Streamlining Telecommunications Management with TEM Solutions
How do you and your company manage telecommunications inventory and expenses? Do you use a spreadsheet that tracks who has which device? Do you know where every device is at all times? How do you handle offboarding and onboarding employees? Is every employee in your organization on the most efficient data plan? If you’ve ever been required to pay for, track, or maintain the communications network for an organization of any size, you understand the inherent complexity and pain of managing a communications estate. Enter Telecom Expense Management (TEM). This niche industry started in the late 1980s and grew quickly in the late 1990s after the breakup of Bell Telephone. TEMs and WEMs consolidate inventory tracking, telecom expenses, and much more allowing companies to get back to their core business. We think there are a number of interesting characteristics in this industry and are so certain that there is opportunity here that we recently joined the Enterprise Technology Management Association (ETMA), an organization dedicated to TEMs, WEMs, mobility management, and all things managed technology for enterprises.
Industry Tailwinds
As with any large organization, big carriers supplying connectivity struggle to provide personalized, customized, and responsive customer service. They don’t always optimize solutions for their customers and may accidentally overcharge their customers. In the B2B world, both companies prefer to partner with “Solution Providers” to resell their carrier services (data, internet connectivity, etc.) as it alleviates the requirement for customer service. Carriers want to outsource the selling (via channel partners) of their connectivity, but more importantly, ensure their clients receive the high-touch customer experience they need. Given the problem they solve, Telecom Expense Management providers are well positioned to provide this level of customer service, and big carriers are happy to partner with them.
In turn, enterprise customers want to leave the carriers for channel partners and other solution providers as they provide customized support for their specific needs (Mckinsey). Consider a quick serve restaurant that uses handheld tablets to take orders. That chain wants a partner they can call to design networks at their restaurants unique to the needs of their business, including bandwidth specifications, tight installation timelines, and rock-solid maintenance and support. Although they are capable of providing this service, the big carriers would much rather focus on simply delivering the connectivity and letting someone else optimize the network design.
Finally, the telecommunications landscape is constantly changing. New technologies demand different hardware, bandwidth, and security measures. The shifting landscape creates opportunities for knowledgeable solution partners and service providers, ready to optimize their customer’s communications network for their desired outcomes.
The Rapid Change in Telecom
In the 1990s and early 2000s, a Telecom Expense Management company could just focus on auditing invoices for their customers. They would review hundreds (sometimes thousands!) of pages of billings for charging errors (including “cramming” - adding charges the customer didn’t want, and “slamming” - changing the customer’s provider without notice) and dispute the charges with the carrier. At this time, telecommunications centered around wireline Plain Old Telephone Systems (POTS), and although communications estates could be fairly complex, a pure audit and correction service was sufficient to deliver savings to the TEM’s customer base. TEMs could pitch savings, land customers, and build successful businesses.
Today, software can scan millions of pages of invoices and highlight changes, errors, and corrections in minutes. A pure savings value proposition may land customers for a year or so, but customer churn risk is high with this approach because, if the TEM is doing its job, savings will diminish over the life of the relationship with the TEM. In fact, as telecommunication requirements change, companies may see their telecom expense increase while contracted with a TEM. If the CEO/CFO/CTO don’t understand the nuances of the changing charges (which are difficult to explain), they will lose sight of the value the TEM brings to their organization. Given the software in the industry, and the diminishing returns on savings, a TEM that only audits and corrects invoices may find itself competing in a race to the bottom in a commodity-like market.
The commoditization of pure expense management companies can be seen in the consolidation within the space. Between 2007 and 2018 Tangoe and its subsidiaries made 12 acquisitions and is now one of the largest investor-backed TEMs in the industry. Similarly, between 2007 and 2022 Calero and its subsidiaries, another behemoth in the industry, made 14 TEM acquisitions. These companies deliver proprietary software that efficiently identifies errors, and serve many of the largest enterprises in the country. But savings and efficiency aren’t sufficient to keep customers.
Characteristics of a Good TEM Partner
Enterprise clients, spending over $1M in telecom expenses every year, demand customized networks that optimize the outcomes for their businesses. They may not need the most cutting edge technology to serve their customers, maybe reliability is the most important metric. Or perhaps they do want the latest tech, but cost is also an important concern. It takes time, and often human interaction, to understand the nuances associated with an enterprise client’s network needs. Large, consolidated firms with outsourced help desks and engineers can struggle to provide a “trusted advisor” level of service. Small and medium-sized TEM companies that put customer service first have an advantage here. They already precisely understand their customers’ telecom spend and network, providing an additional consulting, implementation, and maintenance service deepens the connection to the enterprise client and reinforces the trust already established. Additional services, like managing the mobile devices for the enterprise, providing a help desk call center, and paying their customers’ invoices for them reinforces the white glove positioning and gives the client a one-stop solution for all of their connectivity needs. If we reflect on the problem these enterprises are facing, what they really want is an “easy button” for their telecommunications estate - one vendor (trusted advisor) to hold accountable - so that they can get back to optimizing what makes them money. The best businesses in this industry offer a broad variety of services, tailored to their customers’ needs. They put customer service first, avoid outsourcing client-facing tasks, and develop customized solutions to customer problems.
The Impact and Opportunity of AI
Artificial intelligence will disrupt many industries and may make entire business models obsolete. We do not think that is the case here. In fact, AI is already being used in the commoditized realm of expense optimization via software. It can also be used to more efficiently design and procure network solutions specific to client needs. However, we think that if it is properly leveraged, AI represents an opportunity more than a threat for TEM companies. In addition to the efficiencies mentioned above, AI can be used to reduce onboarding times, create more efficient internal operations, and level-up human customer support services. Although AI may one day be good enough to mimic a human help desk, we are still a very long way from it becoming a trusted advisor - the one throat to choke for all telecom needs - and therefore see it as a TEM performance enhancer, so long as the TEM is focused on the areas we mentioned above.
In Conclusion
Telecommunications networks at large enterprise companies are very difficult to maintain and control. These companies look to experts, like Telecom Expense Management firms, to help optimize their telecom spend and bring efficiency to their operations. The carriers support this approach. However, in order for a TEM to be competitive in the market, they must offer high-touch customer service and a broad array of services, all designed to optimize their customers’ business outcomes.
