Telecom expense management services cut costs, boost WAN efficiency

Manual management of telecom expenses is too old school. Network engineers tasked with managing their wide-area networks more efficiently and at lower cost should consider telecom expense management software and services. Savings of 10% to 30% are possible within the first year.

Telecom expense management software and services are critical elements of wide-area network (WAN) management that can reduce costs and improve efficiency.

"It depends on where you start and how bad you are right now," said Lisa Pierce, president of consultancy Strategic Networks Group LLC. "There are still companies that have not centralized their wireless services and don't know what they have in network inventory. They're a mess. These include large retail companies and holding companies that have many acquisitions. The cleanup process [of telecom expense management] can yield a lot, as much as 10% to 30% in annual savings."

WAN management isn't just about good engineering. Sound business management is critical, particularly when it comes to provisioning new WAN links, maintaining an inventory of the network services already in the WAN, and auditing the invoices of network services providers. As many network managers will attest, the charges on a network services bill don't always match up with what the enterprise has contracted for and received.

"You will find that 7% to 10% of bills usually have errors," said Laurence Guihard-Joly, IBM's vice president of integrated communications services.

Manual telecom expense management doesn't cut it

Many enterprises have historically approached all telecom expense management (TEM) manually -- if they're applying any sort of rigorous process at all.

"Historically, telecom expense management has been very manual," Pierce said. "It was not something that was very planned for. And also, it was seen [by network managers] as a financial function, so they ignored it. And finance didn't see it as a financial function or they would have automated it. No one ever took a look at it."

When an enterprise does finally decide to get rigorous with telecom expense management, the consultant or software vendor it hires will find some pretty old-fashioned approaches to managing a high-tech expense.

"For the most part, the majority of clients have been either paying a bill straight or they have a part-time person monitoring it and checking it," said Kameron Chao, global sales leader for IBM's TEM practice. "And once in a while they bring in an auditor, or they try to do annual or quarterly inventory cleanups. But the challenge for that is that it is extremely manual and inefficient. If there is any issue with an inside system, whether for a wireless device or a T3 line, there's no proactiveness of trying to manage that. An inventory goes out of date the day you do it."

Benign neglect gives way to managed services, software and consulting

For years, enterprises treated with "benign neglect" the telecom expenses associated with WANs and other network services. Pierce said that era is coming to a close as companies become more savvy.

Now, enterprises typically acquire TEM services in one of three ways, she said. They buy TEM software, they subscribe to TEM software delivered through the software as a service (SaaS) model, or they hire a professional services firm.

Depository Trust & Clearing Corporation (DTCC), which processes securities transactions across the globe for leading financial firms, engaged with IBM's telecom expense management consulting and managed services last year. The company processes $1.88 quadrillion worth of securities transactions per year, mainly across its SMART (Securely Managed And Reliable Technology) network, a multi-carrier, secured WAN that banks and brokers across the Untied States and 117 other countries use for transactions. DTCC manages the SMART network end-to-end, including the circuits and the equipment. However, it buys the network links from a variety of network service providers.

DTCC expects to reduce telecom expenses by 20% annually, according to Mike Obiedzinski, the company's vice president of network technology.

"We wanted to automate some of our more manual processes, which included invoice processing and circuit provisioning," Obiedzinski said. "And the second most important factor is that we know from experience that you have to stay on top of the various telecom carrier providers due to inaccuracies in their billing processes."

DTCC's management of telecom expenses had historically been very manual. The company would receive invoices from more than two dozen carriers and process them through its accounting department.

"And on the expense review, we did periodic spot-checks," Obiedzinski said. "Now, we've moved to a process where on a monthly basis invoices are compared to inventory, and exceptions are flagged."

Telecom expense management starts with a good inventory

Working with IBM, Obiedzinski and DTCC established an inventory of all the company's network links, wireless network services for employees, an internal corporate WAN, and an Internet-facing DMZ network.

Once DTCC and IBM had itemized all the circuits and lines, they itemized all the associated billable accounts and built relationships between the inventory and invoices. The third step was to gather all the contracts with network service providers and enter them into a database. IBM's managed services tracks DTCC's invoices and compares them against inventory and provider contracts to make sure no discrepancies arise.

"[TEM is] doing two things," Obiedzinski said. "Everybody in this day and age is under budget pressure. So it's allowed us to reduce and optimize our operating expenses. Secondly, since we manage the network to our [SMART network] participants and they get billed for those services, it's allowing us to directly reduce our customers' expenses because we do a kind of pass-through model. However we can reduce our own expenses gets passed through to our customers."

The provisioning of telecom network services has also been simplified for DTCC's networking team. Before the IBM implementation, the company had an individual provisioning process with each of the dozens of carriers it worked with. Through IBM's managed services, DTCC now provisions WAN network circuits via a portal.

Economy and investment in other areas will push more TEM

IBM's Guihard-Joly said the increased adoption of unified communications and collaboration technologies, particularly voice and video, will continue to push adoption of telecom expense management services and software, not only because these technologies demand more from networks but also because enterprises need to squeeze money out of the WAN budget to pay for them.

"TEM is still more common for much larger companies, because they can afford it," Pierce said. "In midsized companies, I don't think it's happening on a regular, disciplined basis as often as it should. There is still room for companies and organizations to become much more disciplined through the use of these tools."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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