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.
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
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
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
For example, if the company states it will be a
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.
Topics: TEM
