Taking Charges

The other large player is Control Point Solutions, formed last August through the merger of Broadmargin and Teldata Control. The combined firm has more than 400 employees and, according to CEO Greg Carr, should do $50 million to $60 million in revenue this year. Carr claims that more than 100 Fortune 500 companies already use some Control Point Solutions service. He draws an analogy between the nascent TEM space and the payroll-processing business, saying, "We are to our space what ADP was to payroll 40 years ago." Approaching $8 billion in revenue, ADP would make a more-than-adequate lodestar for almost any company.

Competitors might challenge Carr's claim, but there's little doubt that the emergence of larger players offering full outsourced solutions has begun to attract growing interest from large enterprise customers. Rick Valencia, CEO of ProfitLine, a TEM outsourcer based in San Diego, reports a boom in interest among potential customers, with requests for proposals in a recent 100-day period exceeding those issued in all of last year.

Before issuing that RFP, however, a company needs to understand its options. The many vendors in the TEM arena offer a range of products and services, from pure-play software companies (some that sell software outright; others that host it for you) to consultancies to outsourced services that can be either narrow or broad. Some specialize in wireless expenses; others address almost any form of network communication.

While MSS, Control Point Solutions, and ProfitLine all offer full-service outsourcing, software is the essential foundation of TEM services. At the very least, such software builds a database of vendor contracts and a customer's telecom assets (phones, lines, circuits, and so on), receives all invoices from carriers, and examines those invoices for errors and to see if they are consistent with the vendor's contracts.

Historically, the TEM industry has its roots in auditing, according to Alan Gold, senior vice president at Avotus, a Mississauga, Ontario-based TEM-software vendor. By embedding that auditing capability in software and augmenting it with additional functionality, an industry was born. "Automation is critical," says Gold. "You must look at an entire network and how it's tied together."

Since the purchase of and payment for telecom services are usually decentralized across countless divisions and geographies, a prime focus of TEM software is the consolidation of all invoice receipt and bill payment. Such was the motivation of George Cinquegrana, vice president and chief information officer at United Rentals, a $3 billion renter of heavy equipment that recently licensed Avotus software. Until recently, United Rentals got telecom bills at 70 locations. Now all the bills go to its headquarters.

Along with the push it gives to centralized invoice management, TEM software consolidates all the information on carrier tariffs and contracts into a single database. This is no small task, explains Tangoe CEO Al Subbloie: "There are more than 2,000 rate categories in a standard contract with a major carrier. What we've done is made a science of systematizing the capture, categorization, and ongoing management of complex carrier contracted rate structures."

Having consolidated all that information, TEM software can identify bills that do not conform to contract terms and even recommend different combinations of contracts that will save money. In addition to pinpointing bills that do not conform to contracts, such software can identify a surprisingly common phenomenon — billing for lines and phones that aren't even in use.

Avotus's Gold describes another type of phantom billing that TEM software can spot. Often times when an employee leaves a company, his cell phone expenses not only continue but increase. The reason? The departed employee left the building but kept the phone and isn't shy about using it. TEM software can give customers visibility into those overly mobile assets and alert them to improper usage patterns.

CFOs might be particularly interested in another benefit Avotus offers: the ability to break out detailed data on use of telecom services within individual business units. United Rentals is using its Avotus software to track costs back to individual divisions, allowing it to allocate costs more efficiently. And Valencia says the software can get as granular as a CFO wants: "We can go down to the line level. Every line on every invoice can be charged to a particular department."

Software vs. Outsourcing
For all its virtues, the software-only approach to TEM provides just a partial fix. That's the argument made by companies that offer full outsourced solutions. Don Lynch, chairman of Control Point Solutions, says, "People can push invoices around, but in terms of managing cost, you need to have some industry expertise — domain knowledge. And that's what you don't get if you buy software." A former finance executive at MCI, Lynch emphasizes the importance of having consultants who can analyze all the software-generated data and then apply their industry expertise to renegotiate existing contracts and find the optimal mix of new contracts and vendors for a particular enterprise.

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