of significant improvement opportunity were identified.

1) The greatest benefit of the AnchorPoint TEM solution was the use of a centralized technology platform and processes to manage telecom. The client was using spreadsheets and email to track and control voice, data and wireless. Although effective for getting the basic job of ordering and operating telecom services accomplished, current processes and spreadsheets did not provide telecom management with the tools needed to effectively analyze and truly manage telecom operations. Existing manual processes and procedures were not sufficiently scalable to support the larger operation expected to result from merger activity.
Current manual processes caused significant inefficiency and potential for error, made reporting and management difficult, and prevented the efficiency and effectiveness gains that were enabled by an integrated system, central database and business analysis capabilities.

The client benefited immediately from AnchorPoint’s centralized database and application, particularly in the tasks of processing services requests (MACD), auditing invoices against inventory, and the use of AnchorPoint’s data warehouse for reporting and analysis. Future benefits include chargeback opportunities.

2) AnchorPoint software provided the ability for Telecom personnel to manage invoices by exception, increasing the efficiency and effectiveness of invoice management. Due to a lack of management tools, Telecom personnel were forced to first manually process invoices and then look at available data to find problems (exceptions), leaving little time to effectively address and resolve identified problems. AnchorPoint software enabled personnel to work from system-generated exceptions, eliminating time spent searching for problems.

3) Current invoice auditing processes manual (no automation) making the detection of smaller invoice errors ineffective. Considering the volume of invoices processed, current auditing was adequate for catching most large errors. The small errors, shown in most industry studies to add up to greater dollars over time, had not been identified by the existing processes and spreadsheets.

4) The client used a number of disparate spreadsheets and e-mail to track, monitor and control telecom expenses, offering extensive opportunity to centralize and improve database quality and usefulness for analytics. AnchorPoint’s TEM provided a central database for telecom information, enabling improved auditing, better information for contract negotiation, improved financial tracking and compliance, , and access to information for improved analytics, reporting and alerts. AnchorPoint’s comprehensive database enabled our client to capture, analyze and use more telecom data to support real-time decision-making.

5) The client had difficulty implementing a detailed chargeback system with their current telecom spreadsheets.. AnchorPoint’s TEM asset ownership assignment and usage-based chargeback services enabled our client to more effectively manage and reduce telecom spend by creating an accurate inventory of voice, data, and wireless assets and respective telecom spend.

6) There was significant opportunity to reduce contracted rates. AnchorPoint was able to identify an average of 25.4% savings on current contract rates.

Solution Design and Implementation
After gaining agreement from our client as to specific benefits and projected cost savings, AnchorPoint’s Professional Service Team used our Consulting Team’s Solution Profile, a detailed document including the key elements outlined below, to configure the AnchorPoint TEM Application to work effectively with re-designed processes, as well as to create and execute a detailed project plan.

AnchorPoint delivered the client a TEM Solution Profile defining a solution that maximizes the effectiveness of people, process, and technology. AnchorPoint’s Professional Services team, using the Solution Profile as a Guide, followed the implementation methodology and managed to implement the application in accordance with our client’s specific business needs on time and on budget.

AnchorPoint applies its expertise and solution approach to meet our customer’s unique TEM needs and requirements working with them in selecting the delivery approach that best meets their operating needs and preferences.

AnchorPoint’s comprehensive TEM software solution suite designed to reduce time and automate functionality for this client included: Decision-making graphical Business Analytics support tools, Usage and Cost Management, Asset & Inventory Management, Financial & Invoice Management, the AnchorPoint Communications Intelligence Platform, and Contract Requirements Automation & Sourcing.

Results

The cost savings that resulted from the initial contract audit and implemented solution amounted to more than $1,500,000 annually and could be broken down into the components below:
1) Process Optimization Savings: The results of process optimization enabled by AnchorPoint technology “freed up” one full staff member’s time to spend on analysis and problem-solving versus invoice processing. As typically occurs, the results in this case were the more effective use of resources versus a resource reduction, and we did not attribute a dollar figure with this savings.
2) Contract Audit Savings: We initially identified an annual contract savings of $974,088. After assisting the client with the implementation of our recommendations, we exceeded the initial figure by approximately $100,000 annually.
3)On-going Telecom Spend Reduction Cost Savings: AnchorPoint was able to achieve the following annual savings in the categories of: Invoice auditing ($71,350); Business Analysis ($214,000); and Chargeback Visibility ($257,000)

Reporting and cost control were also vastly improved with the new solution. By using the various Key Performance Indicators (KPIs) available through tools like AnchorPoint Business Analytics’ dashboards--such as speedometers that track how the telecom group is performing against its annual budget-- the organization is now able to establish financial controls and gain the visibility into expenses to comply with Sarbanes-Oxley without the need for extensive processes.

The success of this project was secured in its early stages. By determining goals and objectives up front, and conducting a thorough assessment of the current environment, AnchorPoint’s consulting group identified and addressed the gaps, holes and leaks that were causing the most pain. And the resulting solution will result in exceptional savings for years to come.

1Source: Gartner, Geoff Johnson, 2005