Peregrine Systems Inc. has used the acquisition route to build itself into an infrastructure management technology leader, snapping up 15 companies over a three-year span. In doing so, the company inherited something it didn’t cherish: the job of managing 20 to 30 carriers and telecom service contracts.
Last year, Peregrine called in a telecom bill auditing company, which could manage the bills and make sure Peregrine was getting the volume discounts it deserved. So far the auditor has saved Peregrine a half-million dollars, 30 per cent of its telecom expenses.
“If I were to hire [my own] people to go through the bills, it would have cost a fortune,” says Robert Urwiler, Peregrine’s CIO. “It was a no-brainer.”
There has been a sharp increase in the use of telecom bill auditing services over the past 12 months as companies look for ways to cut expenses and get by with fewer employees in the down economy.
“What’s driving the boom in the telecom bill auditing and management industry is the fact that enterprises don’t have the staff to take care of this in-house,” says David Neil, a vice-president at Gartner. “Most enterprises have had some degree of layoffs in the last year or have frozen their headcount.”
Telecom bill auditing and management companies such as ProfitLine are reporting increased revenues and requests for proposals (RFP) for their services.
“During bad economic times our business grows even faster,” says Rick Valencia, CEO at ProfitLine. While the company has consistently grown by 75 percent during the last three years, ProfitLine doubled its revenue from 2000 to 2001 and expects to boast a similar increase this year.
“Up until last year, we were having to make outbound calls explaining the benefits of bill management. Now we’re getting unsolicited RFPs from Fortune 500 companies,” he says.
Bill management and auditing company Teletron has seen the number of RFPs it receives jump since January. “We used to get one RFP every other week, now we’re getting two to three every week,” says Tim Lybrook, the company’s CEO. Another bill management company, Teldata Control, says its revenue grew 60 percent last year compared with 30 percent to 40 percent the year before.
Underlying the move to telecom auditing services is the widely held belief among users and industry watchers that carriers often are inept when it comes to billing and that their mistakes can cost users a bundle.
“Service providers are notorious for having standard errors in their invoices,” Neil says. Typical errors range from charging for T-1 lines that should have been disconnected to volume discounts that are never applied. Not only do the auditing companies find errors, but they also negotiate with the carriers until their clients receive restitution.
Several companies that started in the basic bill auditing business now offer complete telecom bill management services. These services let users send all their voice, data and mobile invoices to a third party, which scours them for errors, provides departmental bill-back services outlined by the user and handles direct bill payment.
Call in the auditors
Relizon, which develops billing forms and generates nearly US$1 billion in annual revenue, late last year handed over its telecom bill management to Teltron. The goal: drive down costs and make better use of Relizon’s telecom staff, says Kevin Werst, manager of communications services at the Dayton, Ohio, company.
Relizon expects to save a minimum of $93,000 this year, but Werst says this is a “pretty conservative number. That’s an easy number for them to hit, while still working hard for us.”
Before working with Teltron, two clerks in Relizon’s telecom department handled all the telecom billing. “We didn’t feel it was a very good fit because we were not analyzing costs, and it was so detached from the main core of accounting,” Werst says.
By outsourcing, Werst has been able to redeploy the two clerks to work with his telecom team on a project to move to a new building. The timing was important because Relizon is operating under a wage and hiring freeze. Not only was Werst able to free up internal staffers, he is saving his company money.
Teltron receives all of Relizon’s voice and data telecommunications bills, then analyzes them and pays the invoices on behalf of Relizon.
Teltron then sends Relizon’s accounting department detailed bill-back information based on predefined parameters.
Peregrine also was looking for a full-service telecom billing partner, which is why it teamed up with ProfitLine. Peregrine was looking to simplify its multiple invoices while reducing its reoccurring telecom costs.
While Peregrine grew very quickly through acquisitions, it wasn’t benefiting from volume discounts and lower rates that larger companies typically are offered. It was important for Peregrine to consolidate its invoices where it could and to verify it was getting the best deals possible.
ProfitLine goes through Peregrine’s voice, data and mobile bills every month, scanning them for inaccuracies and ensuring Peregrine benefits from all the appropriate discounts each service provider offers.
Peregrine pays ProfitLine a flat fee for its telecom bill management services, so the user keeps all of the cost savings ProfitLine recovers.
Contingency vs. flat fee
Flat fees are popular among telecom auditing customers, but many users pay based on a percentage of savings recovered by the auditor.
“We don’t like to argue with customers over savings, and we find that fixed fees are better for long-term relationships,” says Roger Oustecky, CEO at bill management firm MSS Group.
Contingency billing can create bad feelings, especially if a customer finds an error and the savings associated with that error are part of the total contingency findings. “We only work on a fixed-fee basis, no contingency fees,” he says.
This was one of the main reasons why railway company Burlington Northern Santa Fe in Fort Worth, Texas, hired MSS Group about a year ago, moving from a service with contingency-based fees.
“We wanted to move into a more full-service type of audit where we aren’t arguing about contingency pay,” says John Hicks, the railway’s director of unified messaging services.
The company had employees in its accounts payable department who handled all telecom bills each month, but it wasn’t working out. After teaming with MSS Group, Burlington was able to “free up resources within the company to focus on other things,” Hicks says.
Since hiring MSS Group, Burlington has cut its monthly circuit expenses by three per cent. Hicks wouldn’t get into specific dollar figures, but such a percentage savings could save a company thousands of dollars per month.
“To understand exactly what you’re paying for, you need trained professionals to look over each and every one of those invoices,” he says.
“We’re renegotiating contracts on an annual basis and with some carriers every eight months. Discounts that we negotiated need then to be applied to our thousands of invoices. This is very difficult to do without trained personnel,” he adds.
Burlington had been trying to manage its expenses through a contingency-based service long before the economy turned sour, but Hicks says the flat-fee service is ideal for the current environment.