The Aberdeen Group states, in The Cost of Not Acting: The Total Telecom Cost Management Benchmark Report, that the average Fortune 500 Company spends 3.6% of their total revenue on telecom and related expenses. Telecom expense management is the end-to-end, automated management of wireline and wireless expenses, as well as circuits and devices. This encompasses the entire telecom lifecycle, including contract sourcing, procurement, provisioning, inventory management, wireless management and invoice processing/auditing. Reducing these expenses by even a few percentage points can have a significant effect on the enterprise's profitability.

The dramatic drop in telecom rates over the past two decades has created the perception that controlling telecom expenses is less important than in the past, but this belief is not borne out in practice. The reality is that, on average, corporate telecom costs have gone up, due to the proliferation of new applications, such as cell phones, smart phones, pagers, laptops and other portable devices. The sharp increase of high-speed Internet connections has also driven up costs.

Telecom cost savings can be achieved in many areas. For example, the same Aberdeen report mentions that a surprising 65% of survey respondents incur late fees. Although this constitutes but a small percentage of the overall costs, that money could have been put to good use instead.

A complete telecom expense management system is a software system that comprises the following areas:

- A centralized telecom inventory control system. The maxim that one cannot control what cannot be measured suggests that the first area to be addressed is to establish a complete inventory of all telecom resources and services. Many companies have only a vague idea of what equipment and services it is paying for. Companies are often billed for equipment or services they no longer use.

- Centralized telecommunications procurement. This is a logical next step. Unless procurement is also centralized, the inventory will quickly go out of date because of unreported telecom purchases. Moreover, centralized procurement will also tend to avoid unnecessary purchases and save money through bulk purchasing.

- Centralized processing of telecom invoices. This helps to make sure they are paid on time. In addition, by comparing invoice detail against actual call detail records (CDR) and vendor tariff agreements, billing errors can quickly be identified and corrected.

Monitor resource usage. This will help to identify discontinued resources that may still be billed for, as well as inefficiencies, waste, telecom bottlenecks, and unauthorized or fraudulent use of resources. By detecting and reporting anomalies, the system improves security, which is important in this era of terrorism and industrial espionage.

The key to a successful telecom expense management system is automation and organization. The savings in labor costs alone can be dramatic. In addition, productivity can be boosted by relating telecom costs to individual departments, sections, projects, or even individual employees.

In short, a company that does not have a telecom expense management technique in place is in fact wasting funds, while an investment in TEM software will soon pay for itself.