Timothy C. Colwell SVP Efficiency First® Adoption AOTMP
There is a long standing debate in the telecom expense management industry around the best pricing model for telecom audit services. Vendors and enterprises alike have various opinions on the topic. Some argue that contingency or gain share models work best, while others stand by flat fees. While both pricing models may yield benefit, the desired results of an audit dictate the best approach for both buyers and sellers.
A contingency audit is a standard approach if the objective is to identify billing errors, recoup overbillings, and reduce service cost through billing error correction and cost optimization in the near term. This approach targets historical invoicing and offers the opportunity to align services to contracts accurately. Billing error corrections may also generate future telecom savings by correcting errant recurring billings. While contingency audits typically yield positive financial results, they do not address lifecycle management objectives. They don’t identify or resolve the root cause of what creates billing errors and inefficiencies in fixed and mobile telecom environments; the audit objective is purely error identification and financial recovery, not sustainable financial and operational efficiency. Contingency bill audit results are not sustainable. While they can make an immediate financial impact, it is only a matter of months before the problems reappear.
A flat fee audit approach backed by telecom savings objective SLAs outperform contingency engagements in terms of cost, relationship preservation, long-term results and business objective alignment. Best practice SLAs support a very high degree of confidence in identifying cost savings opportunities while adding significant value to the engagement through the identification of efficiency gains, performance improvement opportunities and productivity enhancements. Specifically, vendors can afford to price and perform work that fully supports telecom management lifecycle objectives without having to rely solely on contingency fees to fund the engagement.
Before deciding the preferred method of payment for your telecom audit, establish clear objectives and align them with a vendor that has structured an engagement designed to meet all telecom management objectives.