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Telecom Expense Management
Enabling Automated Bill Validation, Contract Compliance and Audit
Business Background
Corporate spending on telecom expense management (TEM) is rapidly growing-recent estimates from Gartner suggest this segment of the IT market is expected to grow from $500M in 2005 to $1.2B by 2008. According to an Aberdeen Group report, the average Fortune 500 company spends about $116 million on telecommunications services each year. The average mid-market company weighs in at $26 million per year. Aberdeen's research indicates that errors account for between 7 and 12% of what enterprises spend on telecommunications. Given these numbers, for large enterprises, the leakage associated with communications services can easily translate into several millions of dollars annually.
Enterprise telecommunications spend is largely governed by contractual pricing agreements with carriers. These agreements most often contain custom pricing, discounting, revenue commitments, SLAs and other terms tailored to the needs of the individual enterprise client by the service provider. A critical task then in good telecom expense management is broadly called contract compliance, verification that invoice charges represent a faithful and accurate execution of an enterprise customer's agreements. Industry experts have estimated that contract compliance errors represents 25-33% of all lost revenue in enterprise telecom spend.
The state-of-the-art methods for contract compliance today are "custom SQL scripts" and teams of auditors that "stare and compare" invoices and charges to the paper contracts. Performing contract compliance manually is error-prone, slow, and expensive. In practice, checks can only be performed over a small fraction of any given set of contracts. Current practices offer limited economies of scale and the knowledge base is not institutionalized or automated.
The conclusion is clear - automating contract compliance represents an enormous opportunity for TEM software providers.
Business Requirements for Contract Modeling, Validation, and Compliance
To achieve a feasible and truly effective solution for automated contract modeling, validation and compliance in real-world conditions, a TEM software solution must address the following requirements:
- Enable modeling of all pricing data and business logic contained within highly custom one-off pricing agreements, including all manner of pricing, bundling, discounts, waivers, promotions, volume commitments and custom price determinations.
- Provide an intuitive, quick, and low-cost environment where auditors and business analysts have full visibility into and full control over the contract-based price determination logic used for validation and compliance. All modeled pricing must be absolutely transparent to business and audit personnel such that verification, review, and editing of contractual logic are immediately and easily achieved.
- Any solution without this extreme level of visibility into the executable business logic has little value to most TEM groups. Systems with the business rules simply written in traditional programming languages or "rules languages" can not meet this crucial criterion.
- Enable rapid integration of the solution with existing TEM systems, data and workflows. In particular, it is a strong requirement that the server be fully configurable to work with existing data formats and existing database tables. Data transformations due to the diversity of TEM data could add complexity and must be avoided.
- Deliver enterprise-class performance scalability, reliability, and operational efficiency that reflect the demands of auditing high-dollar telecom spend across multiple enterprises with hundreds of millions of events and transactions per month in the aggregate.
Business Benefits and Return on Investment with PriceMaker™
The PriceMaker Enterprise Pricing Server is a proven platform for modeling telecommunications contracts in highly dynamic, Tier 1 telecom environments. Several PriceMaker-based applications have been deployed to-date involving contract-based pricing determination and verification for wholesale, enterprise, or partner billing for large communications carriers. PriceMaker is ideally suited to automating TEM contract validation, compliance and invoice processing with a level of effectiveness, usability and visibility for users, and implementation ease, unparalleled in the marketplace today by any other enterprise software component.
The return on investment for our Tier 1 telecom clients illustrates the transformative power of PriceMaker. After three years of production use of PriceMaker, one carrier has quantified the returns directly attributable to its PriceMaker solution for contract-based pricing, billing, and validation as follows—
- Reduced the "time to market" for new services from "concept to production" by 50 - 75%
- Reduced time to support new custom agreements by 80%
- Improved cash flow by reducing the "Processing Times" by over 90%.
- Reduced "suspense" transactions by over 90% through increased visibility available to business analysts
- Retired 30 legacy customer or product-specific processing systems and duplication of data across multiple systems
- Reduced annual systems maintenance & operations costs by 15% despite a ten-fold increase in services
- Delivered substantial capital expense savings by leveraging all existing systems to meet requirements
- Integrations completed in extremely short time frames because the product was designed from first-principles for easy integration
- Delivered enterprise-class 99.999% reliability and scalability to meet client requirements
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