Revenue Leakage Continues to Prey on Operators, but They’re Starting to Fight BackPhonemagTeam April 24, 2018 0 COMMENTS
TELECOM OPERATORS HAVE BEEN given no quarter when it comes to revenue leakage. While C-level oversight and more enterprise-wide initiatives for revenue assurance have brought the concept out of the nether regions of the IT department and into the financial limelight, problems arising from the rollout of next-gen services are an enemy that has no compassion, never sleeps and waits to stab fiscal health through the heart.
To quantify the danger, operator leakage averaged between 10.5 percent and 13.5 percent in 2006, in stark contrast to the 1-percent to 2-percent level of hemorrhaging that is considered “acceptable,” according to research firm Analysys. That number is expected to escalate with blended services such as fixed-mobile convergence as well as the ongoing rise of entertainment and digital media — all of which are increasing complexity within the revenue chain. To turn the tide, carriers are beginning to build counter-attack strategies. Traditionally, fighting revenue leakage has been a reactive function of after-the-fact cleanup duty. In the innovative service world, proactive optimization of revenue assurance is emerging as the main battle thrust.
“To drive a bottom-line result, you have to align revenue assurance across the business in a proactive manner, so it’s running in parallel to service fulfillment,” says Greg Le Neveu, senior vice president of the Americas at revenue-assurance behemoth Subex Azure Ltd. “This improves the overall quality of service delivery, so you drive operational efficiency and ultimately a happy customer. In many cases, you have slim margins, so revenue assurance becomes a critical program to compete in that marketplace.”
With that in mind, the TeleManagement Forum has tried to lay out the next-generation requirements for revenue assurance in the Revenue Assurance Guidebook, which provides a standard strategy and set of best practices for revenue assurance. This includes using advanced revenue-assurance tools to help predict and manage the leakage, not just detect it. Going forward, platforms will provide broader insights by applying business intelligence methodologies, such as plotting clustering patterns and using root-cause analysis. “In 2007, R (revenue assurance) will accelerate its journey from being an obscure art to being a well-defined methodology,” says Gadi Solotorevsky, chief scientist at revenue-assurance vendor cVidya Networks. “Emerging standards for standard revenueassurance process definitions, information models and KPIs will be adopted by many service providers, permitting the industry to practice RA in a much more mature and predictable way.” Revenue-assurance tools traditionally have focused on finding leakages, “but this is not enough any longer,” adds Solotorevsky. “More and more operators find themselves with large amounts of discovered leakages, millions of CDRs. And so they now have new challenges in what to do with these findings and how to learn from the many individual leakages about the big picture.”
Many providers are implementing a Revenue Operations Center, or ROC, which, much like a NOC, is a centralized battle station, in this case to monitor, control and assure the revenue chain throughout the carrier enterprise (see graphic below). “Revenue assurance is continuing to evolve, and last year we saw a lot of operators formalizing the RA function as a profit and loss center with a head reporting to the CFO, or in some cases parallel to the CFO,” says Travis Russell, senior manager at Tekelec. “It’s a bold move, and these departments are growing rapidly and encompassing a lot more than just billing – it’s marketing, engineering and finance.”
This broad view is the one taken by Subex Azure. “Last year was about marrying the technology and the processes surrounding revenue assurance in order to operationalize the revenue-assurance strategy,” says Le Neveu. “Now, some headway has been made in building a well-defined industry approach. And so we will move from blocking and tackling leakage to focusing more on margin and overall operational efficiency.” That means more investment in analysis and workflow operations across revenue management and the back office.
“Operators function in silos and one of the biggest problems was breaking those down,” says Le Neveu. “But now, integrating analysis and workflow will lead to better decision-making, because you have a better view of the overall health of the revenue chain, and you can keep the cost structure in line and see how processes like fulfillment and billing factor into that picture along with sources of revenue leakage, so you can correlate issues and solve them as they happen. That, in turn, leads to new types of decision-making.”
To that end, Subex Azure announced it will acquire service fulfillment vendor Syndesis for $154.5 million in cash. “Operators need to drive margin in new services, by ensuring people, systems and processes are working efficiently,” says Le Neveu. “A big part of that is service agility, so that’s how this acquisition fits in with our strategic direction.”
These moves toward big-thinking revenue-assurance are timely, since next-generation services will create more points for loss within the service fulfillment chain. In its Revenue Assurance Guidebook, the TeleManagement Forum notes that services that span multiple networks, partners and devices will require an ongoing evolution of back-office systems, more wholesale and content relationships, and more complex revenue-sharing and roaming arrangements. According to the Forum, all of those factors contribute to more points of revenue exposure and greater risk. Thus, partnership proliferation, fraud, provisioning and billing errors, interconnect inconsistencies, corrupt databases, fragmented support systems and manual or ill-defined business processes are all escalating dangers.
“Advanced services such as IPTV are released to customers, while still in an immature state,” says Solotorevsky. “Similar to the DSL boom, the result will be a large amount of leakage, but involving far more complex services and revenue chains than in the DSL boom epoch, in which the main service was network access. In order to avoid a possible revenue disaster, operators must learn from the past and involve revenue assurance activities in the release of these advanced services.”
With an eye to this rising requirement, cVidya just launched a solution for mobile content and fixed-mobile convergence services, based on its MoneyMap product. The new platform takes a holistic view, addressing CRM integration and QoS, multiparty revenue chains, and the need to integrate new technologies into systems designed for more traditional data integrity and revenue assurance.
Also, content providers themselves will begin requiring revenueassurance tools. The classic bill-to-switch and test-call generation of revenue assurance covers only a small fraction of the actual revenue chain, “which now encompasses content providers, content aggregators, network providers, the VNO, etc.,” says Solotorevsky. “All the stations in this complex revenue chain are prone to revenue leakages, and the role of revenue assurance will be to inspect the whole revenue chain. Traditionally, the only client of revenue assurance was the service provider, but soon enough other members of this revenue chain will want to protect their revenues, and will adopt revenue assurance methodologies and tools.”
|Many providers are implementing a Revenue Operations Center, or ROC, which, much like a NOC, is a centralized battle station, in this case to monitor, control and assure the revenue chain throughout the carrier enterprise.|
Take, for example, a music download. It may have been ordered from a record company but delivered on a carrier network. The record company has no visibility as to whether the transaction was successful or not. This simple model becomes exacerbated when extended to FMC services that may run over two or more carrier networks and involve multiple devices and digital rights management agreements. “The content provider is blind to the network,” says Russell. “So there’s an immediate [Sarbanes-Oxley] problem since there’s no way for them to go back and audit that revenue.” Content is also a low-margin business with a 5 percent average revenue split for the operator per transaction. Thus, any RA strategy has to be efficient. “If a subscriber calls in and disputes a download charge, the operator has already lost money,” says Russell.
“For interconnect and wholesale relationships, Sarbanes-Oxley has ratcheted the need for executive oversight to levels previously unseen,” says David Landry, executive director of billing systems at Verizon Business. “Our customers tell us that they want us to make it easier for them to perform revenue-assurance functions, so they want more tools to facilitate analysis.”
Concerned with visibility, Verizon has embarked on a broad billing transformation effort to be completed by mid-2008. The program includes the creation of electronic bonding for partners, enhanced bill analysis tools and a billing portal that consolidates Verizon Business billing on a single portal, including LEC services, all of which will be geared toward easy billing validation.
“[When the program is completed], we will have completely revamped our electronic billing products, consolidated a number of billing engines, streamlined the billing-dispute process both internally and on our portal, and improved the speed and efficiency of our contract rate implementation process,” says Landry. “[We will] deliver quality of billing and the means for customers to validate billing quickly, without the need for a Ph.D. in billing.”
Another way to solve the conundrum is leveraging network information. “As you get more parties involved in services, the data set is growing exponentially, and we’re seeing data warehousing requirements extending out to seven years,” says Russell. “The best data you can rely on as a reference set is signaling data – it’s indisputable and index-able, and you collect it anyway. It’s what makes the network function, and you can use it to provide visibility to that for partners and subscribers alike.”