Karl Scheufler walked into the

Fall 2004 Channel Partners Conference & Expo presentation, Inside the Buyers World, and found the differentiated service he was looking for: telecom expense management, or TEM. The offering now is so crucial to his consultancy, in fact, that it has entirely changed his business model.

Brad Batten started marketing a TEM product in July and by late August had one client under contract, and other companies considering the same decision. We have shifted our focus on a market strategy to leading with the TEM solution, he says.

For Jamey Charapp, everything clicked at one time and TEM became an instant asset to his business.

And Gary Storm has been selling TEM for two years, and counts more than 60 customers using the services that provide his agency recurring revenue.

Solutions providers across the country are changing their business models to incorporate telecom expense management. The driver is the altered nature of telecom companies are wary of straight sales approaches and need more than just a lower rate on long-distance.

This tool offers solutions providers another way to help prospective clients whether they have five phone lines or thousands. Telecom expense management is a seemingly simplistic term for the process of helping companies analyze and track their telecom-related spending. A thorough system ideally a combination of manual and automated efforts will show executives, IT departments and accounts payable personnel any discrepancies in voice, data and wireless services. For example, a business might only need five phone lines, but thanks to employee turnover, someone might have ordered a new line instead of reusing an existing one. The company is then paying for an extra phone line it does not need. As another example, managers can track how many wireless minutes a certain employee uses and determine whether they are legitimate, business-related minutes or personal calls for which the company might not be willing to pay. Telecom expense management is a way for companies to stop paying for telecom services or charges they do not need; the money they recoup often far outweighs the investment needed to start saving.

There are dozens of companies offering TEM solutions. Some work for the solutions provider who targets big corporates; others are better for partners who focus on the SMB market.

Scheufler is president of Intelenet Communications Inc. I heard Scott Levy give a presentation in Chicago last year and was very impressed. … I did not have a good handle on the inventory side, and I gave him a phone call. Levy is director of channel sales for Telecom Solution Center, which owns the inventory management unit, Teledge Group. Teledge centers on inventory management, which it considers the crux of all telecom expense management. Built on Microsoft Corp.s Access program, the Teledge database finds discrepancies in a companys voice, data and wireless bills. Our idea behind a telecom inventory tool was that it needs to be simple, Levy explains. Most packages are billing-centric and they have no analytics; they dont go back to the inventory. … Unless you can go back to the demarc, where that [phone] line comes in and you can see exactly what it costs, its very hard to keep track of inventory. Its very hard to reconcile anything.

The Teledge database is not just invoice tracking, Levy emphasizes; its also variance reports showing users everything that comes in 5 percent high or low, for example as well as exception reports and trend analysis.

Oftentimes you spend a lot of time investing your knowledge and experience into a customer, who gleans all the information they can from you, and then goes to some other solution, Scheufler says. That adds up to a lot of wasted time. … [With Teledge,] from the get-go, you set the expectation that this is a service that [the client will] pay for and then after that, were going to be there to make ongoing recommendations, once they have everything inventoried. … And we get paid for it, and quite handsomely.

Scheufler figures he needs to land two or four inventories per month to get his foot in the door with a company that, at some point, will end up ordering more voice and data services through him.

Levy says solutions providers gross 30 percent by selling Teledges inventory services. The dollar amount can reach the thousands because, even though end users keep the $5,500 database, inventory services are charged based on the number of customer locations and other factors. Im writing commission checks every month for anywhere from $1,500 to $25,000 to channel partners, Levy says.

Selling TEM products leads to recurring revenue, says Charapp, CEO of Alternative Communications Consultants, who also sells Teledges database. Clients are happy with the programs results, and once they understand what they have … you can go and change it and save the customer money on all those different services, says Charapp. Once we get [the inventory] done for the customer, then we work with them to bring them the best solutions as an unbiased vendor for them.

The Teledge database works for small, medium and large companies. For channel partners who are working upmarket, there other proprietary TEM solutions.

PAETEC, for example, has created its software, Pinnacle, which is made up of four products: cost management, operations management, switch management and invoice management. The CLEC is distributing Pinnacle more and more through solutions providers, says Jeff Burke, executive vice president. PAETEC targets companies that use 1,000 or more lines; if an agent doesnt want to tackle that size of client, PAETEC pays a referral fee.

As telecom expense management matures, it really becomes more than just auditing and reconciliation, notes Paul Bolz, vice president of business development. What end customers are looking for is essentially more expertise from that consultant. Theyre also looking for workflow optimization around provisioning telephones and provisioning PRIs and T1s. What Pinnacle does for the agents is it broadens their portfolio … and at the same time increases the consulting services theyre going to get out of those customers. … [Solutions providers] truly become fullfledged telecom consultants.

For the enterprising solutions provider the one who sets his or her sights on the largest of companies Vercuity Inc. offers a good fit, since it, too, eyes companies that spend $1 million to $7 million annually.

The expense side of the telecom industry has reached a mature state. There is little to no room left to lower local and long-distance rates at historical lows levels. Customers now need to focus on verifying that they are realizing what they are contracted for, attests Batten, who is vice president of sales for Tie National Accounts. Vercuitys TEM solution allows clients to monitor their usage against contracted rates and audit rules they establish on a real-time, ongoing basis.

Vercuity helps those companies get a handle on their telecom expenses, and also to reduce spend, says Rob Fortino, alliance program director. [I]n my point of view, telecom expense management includes auditing bills and contracts, processing invoices, which basically puts invoices into our platform and enables us to run them through processing that looks for errors and ways to save money. We negotiate contracts with carriers and try to get the best terms and rates for our customers. We do total outsourcing, where [clients] basically outsource the entire TEM function … to us.

Vercuitys hosted software checks clients monthly telecom expenditures for savings opportunities. Unlike Teledge, Vercuity sells its product for a monthly fee based on customers telecom costs. Fortino says, depending on the deal at hand, agents earn between 8 and 10 percent. That might not seem like a lot, he acknowledges, until you consider these organizations are spending millions of dollars per year on their telecom expenses. Agents can make $60,000 to $70,000 a year on wireline TEM, he says, adding that wireless is similarly profitable.

We spun out our telecom expense management division this year to focus exclusively on this market space, says Storm, president and CEO of the newly formed company, PinPoint Management Inc., a spinoff of VCOM Solutions. We started an entire new business because of TEM.

The market is heating up for TEM services, Vercuitys Fortino says. An agents not going to be spending time trying to convince a company that this is something they should do; itll be more of this is available to Fortune 500 clients; … this is another way for them to make their business more efficient.

Telecom expense management products provide partners the edge they need to reach new clients and foster loyal customers who will look to them for help. When youre providing solutions, you get more of the attention of the end user because they are tired of doing things in a one-off fashion, Telecom Solution Center Inc.s Levy declares. Theyre tired of having to go here, and there and yonder to get something done. They want to be able to get it in one place, from one person, from one company.

For more on how TEM is shaking up the industry, click over to the allnew CSP Network (www.csp-network.com) to hear from resellers who are changing their business models, and the vendors that are backing them.