Traps to avoid when outsourcing your telecom expense management to a TEM provider

Benchmarking is an important tool in telecoms expense management (TEM), there is no question about that. It helps companies to make considerable savings, and offers a valuable insight into an increasingly competitive marketplace. Who doesn’t want to know how much their competitors are paying for their core services?

It may seem like a ‘win-win’ situation as it makes the outsourced TEM provider look good and supplies the client with a saving, but in reality you are being ripped off.

But before you hire a third party TEM provider to benchmark your network expenses, you better be aware of the traps to avoid when outsourcing a network expense benchmark.

It is the job of the TEM provider to supply you with the right rates in line with your competitors, as well as letting you know how you compare in terms of calibre, footprint, services, and spend.

Every TEM provider will claim to offer you game-changing insights and a better deal on your network charges, and this may well be true. But your company shouldn’t settle for a ‘better’ deal – you should be demanding the ‘best’ deal.

When you outsource any of your services you are always going to run the risk of getting inaccurate, incomplete or just straight up bad advice – after all, how can any third party company know your business as well as you do? But the upside lies in the industry knowledge that independent TEM providers bring to the table. It is for this reason that small, medium and large corporations turn to third party TEM providers again and again when it comes to benchmarking.

So what are the dangers?

Danger 1 – By focusing on other customers’ deals, you are missing your *best* deal.

Most third party TEM providers compare their customers’ rates against other customer rates within a similar industry or sector. That’s fair enough, but in reality the major carriers align their customers into verticals (e.g. the financial vertical, the automotive vertical, etc). Each of these verticals are then managed by one senior manager who sets a standard pricing structure across the whole category. When you look at it this way, the fact that your rates align to another customer’s becomes irrelevant – you want your rates to align with the very best deal across all verticals.

A good TEM provider will therefore look at the carrier’s full line of products and clients and analyse their real cost basis to come up with the cheapest price for your desired level of performance. You should end up with the best price possible, irrespective of your vertical.

Danger 2 – No incentive for bigger savings

The outsourced TEM provider’s job is to prove that they are making costs savings to the management team that retains them. These contracts rarely include any stipulations regarding the expected or desired level of savings, so it makes no difference to them if they come back with a 1% saving or a 10% saving. Without additional savings incentives, the risk is that your TEM provider will simply do the least amount of work to prove that they have made the minimum acceptable level of savings. If they are not going to be heavily rewarded for making significant cost savings, then they will not have the motivation to put in the extra effort.

Danger 3 – Lack of transparency

Most TEM providers are retained under at least one Non-Disclosure Agreement (NDA), so they cannot legally tell you exactly where your costs are positioned in the market. Instead, they can only give you where you sit within a particular range. The difference may be negligible…or it may be significant. You will never know.

Danger 4 – Sandbagging savings

It’s the oldest trick in the book – you source the very best savings on the market, but hold a little back so that it looks like there is more to save the next time around. This is more likely to happen if the TEM provider is not being substantially rewarded (as a guide, this should be at least 25% of the total value of any savings made), as their incentive is to maintain the contract and secure repeat business, not to push themselves to save as much as possible every single year. It may seem like a ‘win-win’ situation as it makes the outsourced TEM provider look good and supplies the client with a saving, but in reality you are being ripped off.

Danger 5 – Your organisation never learns

It is all too easy to fall into one of these traps and simply stick with the same TEM provider year after year, making minimal savings while your rivals are able to shave significant amounts off their telecom expenses bills and reinvest in the new technologies and services.

Conclusion

It pays to keep a close eye on your cost and to schedule regular benchmarking reviews, however, in order to do this you need to know your own systems inside and out. Audit your network so you know exactly what you need and only pay for the services that you actually use.

Then install TEM software which comes with a database of rates from a known independent market data provider. Our software is designed to help maintain your network’s expense management to the highest possible standard, so you know where you can cut costs and where you can start making savings.