Hospitality company Carlson, which owns such familiar brands as Radisson Hotels and T.G.I. Friday's, is reaping big savings with a new telecom expense management (TEM) provider whose services go beyond the standard approach of identifying carrier overbilling. According to Gartner research, companies that outsource TEM for their fixed lines could save 16% to 32% of overall fixed-line spending in the first two years and 5% to 11% in subsequent years by avoiding costs, recapturing overpayments and reducing staff.
"Identifying overbilling is the raison d'être for TEM," says Phil McDonald, director of sourcing operations at Carlson, which had $5.4 billion in 2011 revenue. "Carriers are notorious [for] invoicing incorrectly."
But that's just "the tip of the iceberg," he says. One of the biggest savings Carlson has seen with its new TEM provider, which McDonald declines to identify, comes from optimizing the inventory of fixed-line telecommunication circuits the company uses in the U.S. The TEM provider found a significant number of unused circuits.
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It also identified telecommunication contracts that had expired, allowing the carriers to charge Carlson higher "casual" rates for not being on a contract. And it offers suggestions on optimizing the company's telecom spending by providing data on which carriers offer cheaper rates.
Minnesota-based Carlson is a private company, and McDonald is reticent about sharing telecom spending and savings data. But he says the company reduced its spending on mobile phones and accessories to 10% of its overall wireless spending, from an industry average of 30%, by having employees order from a selection of pre-approved devices via a Web portal managed by its TEM provider.
There are more than 400 companies in the $1 billion TEM market, and competition has created powerful downward pressure on prices, according to Eric Goodness, a research vice president at Gartner. "Over the past five years, TEM prices have gone down 75%," he says.
Companies considering TEM should realize that the platforms are not just an add-on application, Goodness says. Typical TEM platforms have "punch outs" to a company's ERP systems, general ledger, human resources and other enterprise applications.
Companies should take great care during TEM deployment and integration since this is the industry's Achilles' heel, Goodness says. "You are not dealing with an integration organization," he says. "You are dealing with small software developers that have become outsourcers over a span of time."
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