What is Technology Expense Management (TEM)?

Technology Expense Management (TEM) is a planning method that companies employ to monitor, analyze, and streamline their expenses on technology items and services. In the modern fast-paced environment of months-long digital transformation in which business are highly dependent upon the use of anything and everything applicable like cloud computing and mobile devices to name just a few, monitoring these costs does not only look prudent but is in fact, the key to staying competitive and profitable.

Imagine: your organization could be wasting thousands (or even millions) of dollars on telecom bills, software licensing, hardware maintenance and data plans. Unless they are kept under check, such expenses could go out of control and incur resources and missed opportunities. This is where Technology Expense Management can be used, as a financial guard dog to your tech stack. It is not only a money saving exercise; it is also about ensuring that each dollar invested in technology works.

Table of Contents

The Core Components of Technology Expense Management

In its essence, the process of Technology Expense Management is a combination of a number of vital processes interconnected through providing the business with a realistic understanding of the spending on technologies. Let’s break it down:

Inventory and Auditing

A good place to start effective TEM is to take an inventory of your technological assets and services. This would entail development of a detailed inventory of devices, contracts, and vendors and patterns of use. Audits on a regular basis could be on the lookout of discrepancy, such as idle licenses, or oversubscribed services, which may be rectified immediately resulting in savings.

For example, consider finding out that 50 percent of your team cloud storage subscriptions are lying unused, auditing with TEM tools can highlight this and you can reduce saving and not impact operations.

Invoice Processing and Validation

TEM simplifies the otherwise tiresome work of processing invoices of various vendors. Automated systems compare the charges to the contracts, identify the mistakes such as billing twice, and keep to the rates agreed upon. Such validation process may by itself recover valuable overpayments, often up to 5-10 percent of all tech expenditure.

Usage Monitoring and Analytics

The latest TEM solutions employ data analytics to track technology asset utilization as it is actually functioning. Monitoring the data usage, calls, or programs to use, businesses will be able to identify the trends or failures. Advanced analytics could even exceed current needs and apply it in pre planning hence budgeting will be precise.

Optimization and Negotiation

TEM enables you to make superior decisions when you have the data. This may include the renegotiation of contracts with the vendors under favorable conditions, service consolidation to eliminate redundancy or the use of cost-effective alternatives. The objective is continual optimization and turning Technology Expense Management into a proactive means as opposed to a reactive one.

Advantages of Technology Expense Management

Living in a world where technology changes at light speed, uncontrolled costs may become a drag within a short period of time. As reported in the industry, companies which do not have a TEM strategy in place end up creating unnecessary spending of 20-30% on the telecom and IT services packages alone. Though the savings are one result:

Cost Savings: TEM may produce a rapid ROI by saving on waste and errors, or in many cases TEM may even save itself within months.
Better Visibility: Have a consolidated picture of all tech spending and streamline technology spending toward business objectives.
Compliance and Risk Management: Manufacture compliance with regulatory laws and risk of illegal use and/or vendor conflicts.
Scalability: TEM grows with your business and supports growth without an equivalent increase in cost.
Improved Efficiency: Release the IT and finance teams to do other work instead of manual work.

Examples of the mid-sized companies, who might have a significant challenge with Technology Expense Management, moving to remote work can go under high costs of unmanaged mobile plans and SaaS applications. The introduction of TEM serves the purpose of keeping these costs under check and remaining productive.

Common Challenges of TEM

Although the advantages of TEM are obvious, an efficient TEM program might be difficult to implement and sustain. A few of the typical barriers are:

Data Inaccuracy: If data is not complete or accurate, this may result in faulty analysis and poor decision making.
Complexity: Modern IT systems can be complex, have different vendors, cloud services, and legacy systems which can complicate TEM.
Resistance to Change: Stakeholders and employees might be opposed to a change in processes or new technologies to support TEM implementation.
Resource Constriction: Lack of employees, training, and/or equipment can hinder TEM.

How to Implement Technology Expense Management in Your Organization

Organizations are supposed to follow the following steps in order to implement TEM successfully:

Evaluation of Current Position: Carry out a detailed evaluation of current IT spending habits and find out areas where some enhancements can be carried out.
Establish Clear Objectives: Develop clear objectives to the TEM program, e.g.: minimize costs, improve efficiency, and increase compliance.
Choose the Correct Tools: The TEM solutions that you choose should be appropriate to the needs of the organization regarding functionality, scalability, and usability.
Design Policies and Processes: Develop transparency policies with respect to procurements, inventory control, billing, and other TEM processes.
Train Employees: Employees must be informed of the new processes and tools to make them inclined to buy-in and perform.
Monitor and Optimize: Real-time monitoring of TEM processes and results and optimization when required to meet desired outcomes.

Outsourced providers of TEM are attractive in many businesses, as the expertise and tools do not have to be developed in-house. Such a combination of resources can particularly help smaller companies who do not have specific departments.

TEM vs. Other Expense Management Practices

It is worth noting that technology expense management differs from other common expense management types. While the broader approach to expense management is called general expense management and includes the cost of travel or office supplies, TEM is technology specific. It overlaps with aspects such as telecom expense management (a narrower sub-specialization that focuses only on communications) and IT asset management (which monitors physical equipment).

Still, TEM offers a comprehensive approach, combining these aspects into an overall strategy. An example would be that when your company adopts enterprise mobility management (EMM) to control devices, TEM would complement this by taking care of the financial aspect, i.e. the need to align costs with usage.

In Summary

In modern and fast-changing world, Technology Expense Management has become not only advantageous but necessary for all organizations that want to get maximum out of their IT investments. With TEM adoption, there is increased possibility of business gaining control over their costs, operational efficiency, and strategic agility hence leading to long term success and sustainability. With technology remaining a crucial part in shaping business results, the value of TEM will only increase.

FAQs About Technology Expense Management

As much as TEM is a subject that attracts more questions than answers, they include the following, to shed more light on the subject:

What is the difference between TEM and Telecom Expense Management?

Telecommunications is a specific part of expense management (TEM) that focuses solely on communication costs such as phone bills and data plans. TEM covers a broad area, including software, hardware, and cloud services.

How much can a business save with TEM?

The savings can differ, yet a significant amount of organizations claim 10-30% savings in regard to technology costs due to improved auditing, negotiation, and optimization.