Buying technology services for an enterprise is a big undertaking and an expensive one, so it can be smart to use yet another service – technology expense-management (TEM) – to help maintain control over what you spend and what you get.
Technology expense-management (TEM) is a service that is of ever-increasing importance to enterprise buyers because it touches on virtually all aspects of the technology lifecycle.
In the past, TEM was defined as telecom expense management, and it was largely focused on managing wireline and wireless telecommunications. However, it has now emerged to encompass the ever-expanding universe of networking technologies and services spend including managed services, maintenance, hosting and cloud services. As these technologies become more complicated and expensive, many enterprise users have availed themselves of third-party TEM services to help manage some or all of these expenses.
Buying TEM services should be approached in the same way your enterprise purchases other technology services. To begin, you must determine which services will be subject to TEM oversight. After determining the in-scope services, you should gather the important metrics for each service. Finally, you should research the market and competitively source the services through an RFP process to achieve the optimal deal.
Define what you need
In determining the in-scope services, consider which technologies you would like the TEM to manage and then determine some basic metrics about that spend such as annual spend, number of invoices and number of suppliers. Quantifying the spend by technology or service type will assist you in determining whether a particular technology should be in scope. It is not necessary to use TEM services for services for which spend is trivial.
If your enterprise has a global reach, be sure to capture the above metrics by region (North America, Latin America, Europe/Mideast, Asia) as the quality, nature and price of each TEM provider’s services vary by region as does the service-delivery location by the underlying supplier. The good news is that if you have an incumbent TEM provider, detailed reports containing this information should be readily available. If you do not have an incumbent TEM provider, you will have a bit of research to do, but all this information should be available from your service providers and by coordinating with your internal accounts payable and finance departments.
After gathering data about services and spend, the next step is to educate yourself about the current market for TEM services. Up-to-date information is critical in this ever-evolving marketplace, as each new year brings: Mergers and acquisitions in the provider roster; changes in scope for areas like wireless and technology spend management; and the changing global reach of each provider’s suite of services. Don’t rely on market-research information more than six months old, as the field of players is constantly changing. Once this market research is complete, you can determine which providers might best fit your requirements.
Pre-screen the providers
Prior to issuing an RFP, it can be surprisingly productive to spend a few days hosting meetings with a group of six to eight TEM companies and then objectively ranking them in terms of ability to meet your requirements. You can use these meetings to learn more about the specific services that the vendors can provide including invoice receipt, processing and payment, auditing and dispute management, provisioning and inventory management, as well as contract management functions.
These sessions will be invaluable if you are new to TEM and will also be very educational for old hands, as the services currently offered by TEM providers, like other technology offerings, are evolving at a rapid pace. For example, several TEM providers have integrated their platforms with ServiceNow’s Configuration Management Database (“CMDB”) tool, which contains and tracks all the assets and business services controlled by a company such as network hardware, software contracts and licenses, and business services. This combination of the TEM provider’s information management system with the CMDB has created a new and powerful tool for enterprise-wide IT management. In addition, on the wireless front, TEM capabilities are expanding tremendously, including the ability to optimize services virtually on a device-by-device basis as well as providing a wide range of end-user services such as provisioning and help-desk support.
Use these vendor meetings to learn about how the providers deliver their services and which method matches your requirements. TEM now comes in many different flavors, including software as a service (SaaS), host and load, host and process for payment, host and pay, and full business process outsourcing (BPO). Understanding TEM providers’ capabilities and technology platforms compared to what your enterprise wants, needs, and is willing to pay for are vital parts of these pre-RFP vendor meetings.
The education you get during these sessions will help you craft the RFP for the specific TEM services to buy as well as how to purchase them. One of the most important benefits of these sessions is allowing you to narrow the field of participants in the RFP process to three or four viable candidates, any one of which – based on what you learned during the vendor meetings – is capable of providing your enterprise with the services it needs in the geographic areas where services are required. This narrowing of the field allows you to spend more time vetting the best candidates during the RFP process, promoting the best vendor selection at the end of the process.
The request for proposal
After gleaning as much market intelligence as possible from the vendor meetings, you should incorporate what you have learned into your RFP document. Given the unique nature of TEM services, you are best served by drafting a fresh RFP for these services, rather than re-purposing an existing technology or professional services document. It is also a best practice to craft your RFP requirements to address all aspects of the required services, from the terms and structure of the contract documents and the financial construct to the specific technical and geographic requirements for each service. From a business perspective, be sure to include the following in the RFP requirements: SLAs by geographic region with escalating credits for regular service failures and rights to terminate (in all or in part) for really bad service; savings guarantees by geographic region; and the right to audit behind the TEM (using your own staff or an outside consultant) and to be reimbursed if the outside audit uncovers savings the TEM reasonably should have found in its scope of work.
The master-services-agreement terms to which you expect potential suppliers to adhere are similar to but not the same as those one would expect to find in a professional services contract. Such terms should be clearly outlined in your RFP and should include the following:
- Your ownership of all intellectual property created during the engagement, including reports and templates
- The right to keep your service and use data (to pass on to successor TEM providers)
- Confidentiality provisions that protect your sensitive information
- Mutual and fair indemnifications and limitations of liability
- Full termination rights for material breaches and chronic failures to meet the contract’s SLAs
- Partial termination rights by region
- Transition periods and the right to use and copy (for enterprise use) all software.
In addition, request that potential suppliers comply with the following implementation details in each of the regional SOWs: The services provided and the fees for these services; an implementation time line, from project kickoff to full implementation; any vendor-provided training; details regarding how the invoices will be processed and in what timeframe; timeframes for dispute management; details of how the ordering, provisioning, and inventory management process works, and how quickly; and regional SLAs.
Time is of the essence
Like any thoroughly planned and well executed large scale procurement, the process can consume six to nine months from initial planning to contract execution. Of course, if your enterprise has a complex service environment with multiple service types in many regions of the world, the timeline will be extended. If there is a limited number of services in a single region, the timeline can be compressed.
Allowing adequate time for contract negotiations is also important. As with any term-based services agreement, the closer you are to a service end date by your incumbent TEM provider, the greater the pressure to close your new deal. In this situation, you are more likely to concede to subpar terms on limitations of liability, indemnities, and SLAs. Therefore, allowing sufficient time to engage in meaningful negotiations of the terms and conditions is critical, and your leverage in these negotiations will be enhanced by getting an early start on the procurement and the transition periods you have (hopefully) negotiated in your last contract.
Remember to allow for adequate time to transition from your incumbent supplier to your new supplier once the new supplier contract is completed. Depending upon your company’s complexity and geographic coverage, this can take three to four months after the contracts are inked.
Sometimes change is a good thing. If you are unhappy with your current provider, step back and assess if the relationship can be repaired by managing them better. If not, obtain the needed internal approvals, rally your procurement resources, and go to market following the RFP process set forth above. If you are happy with your TEM provider, hang on to that relationship as it is rare!
This article originally appeared on NetworkWorld.