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Part 1: Auditing IT Expenses in a SaaS World with Similar Needs and New Challenges

Jul 7, 2021

Traditional enterprise fixed and mobile spend audits are a stable and mature service offered by every large expense management company as well as a plethora of smaller providers and independent analysts. These vendors have built a successful practice around finding billing errors or cost reduction opportunities for clients and sharing a percentage of the monies recovered or the savings achieved. From the early days of telecom expense management (TEM) to today, most enterprises take advantage of this standard service, either as a one-time engagement or on an ongoing basis. 

Executing these traditional audits relies on access to four data elements provided by the customer organization: 

  • Vendor contract  
  • Billing data—via an invoice or vendor portal access 
  • Listing of active customer sites and/or a list of closed locations 
  • Listing of active employees 

Given the chaotic breakup and re-integration of many telecom and mobile providers, it’s not unusual to find numerous, sometimes large billing errors that persist month after month. Claims are often filed with the respective vendors and auditors pursue refunds as far back as they can. In many cases, auditors negotiate settlements with the vendor on behalf of the customer. Any savings opportunities are presented for review and approval before changes are implemented. Savings are typically related to billing changes, with no impact on the service unless the customer opts to switch providers to capitalize on more favorable rates or terms. 

Auditing and optimizing UCaaS and SaaS services, however, is much more complex. Most UCaaS and SaaS services—voice, conferencing, video, etc.—are billed based on subscriptions or licenses. But the way subscriptions are counted and rated is highly variable, and it’s difficult to know exactly what a particular subscription should be priced at given the many custom incentives bundled into the deal. Pricing for services beyond the subscription cost is based on whether that service is enabled for that user, and then which service has been used. 

Example: Conferencing Services 

A user may or may not be able to host a webinar or multi-party conference call. If the dial-back feature is used to have the app call a participant and conference them in, it’s an incremental charge. 

Compounding the challenges is the fact that invoices may reflect only minimal detail around a particular service with no attendant user information. The result is that traditional audit strategies simply aren’t effective when applied to a SaaS environment. The difficulties become clear when we look at the four elements that form the basis of the traditional audit strategy. 

Contracts are required to validate cost. SaaS contracts are a challenge because they’re highly customized and may be specific to the client with no rules on how terms are structured. For instance, smaller organizations may receive better rates or incentives than a customer with a larger workforce.  

  • Varying contract level discounts based on hitting some defined usage threshold 
  • Discounted pricing for phone calls 
  • Varying phone call and call coverage allowances and rates 
  • Varying overage charges if allowances are exceeded 
  • Varying incentives based on contract periods and how services are bundled 

Invoices are also important for cost validation. Unfortunately, charges for UCaaS products typically aren’t presented in a way that makes it easy or even possible to audit for rate compliance. Billing often lacks important details. 

  • Services pre-paid annually or for the contract period, so monthly invoices may show only the number of licenses without any cost detail 
  • Licenses include incentive counts that don’t correlate to the contract quantities 
  • Data shows only a count and a rate for the particular charge category with no detail of how charges—including overage charges—are calculated 
  • Little or no user details for any particular rate or charge 
  • License counts without any usage data on a per-license level 
  • No standard around invoice formats or the data included 

Location is less relevant for delivery of SaaS services, since they’re delivered virtually and users can be located essentially anywhere. However, location data is valuable for determining where a particular service is consumed, which can affect savings opportunities and recommendations. The lack of location information diminishes an enterprise’s ability to fully audit and optimize its service consumption and costs. 

Employee information helps tie costs and consumption together with individual users. Because invoices for UCaaS and SaaS services don’t typically include specific user information, it’s difficult to validate whether charges are correct or understand how services can be optimized based on usage patterns and cost. 

Between the lack of standards, highly customized contracts with incentives, little detail and significant rate variability for services billed, businesses are finding it hugely challenging to apply any of the traditional approaches to auditing or optimizing their UCaaS and SaaS spend.  The use of established data points doesn’t provide the needed level of information and businesses are left guessing how their costs stack up against contract terms and consumption patterns. 

In Part 2 of this series, we’ll look at how these gaps can be addressed through some unique approaches to collecting and analyzing the right data sets, enabling businesses to drive more effective audit and optimization efforts across their UCaaS and SaaS services. 

Topics: SaaS

Written by Sheikh Ali

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