This morning, Vodafone Global Enterprise made a strong push for market leadership when it announced it has acquired two, not one – but two, TEM vendors – TnT and Quickcomm.
Could this be the beginning of a wave of consolidation in the Telecom Expense Management (TEM) market? I sure hope so.
Quickcomm has operated primarily as a TEM application vendor. The company has cemented significant partnerships over the past few years (including Vodafone). TnT Expense Management is a services focused company providing process outsourcing services to large multinational companies. Each company brings good international experience to Vodafone. Quickcomm was founded in Australia and maintains offices in Australia, New York and London. TnT over the past 18 months has expanded its sales and service presence in Asia and Europe (finding notable success in France and Germany). TnT received the highest customer satisfaction ratings in Gartner’s 2009 TEM Marketscope.
Although Vodafone already managed a growing and successful TEM service portfolio, which started with the launch of Vodafone Telecoms Management last year, the acquisitions allow Vodafone to provide its customers and partners more varied and flexible TEM solutions; including software which appeals to how non-multinational companies acquire TEM capabilities in European and Asian markets (while still embryonic, Latin American markets seem to favor a process outsourcing approach for TEM).
The specifics of the deal were not announced. Combined, Gartner estimates that the two acquired TEM companies generate under $25M in revenue. Based on the estimated 2009 revenue of the acquired companies, their trended growth over the past 36 months as well as considering comparable TEM acquisitions, Gartner estimates that the two companies were likely acquired by Vodafone for less than $40 million (US).
The acquisition of these two TEM companies reinforces the importance of Telecom Expense Management to large multinational companies – the core market served by Vodafone Global Enterprise. Telecom expense management is component of the larger communications outsourcing and professional services (COPS) market. While TEM revenue is a very small portion of the revenue generated in the COPS market, TEM is a growing point of focus by users in recently signed communications outsourcing deals as well as in ongoing pipeline opportunities. For vendors, the user goodwill that TEM generates from cost avoidance is an important pull-through mechanism for additional revenue opportunities by outsourcers and consultants.
Telecom expense management, when practiced well, allows a company to discern and enumerate how it consumes communications to support its business. Companies that use TEM tools or services are able to build fact-based business cases to migrate towards unified communications. Because of TEM, the communications segment of IT spend will achieve a level of cost effectiveness, visibility and transparency – such as realtime spend and TCO per user across fixed and mobile modalities – that other IT segments will struggle with for years to come.
My hope is that Vodafone’s acquisitions provide market validation for other Communications Service Providers and IT-Business Process Outsourcers (onshore as well as offshore) to solicit board approval for their own acquisitions. Private labeling and passing through smaller pure-play TEM vendors is far superior to building new capabilities organically; however, it is not a viable long term strategy. In North America, TEM is an outsourcing market. It is transitioning to such in Europe and Asia. Unfortunately, too many TEM companies have little to no outsourcing experience. The current TEM market is being held back by the immaturity of many its practitioners. More acquisitions and mergers, by small and large IT services companies, is exactly what the TEM market requires because that is where the future of TEM lies.
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