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Journal2011Fall-9.WhatEveryCFOShouldKnowAboutTelecomExpenses

ITFMA Journal

What Every CFO Should Know About Telecom Expenses

Kevin Donoghue, President, Telesoft Corporation


These are edited excerpts from Kevin Donoghue’s presentation at the ITFMA Financial World of Information Technology Conference August 2010


There are seven things every CFO should know about telecommunications expenses:

  • Telecom expense management (TEM) is a boardroom issue: they need to know that telecom is among the five major IT expenses, so visibility of telecom expenses is essential; telecom cost needs to be managed proactively, and business units need to be held responsible for these cost
  • Telecom expenses are the most complicated to manage: so it requires personnel who have the knowledge to manage telecom effectively and the necessary technology to help them
  • Telecom spend is rising despite decreasing fixed telecom costs: you need to anticipate, rather than react to, telecom costs and understand that although fixed, Voice Services costs are declining, Mobile Voice/Data costs are rising; also contributing to the rise in cost:
    • there are fewer staff to manage the costs due to recent layoffs and staff displacements
    • recent closing of business sites and services is adding to the workload to disconnect services, reconcile with invoices, and verify removal from billing
    • with mobile usage growing, it is time-consuming to manage mobile policy, thousands of devices, and complicated invoices
  • Billing errors will continue to occur: "If proactive auditing practices are not in place, enterprises could be forfeiting at least $100K for every $1M spent.” – Gartner
  • Wireless costs will surpass fixed telecom costs: wireless spending continues to grow at a rate of 30% or more a year, 80% of enterprises will overspend on their wireless service costs by an average of 15%; and a written mobile policy can only go so far as enforcement is a must-have
  • The CFO’s role in telecom expense management: the CFO needs to recognize the problem and take action, such as, centralize telecom expense management, leverage economies of scale, and use newfound visibility to make informed decisions
  • The costs of ignoring telecom expense management: you may be spending 10-25% too much; the following are actions you can take to reduce telecom expenses:
Action: Centralize telecom inventory and ordering
Results: Avoid overpayments, unintended service disconnects, and billing for services no longer in use
Speed moves, adds, changes, and deletes (MACDs)
Savings: 2%-7%
Action: Simplify telecom invoice processing and reporting
Results: Save time and eliminate late payments by accelerating invoice approval processes
Better budgeting, forecasting, analytics and accrual processes
Savings: 1%-3%
Action: Automate invoice validation and dispute management
Results: Automate invoice validation so there’s no time wasted on manual validation and errors don’t slip by unnoticed
Easily identify, manage, track, and recover invoice disputes through the lifecycle
Savings: 1%-15%
Action: Track usage and chargeback expenses
Results: Drive down consumption by allocating telecom costs to the appropriate cost center
Streamline management of telecom vendors, products, and services
Savings: 1%-5%

These specific actions taken from case studies that resulted in significant reduction in telecom expenses:

  • By centralizing telecom usage and cost allocation management worldwide:
    • produced unique reporting to flag improper conference bridge usage
    • reallocated FTEs by outsourcing usage and cost allocation management
    • established globally consistent telecom policies to drive down internal consumption
    • centralized usage management for fixed and mobile services, equipment, and IP data across worldwide locations
  • By decreasing global telecom expenditures, increased operational efficiencies, and improved financial reporting
    • reduced annual spend while increasing backbone bandwidth by 50%
    • received auditing refunds
    • faster processing and more frequent audit cycles
    • 50% less staff performing monthly, rather than quarterly audit cycles
    • improved communication and strong integration with Accounts Payable, Accounting, Finance and Tax Departments
  • By driving down mobile cost per minute by leveraging corporate buying power:
    • reduced wireless spend by 15%
    • significantly drove down cost per minute
    • developed ten standard packages based on job code needs

 

Copyright © 2011 by the IT Financial Management Association.

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