Evidence shows that a whopping 80% of all telecom bills include mistakes that lead you to over-pay. Many bills contain charges for devices no longer active or circuits that have been disconnected, resulting in payments for unused services. The problem is so pervasive that it spawned an industry that specializes in optimizing telecom spending.
TEM suppliers inspect and unravel those confusing and complex telecom bills and contracts to make sure customers are not overcharged. There are many vendors in this growing market, but most often, our clients look at Tangoe, Calero-MDSL, and Sakon.
TEM Pricing Overview
The fees in TEM deals can be structured in a few ways:
Customers are charged a fixed percentage of the telecom spend reviewed; the percentage clients achieve is highly dependent on their telecom spend threshold.
Customers pay a per device rate; we see this frequently with wireless TEM services.
Customers pay a contingency, where the TEM takes a percentage of the savings found as their payment; these fees typically fall between 10% and 20% of savings found.
An important aspect of every TEM deal is the Savings Guarantee, which promises to achieve a certain level of annual savings during the contract. The guarantee also includes language outlining what happens if the guarantee is missed or exceeded, such as:
If a savings guarantee is missed, some contracts require the vendor to pay a credit up to the full amount of the difference between savings was found and what was guaranteed. It’s also advisable for customers to get contract language that allows them to terminate the TEM deal without penalty if a savings guarantee is missed.
On the other hand, if a saving guarantee is exceeded, there is often language for an additional contingency fee on top of the extra savings found.
TEM Buying Strategy
Competition is heating in the TEM space. Historically, Tangoe has been the market leader, and because of this, is often inflexible during negotiations. To mitigate this behavior, we have seen clients successfully introduce competitors, such as Calero-MDSL and Sakon, to achieve lower rates and more flexible contract terms in their TEM deals.
To illustrate the impact that competition makes in a TEM negotiation, we offer this case study.
A ClearEdge client who used Tangoe for TEM services on their wireline spend was recently looking to expand TEM into their wireless spend. As the incumbent, Tangoe was initially unwilling to negotiate with the client and provided premium fees at rates two times higher than those of other TEM suppliers. When the client introduced Calero-MDSL and a smaller, regional TEM to compete for the wireless TEM deal, Tangoe became worried about losing the incremental business. Armed with competitive bids, the customer kept pushing back on Tangoe and after multiple rounds of negotiation, was able to reduce the Tangoe fees by $600K. The moral of the story is, when procuring a TEM service, it’s advisable to compete out the spend to multiple vendors, as this strategy will drive the best possible pricing and contract terms.
Action Items for Telecom Buyers
To summarize, it’s common for Telecom bills to include fees for devices or circuits not in use and it’s on the customer to identify where these overcharges are occurring. To protect against this risk, customers can use Telecom Expense Vendors to review bills and ensure that no over-payments are made for services no longer needed by the business. When procuring a TEM service, it’s important to compete out the spend to multiple vendors, as this strategy will drive the best possible pricing and contract terms.
It’s also important to note that most TEM services only review present telecom bills and do not go back through previous payments to identify areas of past over-payment. To verify that overcharges have not occurred in the past, organizations must perform a self-audit of their telecom spending. If this cannot be done internally, ClearEdge Partners can help organizations identify areas where overcharging occurred, and credits are due from the Telecom provider. To learn more about our Telecom Audit services, contact your ClearEdge representative to speak to a subject matter expert.
- Olivia Picarillo is an Analyst at ClearEdge Partners.