Paradigm Shift creates New Challenges for Traditional Audit Processes

A Quick History of the Traditional Audit

Before TEM was even a word, there was audit. With roots back in the late 90s, some savvy entrepreneurs (mostly from the carrier space) recognized that the billing of telecom and data services was fraught with errors.

These were a mix of a confusing mush of state tariffs, custom tariffs, special contract provisions, and other creative contracting vehicles, in part enabling carriers to get around the requirements of the Communications Act of 1934 and the Telecommunications Act of 1996.

This was a way for them to offer preferential rates to their preferred customers without having to – as required by the act – offer the same rates to everyone else. As a result of custom tariffs and highly customized, complicated and entangled contracts, billing for the services was often incorrect, mostly in favor of the carrier.

So what started as a cottage industry of auditors painstakingly reviewing the applicable sections of the relevant tariff or contract, and then manually analyzing what was billed to find errors (and there were lots found), has over the years fueled the growth and expansion of the modern-day TEM company.

Over the years, these companies have bolted on capabilities or acquired niche companies to expand into mobility and other service types, driven by the establishment of enterprise mobility in the 2000s and the explosion fueled by the introduction of the smartphone.

Since then, through the evolution of data networks, voice networks, IM, UC, cloud, and all the other acronyms and “new” ways of connecting and communicating, audit services have continued to play an important part as a watchdog over the accuracy of carrier billing and the pursuit of refunds for historical errors.

Usually executed on a revenue-share model, these activities represent zero risk to the enterprise and very little demand on IT staff. The only requirements are access to vendor billing and contracts; the auditor then goes off and does the audit.

Typically coupled with these “historical” audits (pursuing refunds for carrier billing errors to the extent available per the contract, or through the PUC/PSC for local regulated services), auditors will also identify opportunities for the client to reduce recurring costs going forward.

These cost-avoidance recommendations are proposed to the client based on the auditor finding options to reduce the cost of services or to optimize mobile usage.

So What Has Changed Today?

We have all seen the evolution and migration of enterprise IT networks from brick-and-mortar, locked-in-a-room networks, to hosted environments still managed by IT staff, to hosting on cloud infrastructure today.

This relieves the crippling capital cost that was involved not only in very expensive IT gear, but in the very expensive staff to run it. It was not unusual for the cost of running an IT division to be one of the top three expenses (right off the bottom line) for an organization: a major incentive to move these non-value but essential costs from a capital expense to an operating, pay-as-you-go model.

We have also seen the evolution of conferencing and enterprise IM services, from calling cards, to conferencing service providers, to the rapid growth of cloud conferencing services that let users connect by voice or video as easily and affordably as making a video call on a smartphone app.

Zoom became commonplace as a result of the coronavirus pandemic, as did many other conferencing apps and services. Enterprises are also busy migrating their MPLS and other transport protocols to SD-WAN, giving them significantly more flexibility to connect on an any-point-to-any-point basis, rather than paying for and supporting fixed connections that are often not effectively utilized.

Traditional TEM Companies Are Struggling to Adapt

In this new world, traditional TEM companies are increasingly struggling to adapt their systems to the new order.

The fundamental problem, particularly for fixed services, is that these systems were all built around receiving and processing a carrier invoice with discrete charges for lines and circuits, and a rate applied to each of those.

The issue is that in a cloud-based world, there are very few lines and circuits that the enterprise is paying for. Typical cloud providers supply scalable connections as part of their whole suite of cloud managed services (public, hybrid, private).

Further, traditional TEM companies are struggling to adapt their systems to the vastly different billing parameters inherent in cloud billing. This type of service is built around a consumption or usage-based billing model rather than a typical monthly recurring charge (MRC).

Mobility, on the other hand, while voice has become a throwaway in terms of cost for the carrier, continues to bill for data usage on a consumption-based model.

In our opinion, as 5G becomes more widely available, mobile devices will increasingly act as mobile endpoints, and the paradigm of how that usage is billed may well change too.

In the midst of all these changes, niche audit firms, and TEM companies with either an audit partner or an in-house audit team, continue to do what they can with the fixed connections that still exist in the enterprise, as many enterprises are still early in their migration to the cloud.

This, along with mobile optimization, is what remains of the traditional audit market. What none of them are well equipped to do is effectively audit cloud-provided services.

Challenges With Auditing Cloud-Based Services

• Cloud-based billing does not conform to a given billing standard. Different cloud providers may bill for the same services differently, making it difficult to rationalize the details consistently across providers.
• The billing is complex. Cloud services are usually sold on a subscription basis, so in any given month, different resources may be used at different levels that trigger different rates.
• Services are usually sold on a metered basis, but depending on which contract a connection is provided under, the cost of a metered service may differ from the cost of an identical service under a different contract. There is no contractual consistency when multiple service orders support the service.
• The use of servers and apps in the cloud can burst and incur a different charge rate than a lower tier. Variables can include the time metered for one or more applications, CPU time consumed by queries, the rate of use of a specific service, total processing time and more.
• The type of cloud platform being used (iPaaS, SaaS, IaaS) and the level of cloud connectivity (public, hybrid, private or a combination) add further complexity.
• Depending on the type of platform and service used, billing may be prepaid, postpaid, one-time, recurring and so on.

Hopefully, this gives you a sense of how very different billing is for cloud services compared with traditional services. This complexity severely limits not only manual audits, but also the ability of traditional TEM companies to validate cloud-based billing.

How Can Cloud-Based Billing Be Effectively Audited?

The only way to deal with a quantum shift in automation is with automation. A growing number of providers sell what they call billing-as-a-service (BaaS) for third-party cloud providers. This is not an audit tool in itself, but it reflects the growth of billing entities that provide a somewhat cohesive view of cloud use to end customers.

An actual audit of cloud usage, one that not only validates the billing but also confirms that the rate for each charge is contractually compliant, requires a very high level of sophisticated automation.

That automation must be intelligent enough to extract data points from billing and other sources, and sophisticated enough to handle multi-dimensional analysis focused on where there is either (a) a billing error or, more importantly and with more cost impact, (b) usage that is not optimized.

This last area is where the biggest challenge lies. Because of the very complex way services are consumed and billed, traditional audit approaches, whether through an audit firm or a traditional TEM company, are simply not designed to analyze and identify what could be very significant savings.

Examples of areas that could be analyzed for savings include:

• Overall bandwidth usage for all users compared with the bandwidth being paid for. Over a usage cycle, this identifies over- and under-capacity issues.
• Secondary, tertiary and overflow trunk utilization. This shows how effectively routes are engineered.
• Utilization of each cloud service type across multiple parameters (enterprise, division, location, department, user, etc.). This measures the consumption of each service or product.
• Utilization of cloud provider resources (storage, CPU, access, etc.) by each organizational layer. Again, this measures how much overhead is being consumed at each layer.

Measuring these activities requires a level of automation that exceeds traditional audit capabilities, which focus on comparing billing to contract rates for compliance.

What Value Can “True” RPA Deliver?

This is where true robotic process automation (RPA) starts to differentiate itself, by pulling data from other sources, such as server logs, to provide a more sophisticated analysis of usage patterns.

We say “true” RPA because many providers are jumping on the RPA bandwagon when, in fact, their version of RPA is nothing more than pre-existing SQL scripts that passively pull a file from a carrier portal: the same stuff in a new wrapper.

The simple truth is that their systems are not architected to integrate RPA as native functionality. Capabilities and benefits that true RPA solutions can provide include:

Bandwidth Usage Management

• Passively collect bandwidth usage directly from the server or server utility.
• Compare this to the billed usage from the carrier or biller to validate billing accuracy.
• Compare the billed rate to the contract for that service, based on a unique identifier or other codes.
• Flag variances and either report them or initiate an automated audit claim.
• Analyze traffic flow on configured routes (depending on the service package subscribed to).
• Based on the traffic on each route, recommend changes that minimize cost while maintaining critical criteria (such as class of service) based on traffic attributes and the cost of each route.
• Provide custom reporting on traffic and cost optimization savings.

Application Utilization Management

• Passively collect usage data for each cloud application the enterprise uses (Microsoft 365, Salesforce, Concur, Teams, etc.).
• Analyze usage for each application against:
  • Contract rates
  • License utilization
  • Billed rates
  • Route analysis
• Identify variances in cost.
• Identify opportunities to optimize service types and licenses.
• Identify usage optimization opportunities.
• Identify route optimization opportunities.
• Initiate automated actions based on predefined client business rules as necessary.
• Provide customized reporting based on client-defined business rules.

Cloud Provider Resource Management

• Analyze the usage of host provider resources.
• Validate usage against contractual and billing rates.
• Identify variances in cost versus usage.
• Compare rates across providers for like services, presenting a dynamic, real-time comparison of cost.
• Provide customized reporting based on client-defined business rules.

How Asignet Automates the Audit of Cloud and Other IT Expenses

With RPA a native part of its Wayfast platform, Asignet has operationalized RPA-level automation in its architecture and processes. This provides a level of flexibility, integration and configuration that redefines the ability to collect, process, analyze, act on and report on any data point, from any platform, in any format, and present it all in a single holistic management view.

Today, Asignet has built and deployed thousands of automated workflows that execute a wide variety of actions for clients in all verticals globally. Its ability to go deep into ITAM, cloud, traditional fixed services, and all mobility services and devices puts Asignet in a strong position to address specific client requirements in a highly customized way.

Talk to Asignet about automating the audit of your cloud, fixed and mobile expenses.