How to Turn IT/Telecom Department from Cost Center to Profit Center: Make the Transition with Technology Expense Management

Every day enterprises ask an age old question: are we sufficiently profitable? If the answer is yes, then the company will think of ways to maintain and increase their revenue and if the answer is no, then the company will look for ways to improve their bottom line profitability. This usually begins with cutting costs.

Cost-cutting companies will first look at functions perceived as cost centers-functions necessary to conduct business but do not generate revenue and profit. On the other hand, business functions that are producing revenue and profits are viewed as a profit center and will usually remain intact and typically not experience budget cuts.

For many companies, the telecom department is generally viewed as a cost center and companies are learning that to keep this department afloat, engaging in a Technology Expense Management [TEM] initiative is a crucial step in the right direction.  A TEM program often focuses on generating costs savings through reactive audits to historic invoices and just general telecom invoice management.  With this amount of effort, the savings can often meet and exceed the initial investment. But a TEM program can also become a profit generator: by identifying IT and telecom inefficiencies and billing errors on a proactive basis as the bills come in, along with helping to manage an accurate inventory of services, and empowering department managers with better control over the consumption of services.

Questions to Ask

The questions an IT/telecom manager often asks are:

  • How do I turn my department into a profit center?
  • What steps will I need to take to reach my goals?
  • What areas should I focus on to improve my profit center capabilities?

Although there are several steps involved in turning your telecom department into a profit center, a major factor is having the support of senior level executives. TEM managers need senior level executives involved because it helps highlight the value of the TEM program to the entire company, especially to the finance department. TEM programs that want to be viewed as a profit center should have some form of reporting to the finance department, or at least part of the IT Finance department, and not solely in the IT/telecom department.  The key is to include your finance team, so they can see first hand the savings being attained.

Another important step involves implementing a TEM program that goes beyond traditional audits and invoice processing. Today’s TEM programs should optimize control over expenses, including enterprise spending on telecom and the operational costs associated with managing those expenses.

A TEM program should not only include the automation of invoice processing but also incorporate automated telecom exception reporting, integrated MACD capabilities, and have electronic billing data available for spend analysis across all business units throughout the enterprise in a central repository.

Finally, something that is often taken for granted is that a TEM program should be able to leverage the rich detail found in electronic data and allow analysts to develop models and plans for consumption, including “what-if” analyses, to help the finance team project a budget for usage going forward.

Be Patient-It Will Happen

Turning your IT/telecom department into a profit center will take patience because it involves changing the way people view the department. IT and telecom managers are going to need to make a case that a dedicated TEM program will generate savings and if properly maintained, it will continue to create a consistent revenue stream.

Tracking TEM program results will help establish credibility and it will provide a way to prove that the TEM program adds value to the company.  Tracking needs to not only include the number of hard dollar savings achieved but it needs to also include how much cost has been avoided due to better management of IT and telecom services.

Finally, implementing a new TEM program will be useless unless all the information is centrally located and easily viewable for analysis. Being able to run reports to manage your success is only helpful if the information is in one unified repository.

The tools to turn your IT/telecom department into a profit center are available and with some patience and sticking to a few key fundamentals, it can become a reality.

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