Today, competition is driving TEM prices down, Gartner says. But the price declines of the last several years might be slowing. While TEM rates have dropped 75% in the past three and a half to four years, they’ll drop only another 5% to 10% in 2009, predicts Eric Goodness, vice president at Gartner and one of the report’s authors, in an exclusive interview with Voice Report. Gartner predicts that enterprises with TEM deals in the works will sign bigger contracts for higher average monthly recurring costs. TEM spending had decreased in 2008. Savvy enterprises are signing shorter TEM contracts, though, in order to take advantage of the improved pricing, Gartner says. That’s because you want the opportunity to renegotiate contracts more frequently in a declining-price market. It’s no wonder there are deals to be had; the TEM market is a crowded one. The telecom expense management industry continues to be fragmented, with more than 200 players worldwide, Gartner reports. The research house has “abandoned hope” of meaningful market consolidation that would streamline the industry and expects only five to 10 vendors will be eliminated through mergers or acquisitions in 2009. In fact, Gartner predicts new entrants will swell the ranks to 300 TEM providers by 2013. [See sidebar for details on how TEM players are differentiating themselves] TEM deals take longer than they used to, Gartner reports. The average TEM procurement takes between nine and 12 months from bid to deal completion. Enterprises today choose TEM firms that provide business process outsourcing services more often than TEM delivered in a licensed, hosted or managed services model, according to the report’s authors. And they’re also surprisingly comfortable using their telecom service carriers as TEM providers. Customer Service Ratings Improve Customer satisfaction improved since Gartner’s 2008 analysis, the authors say. TEM companies have invested a lot in customer service in the past few years, notes Joes Basili, managing director of the Telecom Expense Management Industry Association (TEMIA), in a recent Telecom Junkies podcast. (www.telecomjunkies.com) Customer churn among the TEMIA members surveyed is at 4%, meaning 96% of TEM contracts are for renewal or greenfield business, Basili says. But the strong churn rates don’t necessarily mean customers are happy, says telecom attorney Hank Levine, partner at Levine, Blaszak, Block & Boothby, in Washington, D.C. Enterprises tell Levine they feel like they’re being low-balled or made the victims of a bait and switch in TEM deals, even though they’re getting more for less. TEM firms are expected to lower their rates or deliver more for the same prices as the industry matures. Those increased expectations are tough to meet, Basili says, because professional services can’t be scaled with technology. While bill processing applications are getting more efficient, people-dependent tasks like negotiating billing settlements don’t get cheaper with technology improvements. While enterprises have complaints, they don’t frequently change TEM providers out of dissatisfaction, Levine and Basili agree. 3 Retain ‘Strong Positive’ Rating, Symphony Joins Top Scorers
Despite the improved customer service feedback, solution integration within large enterprises is still a challenge industry-wide, the report notes. Gartner assigned the overall TEM industry a “promising” evaluation, saying more consolidation and consistent improvements in customer satisfaction need to occur before it confers a “positive” rating. (See chart for an explanation of Gartner’s rankings system) Invoice Insight, Rivermine and Tangoe retained their “strong positive” ratings from Gartner’s last report, issued in February 2008 [VR 2/28/08]. Symphony, meanwhile, improved on a 2008 “positive” rating to a “strong positive” in 2009. Gartner praised the Palo Alto, Calif.-based TEM company for earning the highest ratings in mobile TEM for cost benefits for customer service, cost reduction from invoice auditing, cost reduction from better asset management and better visibility of costs based on allocation capabilities. MBG Expense Management, MDSL, PAETEC, ProfitLine and Quickcomm maintained “positive” ratings from 2008 to 2009, and IBM Global Technology Services earned a “positive” label after not being rated in 2008. TnT Expense Management moved up to “positive” in the latest report from a “promising” in 2008. The firm, in Sandy Hook, Conn., won praise for its development of a network operations center to manage the SaaS-based platform used for its process outsourcing offering and act as the master control center to monitor customer SLAs. TnT also received high customer satisfaction scores. Anchorpoint, Asentinel, Avotus, mindWireless and Telesoft earned “promising” ratings in 2009, a downgrade from their “positive” ratings in 2008. Telwares kept its “promising” label from 2008 to 2009. Control Point Solutions earned the 2008 report’s only “caution” grade but improved to “promising” in 2009 after being acquired by Noida, India-based outsourcer HCL Technologies Ltd. “At the time of acquisition, Gartner considered CPS to be a distressed provider” and Gartner considered its offerings to be the lowest-rated in the market. Control Point was dinged in last year’s report for deriving too much of its revenue from carriers, losing key customers and not giving customers cost reductions through asset management. But the acquisition in August 2008 [VR 8/28/08] has helped the TEM organization to be more successful in the market, Gartner notes. Control Point and HCL combined their executive and delivery teams and earned a spot in the top half of Gartner’s latest customer experience surveys. Enterprises managing their fixed-line expenses with HCL’s services appreciate the customer service, account management, cost reduction from better asset management, better visibility of costs based on chargeback and allocation and a reduced workload for their financial teams because of vendor payment services. However, enterprises using HCL to curtail mobile expenses complained about the vendor’s ability to provide effective monthly invoice audits and had doubts about its ability to reduce costs from head-count reduction and “resource reorientation.” Ad-hoc use of professional services is also a concern, Gartner says. Nevertheless, Control Point CEO Bob McMullan tells Voice Report the company is pleased with the rating and thanks its customers for the support. One vendor – MobilSense Technologies – was downgraded to a “caution” grade in 2009 from a “positive” rating in 2008. The only rating lower than “caution” is “strong negative,” which no company received. Gartner praised MobilSense, in Agoura Hills, Calif., in 2008 for its improved user interface and strong policy management capabilities. But the 2009 report notes the vendor manages a relatively small number of devices and is one of the smallest mobile-only TEM firms. It has limited direct market presence and works mostly through reseller partners, Gartner says. Brussels, Belgium-based Convergence also earned a “caution” ranking; it wasn’t ranked in 2008. The company manages expenses exclusively in Western Europe and Gartner says customers complained about support for outsourced managed services and limited mobile inventory tracking. The Rationale behind the Ratings Gartner invited 145 TEM firms to participate in the rankings. Providers must have published TEM applications or provided TEM services for at least three years in order to be invited. They also had to have at least 10 customers. The research firm then selected 45 providers which then submitted 10 customer referrals each with explanations of duration and scope of their relationships. Firms were “considered for MarketScope independent of their relationship with Gartner,” the authors say in an effort to stem speculation that Gartner customers get preferential treatment and better rankings. More than half of the vendors rated have no formal relationship with Gartner, the authors assert. Customer experiences; products/services; sales execution/pricing; and overall viability in terms of business units, finances, strategy and organization count most when Gartner assigns ratings. Business models, operations and innovation are considered, too. Most TEM firms evaluated by Gartner generate less than $10 million in annual revenue. ( | 
