BlogROI for Telecom Expense Management: A Framework to Develop the Business Case

ROI for Telecom Expense Management: A Framework to Develop the Business Case

August 25, 2016, Expense Management

ROI is More than Fixing Billing Errors

When challenged to provide a business case or justify the return on investment (ROI) of implementing Telecom Expense Management (TEM), IT and telecom executives often focus more on hard dollar paybacks – such as refunds for billing errors. However, it is more accurate and impactful to consider additional benefits that are often overlooked such as the productivity benefits that result from having increased bandwidth (in terms of people) or better performing mobile devices – but typically, organizations have a difficult time quantifying or reporting on these gains.

What the Analysts Say About Telecom Expense Management ROI

Here are three different takes on how to estimate TEM ROI:

  1. AOTMP research shows on average, fixed TEM programs generate 7.7% in annual savings and mobile programs achieve 9.4%.1
  2. Blue Hill Research states “Successful CLM practitioners can reduce direct communications costs by 15% or more while simultaneously reducing in-house labor to process invoices.”2
  3. The Technology Expense Management Industry Association (TEMIA) reports that initial hard-dollar savings can be as high as 15%, while cost avoidance against future spend can drive that number upwards of 30%.

While the numbers from each analyst group vary slightly, it’s clear that organizations are realizing an ROI. The difference is likely caused by the variables they use to calculate ROI for a telecom expense management implementation.

TEM ROI Framework

According to TEMIA, tracking ROI and building a business case for a TEM program addresses changes across four main categories:

  1. Telecom Savings – resulting from fixing billing errors, reducing spend
  2. Labor Efficiencies – reallocating resources to higher IT functions in light of automation, consolidation and help desk resources
  3. Indirect Savings – comes from improved policies, workflows, and decision making
  4. Security Compliance – enhancements and increased adherence to mobile policies resulting in decreased risks and costs associated with security breach

TEMIA has created a worksheet that helps organizations create the metrics to help you understand the true savings that can be achieved within each of these categories.

Below is a summary of potential savings based on their report:

Savings Category Potential Savings
 
Spending less on telecom services
Recovery of refunds for billing errors 2% – 15% of expense
Cost avoidance by reducing future spending 5% – 30% of expense
Labor efficiencies
Automation, consolidation & helpdesk FTE re-allocation to high-priority initiatives
Indirect savings
Improved procurement policy, workflows and decision making 1% – 3% of expense
Security
Security enhancements, global compliance, application of mobile policy and accounting rules globally Likelihood of a breach X cost of lawsuit or penalties

TEMIA’s report, TEM, WEM and MMS Programs: Developing a Sustainable ROI, Cost Justification and Business Case, goes into deeper detail on how to align savings calculations with corporate policies as well as provides practical approaches on how to realize these benefits. It also has a good worksheet to help you baseline where you are today, so you can best calculate your potential return on investment.

The full report can be downloaded here.

Is Your Job at Risk?

If you’re reading this and are becoming concerned your job is at risk, don’t worry. According to Blue Hill Research, organizations rarely let go of personnel after implementing TEM programs, but rather, they reallocate these “cost-savvy employees to higher-value IT procurement, mobile, WAN strategy or project management roles.”

To help calculate labor savings, Blue Hill Research suggests:

“TEM as a managed service typically allows organizations to gain 1 FTE (Full-Time Equivalent) of labor for each 1,000 mobile devices or 2,000 circuits and land lines managed when help desk, invoice processing, line-item audits, service orders, payments, and billing disputes are considered.” 

When Do I Begin Seeing Savings?

With most TEM programs, returns on hard-dollar savings typically start right at the beginning of the engagement. Year one will be where most of those optimizations and efficiencies will be discovered. However, when calculating the overall value, it’s important to take the length of the whole program into account. Gartner reports that “Cost optimization, coupled with business process transformation and growing resources in digitalization, is a key focus for many large and multinational corporations which often seek ROI within two to three years for net-new contracts on TEM deployments.” 3

The Cost of Delaying a Program

But don’t forget to consider the cost of not doing anything – or delaying a decision. When looking at ways to reduce telecommunications and IT expenses, there can be hard costs associated with not acting. Carrier contracts are increasingly limiting the allowable time for customers to file claims for refunds – typically six months for long distance services and two years for local billing. Also, telecom Service Provider Contracts are becoming increasingly stringent on the time allowed to file a claim for billing errors.

Ultimately, the cost justification process should focus on areas that add value for the organization. Cost avoidance savings are an important part of justifying a program and evaluating its ongoing performance. Labor efficiencies, indirect savings and security considerations are also important considerations for the business case.

The moral of this story is to move ahead on TEM initiatives. Build your case across the four areas to gain a truer sense of how your organization will be impacted. There are more dimensions to ROI than just lowering your telecom bills. That is a great start, but a successful TEM program can drive improvements across the organization in terms of improved decision making, productivity, security, and innovation.

Sources:

  1. AOTMP: Research Paper – Going Beyond Invoices and Expenses, September, 2015.
  2. Blue Hill Research: Research Paper – The Evolution of Communications Lifecycle Management, June 2015.
  3. Gartner: Research Paper – Competitive Landscape: Independent Telecom Expense Management Providers, 2016