How to Assess a TEM Vendor’s Stability

Posted by
Josh Bouk

27 February 2018

Blog

Imagine the scenario: after months of proposal requests, discussions, deliberations, and early implementation projects, you finally settle on the perfect service provider. You've negotiated a great rate, they understand the inner workings of your enterprise, and the service they perform is meaningful. Then, poof, in the blink of an eye, they're gone. All that hard work's gone to waste and your organization is left to pick up the pieces.

In any industry, there's nothing worse than your service provider going bust. And with Telecom Expense Management (TEM) providers now covering so many areas within their customers’ business, this disruption is particularly hard-felt. So, before choosing a vendor (and equally, afterwards), what's the best way to assess its stability?

1. Use Independent Industry Reports

Research firms such as Forrester, Gartner, and IDC offer unbiased, in-depth advice on the TEM industry. Reports will help you assess the stabilty of all the various vendors by providing:

  • A full picture of the strengths and weaknesses of each provider
  • Detailed market analysis, including trends and overall direction
  • Recommendations to business leaders in selecting a TEM vendor
  • An understanding of the challenges faced by TEM providers and potential growth areas

Reports (and information on the company’s own websites) should also give you a good idea of their portfolio and approach to TEM. Vendors that have diversified their offerings and cover the full telecom lifecycle are arguably more secure than more traditional TEM providers, that offer little more than an auditing service. The landscape has changed, with many arguing Technology Expense Management better reflects what numerous providers now perform.

Discover why Gartner named Cass as the only publicly traded player in the TEM  space that delivers real results, worldwide: Download Gartner's Guide

2. Vendor Due Diligence Reviews

As stated by VendorRisk, a vendor due diligence review aims to provide surety that a potential vendor has a strong corporate structure, is financially stable, and ethically sound. Used to identify and mitigate risks with vendors, there are two different types:

Initial due diligence reviews

These should be performed on prospective TEM providers, as part of the RFP evaluation process – see our post What Goes into a TEM RFP? for more information on the RFP process as a whole. There are many independent bodies that can help with due diligence activities, such as the Shared Assessments organization, with their Standardized Information Gathering (SIG) questionnaire.

A selection of some of the typical questions to ask a prospective vendor are:

  • Has your company filed for bankruptcy in the past five years?
  • Has your company had any lawsuits filed in the past five years?
  • Has your company been granted any liens or judgements in the past five years?
  • What are your company’s long-term plans for direction and future growth?

Periodic due diligence reviews

Once you have signed up with a TEM vendor, these reviews help you to confirm the provider’s continued capacity to deliver the service you agreed upon, as part of the contract. To complete them, you can actually repeat many of the questions that you asked in the initial due diligence review and compare answers. VendorRisk recommends performing due diligence reviews annually, around 180 days before the renewal notification notice – aiming to mitigate against the following: 

  • Disruption to your service resulting from a vendor filing bankruptcy
  • A change in practices from the TEM provider due to a new management team or owner
  • Risk exposure resulting from any legal actions against the vendor

3. Research and Review the Vendor’s Financials

A good overall summary of how to assess the financial stability of a company, before starting a relationship, comes from Inbound Logistics. How do these tips relate to the TEM world?

Research the Vendor’s Credit History

The web has simplified the process of running a credit report drastically. Some of the biggest providers of this service are Dun & Bradstreet, TransUnion, and Experian, who offer credit reports on millions of companies worldwide. Reports consist of information such as: credit score class, scores for payment promptness , and financial risk scores.

There are many individual country-specific services too – for example, Companies House is a UK governmental registrar, which will provide the financial accounts of British businesses on request.

With hundreds of vendors operating globally, the TEM market is highly fragmented, ranging from small start-ups to large enterprises with a history of acquisitions. Privately-held vendors will vary in willingness to produce financial information, as they are not legally obliged to do so. However, in the case of larger vendors, the information should generally be accessible to you.

Obtain and Review Financial Statements

As we discussed in our post 7 Key Takeaways from the Gartner 2017 TEM Market Guide, many of the big TEM vendors are owned by short-term investors, so their customers carry the risk of their provider being sold (or worse) during their contract. This can be very damaging for TEM customers, as their service is disrupted and they typically have to suffer the costs of repeating implementation projects. And in addition to TEM, exactly the same holds true for Bring Your Own Device (BYOD) and Managed Mobility Services (MMS) programmes too. So, when reviewing financial statements, try to ascertain what the long term strategy of the provider is.

For example, if the company states it will be a long term player in the market and it’s committed to a single platform, but you can see their history is awash with acquisitions and short-term investors, their credibility then becomes doubtful. Customers of these vendors often have to endure the hassle of implementing and reimplementing multiple different platforms.

Obtain the Vendor’s Employer Identification Number

Taxation authorities in many countries (e.g. the IRS) assign a company with an employer identification number (EID). Naming varies (e.g. federal tax ID number is another name), but there’s often useful information tied to the EID. By determining how long the TEM vendor has been assigned the number, you can start to build up a picture. As put by Inbound Logistics:

A short time in business, or switching its corporate make-up frequently, are red flags. If you still want to pursue the partnership, you definitely need references.

Final Thoughts

Vendor churn is a deep-rooted issue within the TEM industry. Changing vendors can be catastrophic for TEM customers, as their service is interrupted, and they usually have to bear the costs of repeating implementation projects.

Most agree that another substantial problem in today’s world is that it's becoming harder and harder to separate fact from fiction. However, some of the organizations we’ve mentioned in this post offer respite, by allowing you to take a more objective look at the TEM landscape.

Finally, and in the spirit of objectivity, we'll conclude with a few more facts. Cass is a publicly traded bank holding company, and thus is subject to examination and regulation by Nasdaq, SEC, the U.S. Federal Reserve, and the Missouri Division of Finance. What's more, in the 2017 TEM Market Guide, Gartner distinguishes Cass Telecom as the only vendor offering a global solution while being traded on a major exchange – download the free guide now to learn more.

Gartner 2018 TEM Market Guide

Topics: TEM

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