Not long ago, Mississippi-based BancorpSouth’s monthly call center phone bill approached astronomical proportions. Its monthly telecom charges filled over 30,000 pages. But what really irritated executives was that both of the bank’s beleaguered telecom services employees had to manually search for billing errors. Finding time to audit bills was difficult because this small staff’s primary duty was to oversee selection and servicing needs for phone, wireless, and data services used by thousands of bank employees.
They would occasionally check to ensure credits for disconnected lines, but they lacked the audit automation tools to accurately monitor rates and fees on thousands of invoices for 260 BancorpSouth branch and office locations.
“Our capabilities were limited,” says Senior Vice-President Michael Lindsey. “If the bill was within a few thousand dollars of the previous month, we accepted it as probably accurate, but were never certain.”
A lot more fat was in those invoices than suspected. An outsourcing provider would soon show them how much and save the firm over a half-million dollars in the first year of the engagement.
Previously, the bank occasionally recovered small amounts from periodic outside forensic audits and occasional “look what I found” discoveries. But there was no ongoing oversight, nor could it introduce new procedures for telecom services and expenses brought on by the bank’s addition of new markets and employees during a protracted period of growth-based acquisitions.
Finally, in early 2005, BancorpSouth outsourced its telecom expense management. The firm entered into a relationship with provider BroadSource of Atlanta and its ASP-hosted formula for integrating billing, inventory, and order processing across its clients’ entire telecom enterprise. The objective was to bring all three into an offsite central warehouse, then integrate with the bank’s network and IT platforms.
Third-party telecom expense management (TEM) is a growing alternative for many diverse financial services firms as they deal with spiking telecom costs. Expenses are on the rise because call centers are beginning to serve as the hub of self-service initiatives at these institutions. Use of wireless services also continues to grow, as does the cost, often under substandard organizational support and oversight, according to several analysis firms.
A September 2005 report on telecom outsourcing from Gartner, Inc., notes the average $75 per-user cell phone rate for corporations is doubling to more than $150 a month when those users adopt emerging data services like wireless email and Internet access through PDAs, Blackberrys, and next-generation mobile phones.
“CFOs understand it’s a large, fluid expense,” says Vincent Brennan, CEO of BroadSource. “It’s a top-five outlay and most banks admit that telecom expense is complex, dynamic, and changes constantly.”
Outsourced TEM: Closing The Black Hole
Telecom invoices eat up almost four percent of revenues for most businesses, according to Aberdeen Research. It suggests that figure is likely higher in the financial service industry which relies heavily on the technology, according to a late 2005 telecom expense management benchmark report by the analysis firm.
Lagging behind the technology’s expansion and costs are the uncontrolled and under-leveraged expense processes they produce. Legacy telecom billing systems from carriers are “notoriously rife with errors,” according to Aberdeen. It also notes that a seven-to-twelve percent monthly inaccuracy rate for large enterprises is not unusual. A margin that wide obviously means large corporations can reap millions in potential annual savings with a telecom expense management program, according to Aberdeen’s analysts.
Keeping on top of expenses is usually one of BancorpSouth’s strengths. The needs assessment prior to deployment of Broadsource’s TEM showed the institution’s carriers had been generally on target with billing accuracy.
Brennan notes the audits allow for some immediate recovery of funds, but the very next day “telecom expense creep” resumes because such audits seldom touch inconsistencies and inefficiencies in the back-office. “BancorpSouth was an exception in this regard because they were pretty much on top of things.”
But there was another area rife for significant savings. “Though pleasantly surprised that they validated that we were not missing that much, the area that really positively impacted our costs surrounded contract negotiations,” says Lindsey.
According to Lindsey, the data intelligence gathered by the BroadSource engagement enabled BancorpSouth to save over 10 percent in the renegotiation of the contracts, about $600,000 annually from its provider Bell South. “We always assumed that because we were a good customer we were getting the best price. But this was the first opportunity for us to have outside market data identify a good benchmark for each line of business and for each product.”
BancorpSouth’s TEM program also impacted the back office by introducing centralized management of the firm’s 400+ cell phone accounts, Web-enabled bill views for employees and managers, and consolidated electronic statements.
TEM typically produces such swift returns. One unnamed Wall Street investment firm cited by Aberdeen reveals its program brought in $20 million in savings in the first year from improved bill-tracking, inventory maintenance, and telecom vendor management. That figure didn’t include the continued savings in price and service evaluations from new contract negotiations that BroadSource’s data and counsel produced.
Saved Money is Found Money
Eliminating telecom silos is one of the strongest features of a TEM initiative. Billing errors or duplications may exist due to contrasting methods surrounding rate compliance, rebates, dispute resolution, and overpay retrieval.
Brennan declares the ROI from telecom expense management can be between 200 and 600 percent for large institutions, with smaller banks and investment houses seeing an “eight-to-tenfold” return.
“Wireless produces the quickest dividend and the easiest place where our clients can immediately increase operational efficiency and save significant money, almost within months,” says Brennan.
Through its TEM, the bank’s future e-banking expansion plans can proceed while still keeping internal telecom growth on track and under budget.
A discrete benefit of its telecom expense management finds BancorpSouth in greater control of its retail and business banking product expansion efforts by giving it a “dashboard view” of its telecom enterprise. And it allows executives to prepare for more sophisticated service offerings, such as wireless customer inquiries via their PDAs and bill-pay functionality over cell and smart phones whosedemand “is just skyrocketing,” reports Brennan.
“We’re just now realizing savings on cellular plans by recent shifts from individual to pool plans,” Lindsey says. “Our largest dollars were associated with the telecommunications landlines in branches. Since we’ve moved to the cellular side we’re already seeing significant decreases in our monthly expense for the corporation.”
In turn, those users will see a smaller allocation of their responsibilities for the associated wireless cost. “We can also have more active plan management in branches, and give them better reporting capabilities on the use of devices,” according to Lindsey.
Lessons from The Outsourcing Journal:
- Outsourced telecom expense management produces quick savings by consolidating and merging all telecom expenses, revealing overcharges and producing timely rebates.
- Armed with a complete overview of its telecom usage, firms are prepared to negotiate the most favorable relationships with telecom providers, producing significant savings that are then stringently monitored.
- The ROI from a TEM can be between 200 and 600 percent for large financial institutions. Smaller ones can see an “eight-to-tenfold” return. BancorpSouth realized $600,000in savings its first year.