BlogFrom TEM to ITEM: Leveraging TEM for Non-Traditional Expenses

From TEM to ITEM: Leveraging TEM for Non-Traditional Expenses

October 25, 2018, Expense Management

As modern IT continues to evolve from traditional asset management to subscription-based management, enterprises are challenged with how to best address the onslaught of new expense categories, like cloud computing, SaaS, IoT and more. In order to properly manage service usage and relate it back to business performance, enterprises are turning to TEM providers, who have the experience, expertise and framework to solve the challenges of managing these new IT spend and asset categories. In this blog, we’ll discuss what’s driving the expansion of these new spend categories, how they align with TEM and best practices for using TEM to manage subscriptions and services.

The Expansion of TEM to New IT Spend Categories 

There are five key areas driving the expansion of TEM-like spend management to the rest of IT: Hosted Telephony, SaaS, IaaS, Internet of Things (IoT), and Utilities. On the hardware side, traditional telephony infrastructure is being replaced by cheaper and easier-to-scale hosted telephony technologies (SD-WAN, UCaaS). Meanwhile, SaaS is driving the overall enterprise software market, transforming the traditional asset-based, large vendor-oriented market into a telecom-like market requiring the management of hundreds of vendors.

IaaS, also known as cloud computing, is also continuing to expand. The free tiers often available from IaaS vendors make it easy for users to create a “free” account. However, these can quickly balloon into an expensive monthly liability that no one is managing. IaaS provides a particular challenge because of this simplicity of sourcing and ease of renewal, as well as rapidly-redefined and new services and a lack of billing standardization.

The Internet of Things (IoT) is expected to multiply by roughly three times over the next four years. These devices require support very similar to the capabilities developed by TEM and Managed Mobility. On a more traditional note, TEM-like cost analysis can also drive efficiency and lower costs in the usage of utilities such as power. This is especially important for organizations with data center investments, which will continue to be an important aspect of enterprise IT for the next 5 to 10 years or more.

As legacy assets and equipment are replaced by SaaS, IaaS, and other leases and subscriptions, IT cost management must become more granular and provide more visibility and flexibility. Enterprises can help achieve this by following the lead of a TEM framework.

How Subscription Management Aligns with TEM

Telecom Expense Management provides a framework that can be replicated and leveraged for managing these new spend categories. The following six core areas (inventory, invoices, users, contracts, service orders and disputes) of TEM can be used to organize the management of IT subscriptions. When used together, they ultimately lead to a seventh category: vendor optimization. Here’s a short intro to how TEM categories overlap with subscription management.

  • Inventory — To accommodate cloud services, inventory definitions have to become more flexible. Because service inventories are more difficult to track, visibility into a variety of data points is increasingly important. Maintaining a well-defined inventory can help cut costs by quickly demonstrating if an organization is purchasing multiple solutions to solve a single problem.
  • Invoices — Matching invoices provides financial visibility that helps better align IT spending with business outcomes.
  • Users — TEM helps sync user identity to a single enterprise system of truth, preventing problems when identifiers change over time.
  • Contracts — Using and measuring service against contracts and agreements is a core TEM practice. To bring a TEM-based perspective to IT subscriptions, contracts need to be part of a centralized repository and accessible to a team who ensures fulfillment of contract terms.
  • Service Orders — Experienced TEM managers find that service orders, invoice processing and inventory should all go together. IT leases should be procured so that service orders lead to a tracked workflow. Each order should correlate with a provisioned inventory item and one or more invoice line items that are defined to a user or owner. The chain of value should be consistent across all IT services.
  • Disputes — Contract and service disputes need to be handled in a consistent fashion across vendors in a specific spend category. This may require coordination with finance or other relevant departments.

When these six areas are practiced, vendor consolidation and standardization is the result. The organization gets clearer on what it is actually using, how to enforce vendor agreements, how to cut costs and how to govern processes. According to Amalgam Insights, by taking a TEM-based approach to IT subscriptions, IT departments have the opportunity to reduce cloud-based expenses by 30% or more. They also gain the strategic visibility needed to treat IT as a profit center and a strategic business differentiator.

Best Practices for Using TEM to Manage Subscriptions

  • Start slow. Start with a single spend category at a time. Each new spend category has the same complexity as telecom. Some of them may have fewer vendors and services compared to TEM, but SaaS may actually provide greater complexity of vendor diversity, invoice templates and service management than telecom.
  • Know who is ordering what. Begin by identifying who manages the majority of spend across SaaS, IaaS, PaaS, IoT, facilities, and/or any other subscriptions that may be relevant for the enterprise-level. This includes key buyers who are outside of IT in departments such as Marketing or Sales Operations.
  • Determine your current level of management across IT spend categories. TEM managers of enterprise telecom environments already have the depth of management needed to support IT subscriptions. Survey the maturity of your current TEM practices and compare to that of your other spend categories. Then, see if your next best step is to integrate with your current solution, augment it or build whole new management capabilities to bring all spend categories into compliance.

To learn more about using TEM for non-traditional IT expense management, download our new whitepaper or watch the Calero World Online session, “From TEM to ITEM: Leveraging TEM for Non-Traditional Expenses.”