What is Telecom Expense Management (TEM) Software?

Telecom Expense Management, or TEM, is a software-based system that allows the IT, procurement, and finance departments of a large enterprise to manage costs, billing, and inventories of their corporate telecommunications services. 

Unless you’ve spent some time working at a large enterprise in the last 20 years, you might be unfamiliar with TEM. Before the telecom market was deregulated back in the late 90s/early 2000s, there wasn’t much call for telecom expense management software – with only a few carriers to choose from, there was less paperwork, and tracking costs and inventories were uncomplicated.

Once the market opened up, and competitors flooded in, it became much harder for large companies with several telecom services across many locations to adequately track their costs, make payments to vendors, and maintain inventories. Enter TEM services. 

Many of the original TEM providers of the 90s still dominate the market today, having expanded their remit to include newer service such as internet connectivity, mobile phone service, VoIP, cloud licenses, UCaaS, and even SaaS services.

Let us help you get your head around TEM – especially if you’re responsible for a diverse network. With a little assistance from Rob Rodier, Lightyear’s VP of Sales, we’re going to talk through the following. 

• Why large enterprises need TEM services

• Key features of TEM software

• How TEM services are priced, and how ROI can be achieved

• What a TEM provider can (and can’t do) for your enterprise

• How to choose a TEM vendor

Why Use TEM? 

TEM services are like a CRM system (think Hubspot or Salesforce) for telecommunication services helping you keep track of vendors, inventories, invoices, and payments.

It’s a large-enterprise oriented solution where you have not just thousands, but tens or even hundreds of thousands of telecom services or devices for which you need to account. There needs to be a system of record for that – otherwise you have your employees fielding hundreds of thousands of invoices every month. Trying to reconcile those and understand, ‘Is this bill right? Do we have this service?’

TEMs are a necessity for enterprises operating with these services at scale – certainly everyone on the Fortune 2000, and maybe a little further down-market than that. If an enterprise’s quantity of telecom services is large enough, TEMs often provide ROI.

Key Features of TEM Software

An effective TEM software solution will typically include the following features. 

• Inventory Management. This ensures the various IDs (think circuit IDs, project codes, purchase orders) each party uses are standardized and matched to a Master ID, as well as tracking associated IP addresses and telephone numbers. Your TEM software automates this process, allowing you to easily locate any data associated with a given service.

• Invoice Tracking / Payments. TEM software will automatically ingest your invoices, reconcile them against contractual terms, provide validation of accuracy, and handle any ticketing to the carrier for corrections required prior to payment. TEMs will also allow you to pay for services on a single consolidated bill.

• Cost Allocation. TEM software can track and report on service costs and allocate chargebacks across thousands of separate locations (and even individual employees).

• Contract Tracking. Thisallows you to filter and analyze contracts, and can identify when contracts are due to expire, making for greater efficiencies in procurement.

• Voice Usage. Voice services are usually billed according to estimated usage – TEM software can provide an independent measure of your usage to ensure accurate billing from your carrier.

• Wireless Usage. As with voice services, TEM software provides tracking functionality to keep tabs on your wireless devices and data usage.

Basic table stakes for any self-respecting TEM provider include top-drawer customer support (preferably with a dedicated account manager), self-serve IT, and custom reporting. 

Self-serve IT allows your employees to access and complete software functions, without having to contact the TEM providers. These functions can usually be arranged as bespoke options if required.

Intuitive, customizable reporting modules and dashboards are increasingly a necessity – if your needs aren’t met by the templated options, your TEM provider should be willing to adjust the reporting parameters at no additional charge.

The Costs and ROI of TEM Software

TEM providers typically charge their clients a monthly fee based on a percentage of what the client spends on the services under TEM management. This is usually between 2% and 5% of the client’s overall service spend.

The TEM provider then gets to work uncovering ways to reduce these costs. They’ll identify billing errors, unused or duplicate services, or services that are out of the contract term and are ready for renegotiation.

For large companies spending more than $1 million a year on telecoms services, TEM services may represent decent value for money. Companies of this size incur hefty overhead costs simply from the day-to-day management of their telecom budget.

And if your telecom devices and IT assets haven’t been subjected to accurate inventory procedures, the savings could be huge. There are also potential gains from the invoice reviews and contract management most TEMs offer as standard.

You might find several services that should be disconnected but aren’t, so you start canceling those that are costing hundreds of thousands of dollars a month because they're not being used, and no one even knew it. There’s also the long-term ROI, as you operationalize what the TEM can do and gain efficiencies from it.

Many times, the function of TEM would be to conduct an audit to ensure the integrity of the data that’s input into the system. An audit can be a huge cost-saver that comes into effect 60, 90, 120 days in.

What Other Services Can TEMs Provide?

In recent years, TEM providers have been experimenting with offering additional or adjacent services, such as business-intelligence reporting, or even procurement. Additionally, Gartner’s 2021 ‘Market Guide for Telecom Expense Management Services’ describes a growing market expectation for TEM providers to branch out into adjacent services. However, TEMs have had mixed success in these areas, as they are different functions altogether..

Take procurement, which is more strategic in nature. TEMs are built like a CRM – a system for accounting – and procurement is an entirely different beast. Some TEMs are expanding into procurement, and offer procurement functions that are disjointed from their primary software interfaces. In many cases, it’s not a digital-first experience but a professional services or consultation exercise, and it’s clear the service offered is subpar relative to the core TEM service. This takes the enterprise who is hoping to shift away from the status quo of manual, offline procurement cycles and has them doing the same thing through a third-party. At Lightyear, we’ve of course designed the software to be procurement-first and as such the experience is digitally native.

That’s not to say all lateral expansion or integration is a bad idea. In recent years, we’ve seen TEM services successfully integrated with accounts payable systems,enterprise resource planning systems, and IT service-management systems.

What Are the Drawbacks With TEM?

You can’t please all the departments, all the time. While TEMs are essential for large companies, they’re not hugely popular. Rob sees this as an unavoidable result of what happens when you take a finance-based solution and share it as a tool for other departments – like IT, who are used to more ergonomic, “virtual” systems. 

Ultimately, the TEMs are providing accounting and invoice reconciliation and single-bill consolidation. Those are finance functions, and the systems have been built out from that viewpoint. IT teams prefer to leverage these systems for different things. IT doesn’t like these systems because they are ‘legacy,’ and not always easy to use.

There are two very different consumers of the product that require different things out of it, and traditional TEMs today are still biased towards the finance aspect of it. 

Slow progress in the TEM space, with manual work still required. TEM software is often accused of being “clunky,” compared to more modern UIs and software enterprise tools.

For one, TEM market leaders were built in the 90s and are for the most part private-equity owned today. This means that the software was designed decades ago and has not invested in keeping pace with modern software solutions.

Further, lots of workflows that should be automated and digitized for TEMs have not been. Onboarding and reconciling data is often a manual process for the enterprise that TEM vendors have not fixed effectively. Some customers end up spending hours per month on the phone with their TEM vendor fixing out of sync data.

Big returns – but only if you’re a big spender. Another huge issue with TEM services is cost. Even though many mid-market companies would love a TEM solution for their invoicing and inventory woes, they simply can’t afford it. And in certain cases, are not even allowed to use it!

TEM fees, at 2-5% of total spend, with other professional services and implementation fees on top, are expensive and require scale to see ROI. Also, the initial onboarding is extremely time consuming and includes a significant human capital investment as well. For these reasons, many mid-market customers (and certainly SMBs) avoid TEMs.

In some cases, TEM vendors require a minimum annual telecom spend to even be considered as a potential customer, effectively ruling out certain solutions for mid-market customers.

A software solution with an all-too-human side. This dependence on manual processes leaves TEM services with unavoidable vulnerabilities. Although much can be automated, TEM services are still partly based around a “consultation” model. Given the data-intensive nature of expense management at this scale, this working model inevitably results in discrepancies and delays.

How Do You Choose a Vendor? 

There are more than 100 TEM vendors to choose from – the legacy players with more than 20 years’ experience through to modern boutique consultancies with specific industry solutions.

Different TEM providers may offer varied feature sets. They may also focus on different markets (despite the drawbacks we’ve already discussed, some TEMs like RadiusPoint are geared towards mid-market solutions), or they may offer product specialties and expertise, such as management of usage-based services like voice.

If you’re wanting the reassurance of working with one of the larger market leaders, then Tangoe, Sakon, or Calero-MDSL would all be good places to start, but we’d always recommend searching through Gartner or G2 to make sure you’re looking at a comprehensive set of options. 

In Conclusion

TEMs are an essential part of large-scale enterprise infrastructure. While they might be your IT team’s least favorite part of the job, they’re still the best way to manage the costs, invoicing, and inventory of both legacy and internet-based services, in a way that provides significant operational advantages and savings. 

Manual processes may keep TEM costs unavoidably high for some time, but as technological solutions develop, this important service may become more accessible to smaller, mid-market enterprises.

If you’re looking to augment your TEM processes with a cost-effective, automated procurement solution, look no further than Lightyear. Our services work flawlessly with most TEM approaches, and we offer overlapping services like inventory management and contract management at no additional cost – giving you even greater flexibility in choosing the TEM solution your enterprise needs.