Meta trend: In 2002, users will increase outsourcing to 30 percent of non-strategic network services (for example, voice administration, managed router services, publishing-oriented Web hosting, and telecommuter support) and develop centers of excellence for strategy/architecture, infrastructure planning, and partner management/negotiation (2002-04). Bill auditing will become an essential cost-control measure during 2002/03. Surviving carriers will be forced to de-emphasize traditional commodity services. Virtual services provided "in the cloud" will become a viable option for PBXs, voice mail, identity infrastructure, and security by 2005/06.

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Telecom agreements need constant attention to avoid blatant or creeping overpayments during the lifetime of an agreement. Users must either hire staff or seek outsourced assistance to manage the carrier relationship, manage billing, handle the move/add/change process, coordinate trouble ticketing, and handle circuit inventory. Meta Group shows that up to 50 percent of enterprises are understaffed for providing these functions internally. By 2003, many enterprises will be evaluating outsourcing these services as part of telecom portfolio management. Companies that spend less than $25M per year in telecommunications will outsource these functions beginning in 2004. Companies that spend more than $25M per year in telecommunications costs will continue to manage their agreements using internal personnel through 2005. Manpower costs will increase as more complex services are added to enterprise backbones, including IP/VPN services such as Multiprotocol Label Switching (MPLS), voice over IP (VoIP), and next-generation cellular, making telecommunications portfolio management the best practice for enterprises spending more than $25M per year by 2006 or later.

The cost of managing telecom agreements

According to our research, the cost of managing telecom agreements averages 2 to 3 percent of the gross telecom expenditure, requiring one full-time employee (FTE) for every $4M to $5M of telecom spending. Outsourcing is not an option for smaller companies spending less than $5M annually. Through 2004 or later, smaller companies have no other option but to manage their own telecom agreements because of the cost of a third-party engagement. The inability to properly manage existing agreements and prepare for new contract negotiations is one of the reasons that small and medium enterprises pay 10 to15 percent more than they should for comparable telecom services. Enterprises that spend $4M to $25M also benefit most from telecom portfolio outsourcing because they can ill afford the specialized staffing that is needed for thorough contract management.

At $25M or more, the enterprise can justify the staffing costs. However, the expenditure may not be appropriate. Telecommunications contract management capabilities are not core business functions for most enterprises. Internal enterprise telecom management teams are often understaffed, undertrained, and underequipped to properly manage telecom agreements at most enterprises. Further, as the complexity of network services increases, telecommunications portfolio outsourcing will become best practice even for these enterprises by 2006 or later.

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