Amid the bevy of exotic information technologies that companies hope to leverage — or at least understand — it’s easy to lose sight of a relatively low-tech piece of equipment: the telephone. Until, that is, the bill arrives.
Make that bills. Every month at Hewlett-Packard, for example, nearly 2,000 invoices from telecom carriers arrive, some of them hundreds of pages long, totaling an astounding $250 million a year. Down in Plano, Texas, it’s David Samuels’s job to sift through that monthly mountain of invoices to find billing errors. It isn’t hard to find them: overcharges or fees for lines HP had ordered disconnected, among other errors, are common. But with just two auditors on his staff, Samuels began to suspect that his spot checks were uncovering just a fraction of HP’s potential savings.
“We looked for the low-hanging fruit where we could get large savings quickly,” explains Samuels, whose title, voice network engineering manager, belies his financial responsibilities. But no matter how many “low-hanging” billing errors he and his staff uncovered, there always seemed to be more. “Everyone kept thinking that the low-hanging fruit would be gone, but every time we audited the bills, we found more,” he says. Samuels and his staff, along with some external auditors, were finding errors that saved HP about 1 percent to 2 percent of its annual telecom costs. But Samuels says his team was “fairly comfortable that 5 percent of the total bills were in error.”
So just over a year ago, Samuels began looking for an automated solution. After examining several software products, he chose the Communications Management Platform from Tangoe Inc., a New Haven-based software and consulting firm. The software examines all invoices, compares them against existing contracts and tariffs, and systematically identifies errors. It also inventories all of HP’s telecom assets — phones, lines, and wireless devices — and identifies usage patterns for internal cost allocation and assets that are being billed but are no longer in use.
Samuels licensed the software from Tangoe at a cost close to $2 million, a not-inconsiderable sum in these days of constrained budgets. But he says the telecom-expense management (TEM) software has returned that investment and then some. “We’ve already identified almost $3 million in savings in less than a year,” he says, adding that they are above and beyond what his normal auditing approach would have produced.
Those sorts of ROI success stories may propel the nascent TEM market, now estimated to be about a $500 million business in North America, to 50 percent compound annual growth through 2008, according to Dataquest. To date, it’s a very fragmented market: Gartner identifies at least 70 companies that offer software, outsourcing services, or some combination of both, although there are already signs that mergers will create fewer and bigger players. Driving the market is a simple but compelling financial argument: by supporting telecom cost management efforts with a centralized usage and invoice reconciliation information management solution, companies can save 26 percent on average, according to an Aberdeen Group study. Given that Aberdeen found that the average large company spends $118 million a year on telecommunications services (the average midmarket firm, $26 million), the savings potential of TEM software and services seems hard to ignore.