Revenue Assurance Trends: Providers Get Down to Business

Providers have placed a great emphasis on cleaning up their act and infusing efficiency into their operations following the hey-day of massive network build-out. And, if the market downturn has not been a big enough driver to reduce revenue leakage, the regulatory onslaught of Sarbanes-Oxley is kicking revenue assurance projects into high gear.

Sanjay Mewada, vice president of telecom software strategies at Yankee Group, indicates that global spending on revenue assurance services and products will grow to nearly $934 million by 2008. That is up from about $508 million in 2003.

So exactly where is the leakage occurring? Anywhere and everywhere, depending on the provider. The root causes of revenue leakage vary. Providers upgrade systems or convert to a new system, and errors occur during the upgrade or conversion. Providers hire new people, and they input errors. Mistakes occur at order entry, or a service is not disconnected when it should be. Companies merge or acquire other telcos and are faced with consolidating systems. And, even though providers have been struggling for years to improve the accuracy of intercarrier billing, the problems only seem to be getting worse.

Enterprise vs. Project Approach

Three to four years ago, revenue assurance occurred mainly in a project-oriented fashion with one-off efforts targeting a single business function. These efforts were often originated from the IT department to solve problems around billing with little thought to how one area of leakage may impact the company as a whole. But today, as C-level executives are championing revenue assurance efforts and are able to quantify the levels of savings, companies are seeking to evolve single-focused efforts to projects that span the entire company. Providers want to see the impact of revenue assurance projects on human resource issues, organization issues, process issues as well as network and billing problems. But, Mewada maintains that taking revenue assurance projects across the enterprise requires automation to be successful. “If you are trying to scale it on a manual basis, it’s impossible.”

Revenue assurance projects that have a true enterprise-wide focus transcend the billing department and cross over into order management and provisioning and many other areas where leakage often occurs. And, bringing finance into the fold may be an entirely new experience for some departments. Providers are often dealing with internal politics and a culture that may be resistant to change.

But have most providers achieved an enterprise focus yet? Ellen Rubin, director of marketing at Netezza, asserts that most providers are not there. She explains that many providers that work with Netezza will start with a small data mart around a single issue. These projects are focused around a department. The departments learn of other projects and then want to start coordinating to use these systems. Rubin says often the different departments are interested in the same data; they just want to slice it a different way. She recalls one provider that admitted to having 87 different revenue assurance solutions in place. Situations like this are creating a demand for revenue assurance vendors whose products can integrate with other systems. Telcos want an integrated data warehouse that gives them “one version of the truth,” but often because of politics and technological challenges this is not happening.

Process vs. Tools

One question the industry is asking is whether revenue assurance is a problem of people, processes or systems.

All too often, processes and systems are not improved to keep pace with new technology or marketing. Further, having multiple billing systems complicates bundling, and company consolidations within the industry have only increased the number of systems with which many providers are forced to operate internally. Add to this that most companies are so “skinny” these days, says Woody Ritchey, president and CEO of Connexn, and the complex, tedious and time-consuming processes are a real challenge for providers. “They’re really under-resourced right now worldwide,” Ritchey says. “CSRs are just stretched to the brink.”

While providers struggle to perfect their processes, their business is in a constant state of flux. The challenge is keeping up with the changing business dynamics and retaining the best processes simultaneously. “You’re almost running the business in spite of the systems rather than having them help you,” says Rod Favaron, president and CEO of Lombardi Software.

But changing processes within the corporate culture of telecom is not a simple task. “Reorganizing what you do is a big process,” says CommSoft’s Lee Cuff, vice president of sales. And, since processes often are not confined to one department within a telco, transcending these lines to affect process change can be doubly hard. Politics and territory disputes can often get in the way when undertaking an effort to improve processes. Within some providers, the revenue assurance teams are not welcomed because they highlight people’s mistakes. These internal debates can stop a revenue assurance initiative in its tracks or at least cause great delays.

Companies like Lombardi Software, which are rooted in business process management, try to determine where business processes are creating problems or not solving them.

“I think it’s a combination of processes and systems,” Favaron says. “I don’t think people are the problem. People are the Band-Aid.”

Favaron says it is actually amazingly easy to get a provider to tell you which processes are broken. But, what companies lack today is the actual validation that their processes are not working.

Often process problems can creep in when working with software vendors. After sitting down with a provider to determine its needs, a software vendor will often go back and spend 4 months customizing the tool for the provider. During this time, Favaron says the software vendor makes a lot of assumptions about process on behalf of the provider.

“I’ve had customers tell me they work around their processes because [the processes] are just too slow to get [the work] done,” Ritchey says of providers with whom he has spoken. When employees create their own workarounds they can input errors, and the problem only compounds.

The Human Touch

Often, revenue leakage occurs due to human intervention, in particular with service ordering and provisioning. Duplicate orders are entered into a system, or order fallout delays the provisioning of a process.

Trouble ticketing or dispute resolution is another pain point. The process for fixing order troubles may be broken and may cause delays in dispute resolution. Because of convergence and the push to provide information about multiple services on one account on a single convergent bill, having to reconcile this across five different billing or customer care systems versus having one system can be a challenge.

Someone who is proficient in one system may not be proficient in another, which may cause errors, says CommSoft’s Cuff.

CommSoft has found that there is typically a 15 to 20 percent discrepancy between what is in the billing system and what has been provisioned in the network. Often, these discrepancies include primary interexchange carrier (PIC) changes that were not made. That is, a long distance customer may churn and go to another provider, but the record remains therefore creating a discrepancy. In addition, service features such as call waiting may have been canceled by the customer, but may not have been eliminated from the account in the system. Or, a technician may get a trouble call and may go out into the field and accidentally change services in an account.

Because of the likelihood of human errors, providers need to perform continual audits. If 15 out of 20 orders are wrong, using an audit to identify which CSR handled them all can help a provider identify a need for training for a person or even for an entire department. Likewise, it can signify changes to processes or systems that need to be made.

Understanding Service Profitability

One area in which providers often fail miserably is in understanding the true profitability of their services. Some providers give sales executives or CSRs too much flexibility to change a billed amount, the price of a service or the credit for an account. Yet, the service provider wants to encourage customer satisfaction; however, not enough attention is paid to the bottom line. Isaac Israel, consulting principal manager at Amdocs, says there is an inherent need for providers to allow adjustments but with a serious consideration for the loss line for the provider.

And in the world of content, where providers deal with partner companies to provide services, Israel says that sometimes “payment that the end customer is paying for services is lower than the payment the telco was transferring to partners.” Israel tells of one provider with 3 to 4 million subscribers that saved $3 to $4 million in a 6-month time frame because the company realized that it was actually paying more money out to its partners for specific services than it was making.

If providers have an understanding of the profitability lines for their services, they can protect their revenue by ensuring that they are not taking a financial hit on some services either to appease customers or pay back partners.

The Interconnect Train Wreck

Revenue assurance painfully extends well beyond being an internal problem. Providers know well that leakage can occur where services transcend onto other providers’ networks. And the leakage at this point impacts one of their highest revenue generators—interconnection fees.

John Metzger, telecom industry manager at Netezza, says of providers who are auditing interconnection points, “They’re seeing that there is a loss of millions of dollars a year.”

Mewada maintains that interconnect is the low-hanging fruit for providers undergoing revenue assurance initiatives; thus he maintains this will certainly continue to be a key focus.

In interconnection, carriers are juggling multiple agreements with many operators across many different types of networks. They must keep up with changing routing codes, in some cases totaling hundreds of thousands of code changes per month. In the pursuit of least-cost routing, providers must ensure that there is no degradation of service quality resulting in any breeches of service level agreements and that they are actually routing in the most efficient manner. Sales teams may offer non-standard rates that are not supported by the rate management system. And, providers often face false disputes from other carriers that may question interconnection charges. Further, carriers have been called into question for intentionally stripping information from records, creating “phantom traffic” to mask the traffic’s owner. If a provider does not have the data to back up the disputed claims, it could be forced to blindly pay out more to its interconnection partners than is necessary. In some instances, interconnection partners go bankrupt and just do not pay.

To combat these problems, many providers may turn to Signaling System 7 (SS7) tools for traffic audits.

Leakage from Major Accounts

Chris Berger, vice president of solutions delivery at BlueSpring Software, believes the enterprise arena is the “battleground for growth.” But despite the level of importance of a business customer, enterprise customer care and billing is where many problems occur.

Based on BlueSpring observations, Berger says that as much as 25 percent of revenue leaks from enterprise accounts. Many accounts contain billing errors in excess of 90 percent, he asserts.

Berger suggests that revenue assurance gurus spend some time on the front lines to see how custom enterprise accounts are handled, developed and managed. To obtain an accurate picture of every leakage point, Berger recommends following an enterprise order through from start to finish. This exercise can be very telling. Often, mistakes are made during the sales cycle—such as promising customers a specific time for delivery of services that is unreasonable. In addition, a huge loss line can occur when sales agents aren’t properly managed. A sales associate may sell service bundles that aren’t profitable, just to keep a customer or gain a new one, and in the end collect sales commission for it.

Measuring Customer Satisfaction

The industry has matured from 3 or 4 years ago when people were simply trying to define revenue assurance. Today, high-level executives have embraced revenue assurance, and companies are becoming more sophisticated in their endeavors.

Connexn’s Ritchey points out that because providers are all competing for the same dollars, customer satisfaction is on everyone’s front burner these days. Every interaction a provider has with a customer is based on the data it has in its system. If that data is off, the customer’s satisfaction decreases. “That is the core between what creates ill will between the service provider and the customers,” says Connexn’s Ruth Cox, vice president of marketing.

Many companies are reorganizing along the customer experience line, notes Lombardi’s Favaron.

Overall, Berger says maintaining customer satisfaction and producing an accurate bill is critical for stopping revenue leakage. When it comes to enterprise customers, he suggests there is a 10 to 1 benefit over generating new business.

However, for companies whose processes typically have been centered around their products, shifting to a customer focus is not without its pains. Favaron asserts that companies’ systems are not designed to think with the customer experience in mind.

But, are providers’ systems and data sophisticated enough to be able to ascertain this information?

Ritchey says really advanced providers are tracking the cost of customer retention back into their retention plans. Therefore, they will likely build churn management and retention efforts into their revenue assurance projects.

When it comes to revenue assurance projects that uncover back billing, consumers are usually spared from back collection; however, businesses do not often fare as well. With businesses, Ritchey says, “It’s so big [a number] that they can’t turn a blind eye to it.” But he says most skilled providers have a way of turning even the bad issues into a positive experience for the customer. Some providers have stated that they will use back billing blunders as leverage in the negotiation process with a customer to try to retain their business, possibly focusing on the amount of free services a customer has obtained.

Some companies do not have the resources to support churn management that results from revenue assurance projects. “It demands a tremendous amount of care,” Cuff says about managing customer satisfaction levels when leakage is found that may cause a disruption in service. Some providers may have to call individual customers to explain. Smaller providers often have more intimate relationships with their customers, and they have to manage these relationships carefully. Cuff believes this really all depends on how much revenue is at stake as to how the situation will be handled with customers.

Key Performance Indicators

Companies often hire consultants to come in and analyze their processes. They spend millions of dollars to fix their data. But, Cox says their problems remain because they are not getting accurate reports concerning their customer base. Billing vendors often provide canned reports for providers; however, companies like Sentori are hearing demands from providers seeking more robust reporting tools. In one example noted by Sentori, a provider’s existing billing system delivered a 9-point revenue assurance report, with seven of those reports not being strong enough.

More and more, executives are seeking dashboards or key performance indicators (KPIs) to identify their revenue assurance track record and justify investments in cost recovery projects. Guy Alon, revenue assurance product manager at Amdocs, says there are two types of KPIs—operational and business. Operational KPIs may include quality of service or call detail record (CDR) volume tracking. Carriers want to ensure service level agreements and the customer’s satisfaction regarding the service quality, and tracking CDR volume can potentially uncover huge discrepancies that point to system errors.

Alon says today there are more business KPIs, but these indicators are infinitely more complex to measure than the operational KPIs because they require the operational information to be translated into business or financial terms. These may include average revenue per bill cycle or trending of bill revenue per region or bill adjustments overall. Alon says equating this operational information into its impact on the business is often not even possible.

For example, it may be easy to identify whether an end customer received a download rate slower than what the SLA stipulates. However, measuring the impact of customer satisfaction because of the slower download is somewhat harder to pin down other than the number of customer complaints in the call center.

The Data Equation

When it comes down to it, data is the single most important element of a revenue assurance project. But this data comes in immense quantities, so where should it be kept and for how long?

Some providers have leaned toward the data warehouse. Some have chosen to work within a revenue assurance system. Each has its pros and cons.

Amdoc’s Israel says he is seeing far fewer calls to use a data warehouse for revenue assurance projects. Mainly, he says, this is because the source of data within a cumbersome data warehouse is often difficult to pinpoint. If a provider is conducting a billing verification but does not know the source file for the data that is being analyzed, the provider may have delineated the problem, but has no way to know which system to fix.

Even a small company will have millions of CDRs. After a few months, it can become impossible to trace the root cause of leakage.

Netezza’s Metzger points out it is difficult to look at large data sets over a portion of time—another possible drawback of massive data warehouses.

Although Amdocs recommends saving a history of the researched data, the company suggests working with the operational data versus stored, dated information simply because it is newer and more relevant than data that may not fully represent the current situations.

When it comes to data, processing time also becomes a major issue for providers. Metzger points to one customer that was spending more than 30 hours to analyze its data. “They ran out of time…because they couldn’t do the analysis fast enough,” he says.

There is a great need for providers to look at 100 percent of their data in the search for revenue leakage, says ACL Services sales executive Steve Nicholson. In the past, many organizations have used sampling techniques and only review a portion of their data. ACL does not recommend this practice. “You never know what error is not going to be caught,” Nicholson says.

When providers create a new repository of exception data, the issue arises of how much data the provider wants to keep. Some revenue assurance vendors will store the data for the customer in a separate software engine or put that exception data back into an existing data warehouse for economies of scale.

Despite the suggestion from some in the industry that data warehouses may not be the system of choice, PeopleSoft’s vice president of communications industry strategy, Daniel Kenyon, says “Those legacy data warehouses are not going away.” He suggests that data marts are going to become more specialized.

With Sarbanes-Oxley, executives will have to sign off on their company’s financial statements or risk personal consequences. Thus, company executives have a vested interest in the company getting it right.

One critical issue here is having an accurate view of the company’s asset base, which is, at best, a challenge for most providers. Companies like Nextel, which recently retooled its inventory management processes and capabilities, report finding dormant equipment in storage facilities and in employees’ closets at home, illustrating what significant inventory issues providers face. They have little idea of what equipment is where or how much this equipment has depreciated. And, because providers lack the knowledge of what they have, they are left guessing at how much to pay in taxes for their network equipment. When it comes to network inventory, ignorance can be costly.

Revenue assurance is likely to remain a key focus for providers into the future not only because returns on such projects can be great, but also because regulatory pressures are underscoring the relevance of accuracy in business accounting. As next-generation services force margins down, the competitive prowess of telecom companies will be critical to their success and ultimately their survival. Those who can get it right will have revenue assurance woven through every process within their organization and will reap the benefits of tighter and more efficient operations.