More TEM consolidation coming in 2009?

Just before Christmas the news was released that Israeli TEM player MTS acquired the Telecom Expense Management Operations of US based AnchorPoint. This is yet another TEM acquisition/merger ……in 2008 Tangoe acquired Information Strategies Group (ISG) and HCL Technologies acquiring Control Point Solutions. 

Market consolidation in the TEM space is taking place and will accelerate. Why? Here are some reasons:

  • Completeness of Product/Service
    The market is moving beyond being a national market to a global market, away from billing validation to full telecom lifecycle, from fixed to mobile…..
  • Flawed Business Model
    Most vendors have their resources onshore and deploy a premise based model with high levels customization (no SaaS). Their ability to scale is limited and they face high CapEx and OpEx to maintain their service. 
  • Limited Differentiation & Competitiveness
    Most US TEM players have limited differentiation and find themselves in a very competitive market place leading to high customer churn and high customer acquisition cost.
  • Retreat of Venture Capital and Private Equity

Given the above considerations this implies a lot of the TEM vendor will simply not reach profitability leading to a shake out and companies looking for economies of scale. 

Consolidation in the TEM space – who is next?

http://www.tangoe.com/news-events/press-releases/tangoe-combines-with-information-strategies-group-isg.html 

http://www.controlpointsolutions.com/news-resources-resourcecenter.htm

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This entry was posted on Thursday, January 22nd, 2009 at 6:45 am and is filed under Analysts, News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “More TEM consolidation coming in 2009?”

  1. Visicom says on February 9th, 2009 at 2:21 pm :

    I think you are 100% right, without differentiation and a good business model – there is a diminished likelihood of success. At Visicom (http://www.visicomcorp.com/), we have a special section dedicated to showcasing what sets us apart from our competition. One of our biggest is the fact at that we are 100% woman-owned, so we are able to help our clients meet supplier diversity requirements.

    Further, we have a wonderful proprietary software called “Clearview” which allows us to post invoices for our clients to see, sort through, and monitor as they see fit. Further, they can see what we are working on disputing as well as what progress has been made toward cost reduction. I think this SaaS option has allowed us to better serve our clients and maintain a strong market share.

    Bridget Thomas
    Visicom – Madison, WI

  2. Eric Goodness says on March 30th, 2009 at 7:21 am :

    Not really.

    You think the market is crowded now? Wait a little bit.

    The TEM market will see M&A activity, but not consolidation. Over the next few years we will see the emergence of new companies coming to market. In addition to seeing SIs and outsourcers and carriers bring TEM services to market; we will see the emergence of pure-play TEM companies – both onshore and offshore models.

    I expect that I will be tracking 300 TEM companies, globally, by 2012.

  3. Jesus Ruiz says on July 16th, 2009 at 9:48 am :

    I agree that consolidation and M&A will take place, but there is an historic trend to think that what works well in a country or region scenario is then applicable to all.

    We have been developing our services in Spain and Portugal and are now studying the possibility of covering LATAM and some countries in Europe, and what is clear to us is that big BPO traditional players are now looking towards the TEM, until now boutique consultancy niche, as cost reduction is now fashionable; as a result they are seeking for a “global solution” or partners.

    Many US-UK based companies market themselves as global solutions, as they believe what works in their markets must work elsewhere, but that is simply NOT true, as first you need to be able to read and process local operators invoice files, which for big corporate accounts, are all but standards, and also you need to have local expertise when dealing with RFPs and applicable technologies.

    Therefore, I believe consolation will come from either:
    - Big cash-rich groups or traditional IT acquiring small local specialised partners and adapting them to a common reporting language to be able to truly offer a global solution to their end clients.
    - Small ones coming together to offer ad-hoc services to clients with specific markets needs. (The cost of servicing a client in Brazil with 40 lines, is not far way form servicing the same client in Spain with 4.000).

    Being able to offer detail common-language-nomenclature reporting, to country-cross-consultancy, with the local negotiation and invoice auditing skills; hence, a mix of global and local technologies, is in my opinion the way to go.

    The issue is, who will lead teh global fight?

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