The authority on standards

and best practices for telecom

environment management

September 27, 2007

Best Practice Recommendations for IT and Telecom Inventory

Management
Telecom assets are a special class of IT assets that require an accurate inventory for effective
financial management. Enterprises should consider the benefits of establishing a “single version
of the truth” that comes from linking management of IT and telecom assets with their other
systems and processes. An accurate inventory is critical for effective financial management.
Managers need accurate information that supports their business decisions. This document
highlights some of the challenges to managing IT and telecom assets, and how an inventory can be
used to support financial management of assets.

Inventory Is Critical to Managing IT and Telecom Assets

Two challenges to managing IT and telecom expenses are lack of automation and inventory
accuracy. Figure 1 highlights the challenges to effective management of telecom expenses.
Inventory accuracy was identified by 47% of our respondents as one of their top challenges. The
other issues that were identified (lack of resources, decentralized receipt of billing, lack of
expertise, and decentralized procurement) all relate to the challenges in managing assets. While
this survey was specific to telecom, many of these challenges are common to IT asset management.
IT and Telecom assets are difficult to track because they include tangible assets (computers,
network equipment, software telecom lines, and circuits) and intangible services. One challenge of
managing laptops, cell phones, smartphones, wireless broadband and VPN service inventories is
that the hardware and services are mobile. They need to be associated with users, not with physical
service addresses. Changes with employees need to be reconciled to the inventory. For example,
new employees join the organization, they change departments, and they leave the organization.
Figure 1: Top Enterprise Challenges to Effectively Managing Telecom Expenses
Lack of automation to manage telecom
51%
expenses

Inventory accuracy 47%

Lack of resources to manage telecom

expenses 46%

Decentralized receipt of telecom billing 26%

Lack of expertise to manage telecom

23%
expenses
Decentralized procurement of telecom
21%
services
(Respondents were asked to select three choices for this question) Source: AOTMP, September 2007

Save the Date! AOTMP’s Decisions 2008 Conference for Enterprises is April 28-May 1.
Learn more at: www.aotmp.com.
 Inventory Best Practice Recommendations
Telecom Strategies Page 2

Creating an Inventory
An inventory should capture the service address, service identifiers, service features and
configurations, cost details, contract details, service provider information for voice services, data
services, equipment, hardware, software, network devices, mobile devices, telecom resources,
personnel, projects, and budgets in a usable format. Organizations must manage the entire end-to-
end lifecycle for assets and expenses. If any area is neglected, it will have a downstream impact in
terms of inefficiencies and additional costs. Figure 2 highlights the main steps of managing IT and
telecom assets. Our research shows that most enterprises have disjointed processes; different
functional areas may get involved, and there is rarely a smooth hand-off from one group to another.
It is also common to find functional areas within an enterprise have little to no understanding of
what other groups are doing.
Figure 2: Managing Assets and the Expense Lifecycle

detailed accurate expense

competitive
reporting, budget tracking,
& supplier tracking
Sourcing benchmarking
Reporting of pricing
& Analysis

Retirement
data removal,
recapture of value,
disposal, inventory &
billing update
Asset
reconciliation of inventory,
billing records, order activity
& cost optimization
Procurement
workflow to manage
requests, acquisition,
placing orders with
vendors & tracking
Invoice
Reconciliation
& Payment
Management
invoice processing, validation,
dispute management, internal
expense allocation charge back, &
bill payment

Source: AOTMP, September 2007

Contracts Role in IT and Telecom Inventory Management

Many enterprises focus on negotiating the contract, but they do not have a system to associate IT
and telecom assets to their contracts. Reconciling the contracts, addendums, and attachments for
each contract provides critical information to validate billing and provide information regarding
financial commitments between a customer and their suppliers. This information is just as
important as knowing which assets and services exist. Enterprises must:
 Establish on centralized repository for tacking contracts, expiration dates, and special
pricing arrangements
 Associate contract numbers to line items for assets and services
 Proactively identify situations where service changes may be impacted by contracts.

© 2007 AOTMP Telephone: (800) 460-9568

6325 Digital Way, Suite 490 Fax: (317) 219-0570
Indianapolis, IN 46278 www.aotmp.com
 Inventory Best Practice Recommendations
Telecom Strategies Page 3

Association of contract numbers or identifiers with line item services helps to track the impact of
changes against contractual requirements. For example, termination of a data circuit that received a
contractual installation waiver may be subject to a minimum retention period to maintain
installation waiver status. If the contract stipulates the circuit must remain installed for a minimum
period of twelve months and it is disconnected early, the installation credit would appear as a
charge on a subsequent invoice.
Manage Procurement Practices
Enterprises must gain control over the procurement process to leverage volume discounts for large
purchases. Establishing control also helps to ensure that a standard process is followed. Orders
should reference contracts that were negotiated, and they should be placed with preferred vendors.
 Enterprises must establish clear policy guidelines for the ordering of software, telecom
services, supplier selection, and use of services.
 Automation can help track software licenses. The system should track the version of the
application that is being used, and updates or patches to the software.
 Enterprises should track activity that falls outside of the established completion timelines.
o The information will provide insight into change management activities required for
on-going projects.
o The information can be used with the inventory to determine when services should stop
or start billing, and for tracking when a rate change will be implemented on the bills.
o The information should be compiled and presented to the provider during formal
annual reviews and during contract negotiations to improve customer leverage.
Automate Invoice Reconciliation and Payment
 For telecom services, large volumes of invoices that must be processed each month.
Delays in getting the bills paid can lead to uncontrolled service disconnects.
 The system should match services to service addresses across an organization to ensure that
invoiced services are terminated at valid locations. This validation should also include
reviews to determine that the services are accurate and they should exist.
 Enterprises need to have a mechanism to ensure payment information is tracked and
suppliers are applying payments properly to avoid service disconnects.
 Software as a Service (SaaS) will add more complexity for IT with bills that will need to be
processed each month. There will also be added requirements to reconcile the bills with
changes in personnel status to avoid paying for subscriptions to software that is not used.

© 2007 AOTMP Telephone: (800) 460-9568

6325 Digital Way, Suite 490 Fax: (317) 219-0570
Indianapolis, IN 46278 www.aotmp.com
 Inventory Best Practice Recommendations
Telecom Strategies Page 4

Effective Asset Management Reconciles Change Activity

Enterprises must monitor and reconcile discontinued service to ensure that the organization is not
billed for discontinued or unused equipment. Firms that anticipate significant corporate
restructuring or continued merger/acquisition activities should focus proactively on optimizing use
of hardware, equipment, and network services. Companies in transition should also cancel
maintenance contracts for unneeded hardware and send disconnect notices for services that are no
longer needed.
 The more locations an organization has and the greater the pace of location change, the
more likely that orphaned services and invoices will appear.
Enterprises Must Proactively Manage Retirement of IT and Telecom Assets
 Enterprises need to ensure all records and data have been removed when they retire
hardware.
 For hardware and other assets, there may be an opportunity to recapture some value
through reselling the equipment or donating the assets to a charitable organization.
 For assets that are obsolete, there are environmental concerns for how it is disposed.
 When retiring assets, inventory must be updated and maintenance agreements must be
cancelled. Enterprises must also verify that disconnected services and retired items have
been removed from billing.
Keeping Score through Reporting and Analysis
An effective program will help provide visibility into expense trends and access to the data. Ideally
a system of reporting will promote accountability by using allocation charge-backs for expenses.
Reporting can provide data that can be used to manage sourcing and technology migration plans.

Creating an Inventory

In addition to physically identifying inventory of hardware and equipment, invoices provide

information regarding the amount of money spent on assets and services. But enterprises need to
be wary of using invoices as the sole source of information to populate an inventory because
invoices may contain billing errors or charges for non-existent services.

Specialized Information for Building Telecom Inventories

Itemized cost information about telecom services require service detail and that is only available
with line level service detail and itemized cost from customer service records, circuit catalogs, toll
free ring-to catalogs, contracts, tariffs, and service guides.
Customer service records (CSRs) provide information about local services and their configurations.
CSRs detail all service component configurations, component costs, and ancillary costs, such as
taxes, surcharges, and service fees. Understanding each service, its configuration, and its cost
empowers managers to make informed decisions.

© 2007 AOTMP Telephone: (800) 460-9568

6325 Digital Way, Suite 490 Fax: (317) 219-0570
Indianapolis, IN 46278 www.aotmp.com
 Inventory Best Practice Recommendations
Telecom Strategies Page 5

Information from service provider circuit catalogs and toll free ring-to catalogs can be used to
complete an inventory. It provides the necessary details about service types. All circuits have
configuration details that impact their technical performance and price structure. Dedicated voice
T-1s, ISDN PRI’s, frame relay circuits, and Internet access may have fixed monthly charges or the
costs may be impacted by access, mileage, muxing, coordination, port, and management
configuration components.
The Impact of Mergers, Acquisitions and Downsizing on IT and Telecom Assets
 One of the greatest challenges is cataloging and evaluating IT assets after a merger or
acquisition. Enterprises, should balance opportunities to consolidate assets with potential
financial liabilities and penalties for early cancellation of contracts. In the rush that
accompanies restructuring, companies often make costly mistakes. For example, obsolete
or redundant equipment may be taken out of service, but enterprises must also track the
billing associated with the equipment and cancel maintenance agreements for this
equipment.
 After organizations downsize, locations often have too much capacity. Savings can be
found by eliminating unused computer hardware, excess routers, hubs, PBXs, cards, ports.
Organizations may find opportunities to delay new purchases of software and hardware by
moving unused assets to facilities that need the assets. They may be able to resell
equipment that is not needed or in some cases they may be able to return it and receive a
credit from their supplier. Unused computers, software, pagers and cellular equipment can
be donated to charity.
 Organizations should continually monitor usage. For example, voice and data utilization
studies can help identify opportunities to upgrade to equipment with greater capacity and
lower maintenance and operation costs or consolidate vendors to reduce costs.
 Analysis of software usage can help to identify opportunities to discontinue support for
software that is no longer being used and opportunities to standardize legacy software
applications.

Conclusion

Aside from the business case for cost savings from better management of equipment, enterprises
need rigorous internal controls for financial reporting and Sarbanes-Oxley compliance. Enterprises
need to establish controls and employ systems that meet their specific needs, which may involve
upgrades to help improve inventory management. These systems should detect unauthorized
transactions, automate reconciliation of invoices to inventory, and provide more transparency for
financial transactions. Reporting should provide visibility, access to expense data, and
accountability through expense charge-back.
As traditional voice networks begin to converge with data networks, enterprises are starting to see
that telecom is another application that must be managed. Telecom inventories need to be aligned
with IT asset management and integrated with enterprise systems. Budget management,
forecasting, and needs assessments can be efficiently performed if the enterprise understands what
assets it has, where they are located, and the value of the assets. The integrated system can become
the definitive baseline for all operational and financial decisions.

© 2007 AOTMP Telephone: (800) 460-9568

6325 Digital Way, Suite 490 Fax: (317) 219-0570
Indianapolis, IN 46278 www.aotmp.com
 Telecom Expense Management
Page 6

Upcoming Research

Best Practices in Selecting a TEM Provider: TEM Decisions 07 Conference Brief: New Rules
Setting the Framework for a Successful for Improving Telecom Expense Management
Engagement, October 2007 Engagements, November 2007

Author: Joe Basili, Vice President of Research, jbasili@aotmp.com

This document is the result of research performed independently by AOTMP. Over 294 end-user
enterprises participated in the survey cited in this document. The research findings are objective
and represent the best analysis available at the time of publication.
Print and electronic reproduction of selected articles or elements of this document is encouraged,
but only with the expressed written consent of AOTMP and document licensee. The entire contents
of this publication are copyrighted by AOTMP. The document and its contents may not be
reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior
written consent by AOTMP and document licensee.
AOTMP is the authority on standards and best practices for telecom management. AOTMP
provides information, resources, tools, and benchmarking standards through certification programs,
skills assessments, environment assessments, research publication, and industry conferences. Our
programs serve Telecom and IT Professionals working for enterprise carriers, and technology
solution providers.

© 2007 AOTMP Telephone: (800) 460-9568

6325 Digital Way, Suite 490 Fax: (317) 219-0570
Indianapolis, IN 46278 www.aotmp.com