Because TEM saves money, TEM solutions are often self-funding. In fact, depending on the specifics of a given TEM solution, it can cost the client nothing out-of-pocket.
Some of the most common TEM solution pricing models are described below. Keep in mind that each project is unique and you’ll need to work out appropriate pricing with your TEM provider based on the services required. Some professional services such as network assessments naturally lend themselves to fixed fee payment arrangements while others such as network audit and optimization engagements naturally align with the contingency / success fee pricing model.
It’s the flexibility of these models that helps make TEM a low-risk investment with high ROI. You can negotiate pricing along with the other details of your solution to find the perfect fit for your TEM needs and budget.
Fixed Fee
Some professional services such as a network assessment are often priced on a fixed-fee basis. A company may want to know where they stand in terms of their operational performance and costs relative to market; a fixed fee based upon the scope of the project and the payment for services is relatively cut-and-dried. In many cases, half of the fixed fee will be paid to initiate the engagement while the remaining half will be paid upon completion of the project and execution of all agreed-upon deliverables.
Success Fee / Contingency Fee
Many companies prefer to engage a TEM provider on a contingency or success fee basis. This allows them to become acquainted with the TEM firm while gaining access to professional services such as network audit and optimization reviews with no up-front financial exposure. It costs the client nothing to have services performed; the TEM provider is compensated based upon a percentage of savings for dispute and optimization analyses. Percentages will vary depending upon many factors such as the size of the client’s monthly spend, professional services desired, overall network situation of the client, scope of the project, etc.
Mixed Pricing (Fixed & Success Fee)
Some engagements take advantage of both fixed fee and success fee pricing. For example, a client might want an inventory build along with audit services. In this case, the inventory build would likely be billed on a fixed-fee basis, while audit services would most likely be billed on a success-fee basis.
Savings Guarantees
Savings guarantees are another way that the value of TEM is reflected in affordable, low-risk TEM project pricing.
Professional services such as a contingency audit or optimization review don’t require a savings guarantee, because there is no financial exposure for the client in the first place (being that the TEM firm is paid on realized savings). However, other services, such as sourcing, will often incorporate savings guarantees to underscore the TEM provider’s confidence in the value of the solution and eliminate any concerns the client may have about financial risk.
For example, language for a savings guarantee might sound something like this: “TEM firm ABC guarantees the annualized savings resulting from the negotiated contracts will be more than X times TEM firm ABC’s fee. If the first year savings is not at least X times the consulting firm ABC’s fee, the fee will be reduced proportionately relative to the expected savings, with a minimum fee of $ N.“
The nature of a savings guarantee is unique to each situation, but if there are any concerns over whether or not the value of services provided is commensurate to billable consulting fees, it’s advisable to inquire with the TEM firm you are engaging to see what they offer with respect to a savings guarantee for services you are asking them to perform.
Veramark Technologies is a leading provider of Telecom Expense Management and Call Accounting Solutions.
