AKJ Talks to the Financial Times

As awareness grows about the importance of having a sound Telecom Expense Management (TEM) strategy, the FT reports on TEM in its November Digital Business Special report.

Fight to control a ‘loaded gun’ By Ingrid Lunden

The business world might have come far in its use and management of communications, but there has been very little movement in one crucial area: controlling costs.

Perhaps this is partly due to the fact that telecoms expense management is starting to mean different things in different parts of the world; and because the kinds of businesses claiming to offer TEM services have consequently adapted to their environments.

Ironically, the US, one of the biggest markets for advanced communications services, seems to be one of the biggest hotspots for mismanagement. In the US, the TEM debate has hardly advanced beyond the basic items of bill itemisation and checking.

According to one TEM vendor, before the break-up of telecoms giant Bell, most companies received one bill. They now receive bills from various service providers, covering different regions and aspects of service – sometimes up to 100 different bills.

With such a volume and with error rates of between 8 and 12 per cent, a typical enterprise spending $125m annually on telecoms could be losing $14m a year. Large customers spending $1bn on telecoms annually, could face up to $120m of potentially incorrect costs.

Some blame the telecoms operators for TEM’s lack of progress. Next-generation networks are starting to evolve but even those operators that are investing in IP core networks and the technology that will make data management more efficient can still have as many as 40 legacy billing systems. “It’s such a daunting task for them,” says Alan Gold, chief marketing officer at Avotus, a vendor of TEM solutions. “Carriers would rather be spending their money on other sorts of things. Billing has not been a priority.”

Carriers, on the other hand, blame enterprises and how they buy comms services. “The budgets for mobile services and fixed/IP data services still come from different parts of the organisation,” says Derek Austin, a marketing director at Orange. He says this keeps operators from being able to sell more cost-effective converged solutions.

“But with IT departments becoming more involved in mobile IT services, and a growing focus on cost management, we see them getting closer,” he adds.

In some markets, such as the UK, TEM vendors say their jobs have evolved from basic accounting into a consulting role, helping businesses decide on future investments as a way of tackling costs.
In some regions a company can expect just one bill for its monthly comms services – or at the very most, three, for voice, data and mobile, says Matt Atkinson, the managing director of Aurora Kendrick James, a TEM firm.

The company was behind the recent news announced by McDonald’s in the UK that it would offer free Wi-Fi hotspot access in all of its restaurants. McDonald’s claims roaming workers can save hundreds of pounds using this facility.

But the public service is just the tip of the iceberg, says Mr Atkinson, since the bigger deal is that McDonald’s has also bought into a wireless solution that it is using primarily for its intra and extra restaurant communications.

Even in the more slowly adapting markets, help appears to be at hand. TEM vendors are increasingly selling software that helps at least automate the checking of the bill. With telecoms costs being so high, chief financial officers are taking more notice and companies are starting to approach the problem in strategic ways, by implementing solutions such as voice over internet (VoIP). This is also making operators more sophisticated about how they sell services.

AT&T says its contract last year with General Motors is not just about cost savings. “It’s a transformation of the business,” says Lloyd Salvage, vice president for global segment marketing. “Cost savings can only happen so many times. Otherwise you get into a downward spiral and you hit the floor. At some point you need to go into a transformation/transition activity.”

Indeed, Mr Atkinson at AKJ points out that typically an enterprise will expect to reduce its comms budget by 10 to 15 per cent each time a contract is renewed.

For carriers and vendors, escalating costs help them to sell next-generation services and equipment, especially in areas where costs have risen sharply, such as mobile services. While enterprises complain about high charges for data services, notably when roaming, it is still voice charges that concern them most. “When you hand over a mobile device to a worker, you are handing over a loaded gun,” says Mr Salvage. “The person responsible for that budget doesn’t have a clue what will come back at the end of the month.”
Mr Atkinson at AKJ says one client had a user who ran up a £600 bill for a single mobile data call. “The user was unaware, thinking it was part of the plan.”

Personal use of work phones is another issue: “Most commonly we are seeing 20-25 per cent of a telephone bill for personal use. There’s no visibility or accountability for it. It’s one area where you allow employees to spend.”

OnRelay, an IP voice vendor, claims that between 50 and 80 per cent of enterprise telephony is conducted over mobiles yet this is not reflected in corporate investment in telecoms: “There is all this talk about Skype, but in truth there has been a very small take-up of free VoIP. ‘Free’ services exist but if they don’t function in ways that people function it won’t work,” says Marie Wold, OnRelay’s president and CFO. “If you map usage of something like Skype compared to mobile, it’s very small right now. People will always pay and have paid a premium for the convenience of the mobile phone.”

Orange’s Mr Austin says that while he is seeing growth in BlackBerry, mobile e-mail, and data card usage, “the vast majority” of revenue is still for voice traffic.

“The larger companies are keen to consolidate first their voice bills in their respective countries,” says Philippe Bernard, executive vice president for Orange Business Solutions. “The main expectation is to get cost control on that. The big companies today are not prepared to take central decisions on data functions.” He says this is because data usage still varies and is linked to IT.

Mobile carriers have for some years been working in alliances to provide seamless services at least to give corporations better control over their roaming charges.

Individual operators are also trying to do their bit to help with cost management. Orange, part of the Freemove alliance with T-Mobile, TIM and TeliaSonera, has started to offer different services to keep its customers informed about what they are spending. These include dashboards on laptops, providing details on bills, such as domestic data versus roaming charges, and even identifying items that might need specific attention.

But it does not go so far as to suggest which operator might provide the best rates in a particular scenario: “Customers need more advice on costs, but we’re not inter-ested in the humanistic approach,” says Orange’s Mr Bernard. “We would like to optimise the bill and to keep that customer with us.”