How large is Telecom Expense Management (TEM)? Will TEM suppliers find that they can't grow because there are too many of them and they saturate the market? What is the future of an enterprise employee that is working in a TEM department? The answer depends on TEM is defined. If TEM is limited to focusing on auditing phone bills in the US the market is small. A good case can be made that enterprise customers expect more then just bill uditing from their TEM suppliers.
The ultimate goal of Telecom Expense Management is to ensure accurate and optimal spending on communication services. An effective TEM program manages the full lifecycle of telecom expenses with a focus on six major service domains: managing inventory, sourcing, procurement of services, invoice managmeent, expense management, and payments. This broad definition allows for many additional services to be included as part of TEM. This in turn allows us to increase our estimates of the size of the TEM market.
The diagram below outlines core activities that enterprises must address as part of their program. For the purpose of this discussion, uasage management is part of the expense management function. It maps to call accounting products and it is part of an expense management offering. Also dispute management and auditing is part of the expense management function.
Market Sizing
There are several approaches to sizing the addressable market for TEM services. One approach is to work from estimates based on the amount of money that is spent on telecom services. Approximately $350 billion is spent in the US business market for communication services. If enterprises spend between 2% to 5% of their telecom budget managing expenses, this would equate to a market of $7 to $17 billion in the US. If international spending of $700 billion is added to these figures the TEM market of $21 billion to $52 billion looks quite large.
However, the real addressable market for TEM services is much smaller. Many enterprises are too small for suppliers to scale their offerings. For companies that are spending less then $400,000 per year on telecom services there are limited capabilities of TEM suppliers to scale their offering down. Also the value proposition behind sourcing, service order management, and invoice management is not as compelling for many small enterprises that only have one or two telecom carriers and little Move, Add Change, Disconnect (MACD) activity.
Another approach to market sizing is to build a model based on the revenue per solution.
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