How CFOs Can Plug Telecom Spend Leakages

Telecommunications has become the operational backbone for any large organisation in Asia to succeed. Over the last many years, IDD tariffs have dropped significantly and Internet access has become a necessity.

 
More and more business applications are now IP-based and are putting large demands on network bandwidth. Most of all, the explosive growth of smart mobility devices in corporate Asia has meant that IT managers must now find ways to more effectively manage this untethered communications network. 
 
What does all this mean for the CFO? 
 
From finance’s perspective, it means that telecommunications expenditures are rising at an alarming rate year on year. Take mobility as an example. According to a recent study by US wireless network operator iPass, 42% of global enterprises surveyed believe that mobility costs would likely outpace inflation, with an increase of at least 5%, in the coming year while 30% believe costs would increase by more than 10%. 
 
This is not surprising since companies are quickly adopting smart mobility devices as a way to improve worker productivity and empowerment in the field through their messaging and application capabilities. As a result of these initiatives, enterprises are quickly finding out that increased productivity and empowerment comes at a significant cost.     
 
Finance challenges
For the CFO, several factors make telecom expenditures particularly challenging to manage:
 
  • Sheer volume of monthly telecom bills. A recent project engagement by StrateValue with one of the largest banks in Malaysia garnered roughly 25,000 pages of invoices on a monthly basis from the company’s voice expenditures alone.
 
  • Technical nature of the telecom industry. Business managers do not always have the right knowledge to scrutinise and monitor telecom expenditures
 
  • Constant flux in telecom expenditures. Trying to track all the changes that go on within the organisation or tracking the changes in products and services from each telecom service providers is a constant struggle
 
  • Sparse details in telecom expenditure reporting. This is typically done at the summary level and does not give business managers the ability to drill down to scrutinise the line details
 
A more holistic and practical way to manage these expenditures is clearly needed in order to fully manage and control this runaway expenditure.
 
What is the solution?
Telecom Expense Management (TEM) and Mobile Expense Management (MEM) have been gaining traction in Asia Pacific over the last several years as the way to rein in telecom costs. With more businesses shifting their investment focus to Asia as the growth engine for their global ambitions, the need to remain cost-efficient, and thus profitable, becomes even more important. 
 
Considering the disparate geographical, regulatory, cultural, and diverse telecommunications offerings within Asia Pacific, managing the diversity and complexity of telecom expenditures across the region becomes a mammoth undertaking in itself. As such, many CFOs have identified TEM and MEM as the means to gain control and increase visibility in this runaway expense.
 
Over the past several years, this interest in TEM/MEM have prompted global solutions providers like IBM, CSC, Cable & Wireless, Accenture, and Vodafone as well as ‘home-grown’ Asian companies like Eastcom Systems to develop regional and local expertise. Their technology is designed serve multinational and Asian enterprises alike.       
 
TEM and MEM are two telecom cost management disciplines that bring forth financial visibility and business process improvements into all aspects of an organisation’s voice, data, and mobile expenditure. They deliver incisive analytics and financial cost reporting in addition to cost savings recommendations on how to reduce and sustain an optimised level of telecom expenditures moving forward. 
 
Case studies
Typically, the financial gains achieved from deploying a proper TEM and MEM solution can range anywhere from 10% to 35% of an organisation’s annual telecommunications expenditure. The key to achieving these financial gains is to increase spend visibility into where and how every telecom dollar is being spent and to identify all spend leakages within that lump sum that is being paid out on a monthly basis. 
 
Examples of spend leakages can be found in the form of service provider billing errors, excessive mobile roaming, unfavourable contracted IDD tariff rates, and even internal corporate process inefficiencies.
 
To cite a recent example, the administrative department of a global bank that has its regional headquarters in Singapore recently negotiated very low IDD tariffs with its local telecom service provider. However, this information was not disseminated to the IT department in charge of the office’s PABX system, which provides IDD lines to staff using a single access number.
 
Without being updated on the new contractual terms, the IT department had configured the PABX to use IDD services that were more expensive than what was negotiated by the administrative department. Only when a telecom bill audit took place by a TEM service provider was this discrepancy uncovered.   As a result, the bank overspent roughly S$60,000 (US$46,700) in IDD costs over a span of six months. 
 
Another common spend leakage pertains to cancellation of services. The bank in the above example had moved offices and had cancelled its ISDN trunk lines at the old location and re-subscribed the same service at the new one. Unfortunately, the account manager at the telecom service provider never updated his internal system.
 
The bank continued to be billed for telecom services at old location for another six months before a bill audit uncovered the discrepancy. This leakage alone cost the bank S$70,000 over six months. (The bank asked for a refund, but it took the telecom company six months to investigate and return the payment.) As can be seen, the aggregate savings from the many areas of telecom expenditures can be significant.     
 
What to do?
Get advice from a TEM or MEM service provider on how to get started in taking control of that runaway telecom expenditure. A reputable TEM and MEM service provider will typically guide you into taking the initial steps to achieve immediate savings from tackling the low hanging fruits. 
 
The TEM /MEM solution providers listed above are a good place to start in identifying the right partners to kick-start the process. Depending on the delivery model, the established TEM / MEM solutions providers will be flexible in deploying the services or technologies that best fits your business. 
 
The options include an on-premise license solution, where the customer purchases the software licenses and deploys the TEM /MEM technology in-house. Or it could be a fully managed services arrangement, where the customer provides all the billing and corporate data to the service provider. In turn, the service provider will deliver to the customer monthly summary and detailed and recommendations reports on how to reduce its telecom expenditures moving forward. 
 
Ultimately, organisations that have adopted TEM and MEM practices are finding out that they are sitting on a mountain of savings that they would otherwise not have seen and each dollar recovered is profit that goes straight to the bottom line. For the TEM and MEM providers, achieving immediate savings results in the customer developing confidence in the programme – and willingness to tackle more difficult telecom expenditure issues.
 
About the Author
Peter Hum is Founder and Managing Director of StrateValue, a business accelerator and thought leadership advisory firm based in Singapore. He has more than 18 years of international business and global telecommunications experience.
 

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