Compared with service providers in the United States, it is generally agreed that European service providers have been more advanced and more forward-thinking in adopting revenue assurance. This gap has lessened in the past 12 months due to various drivers, but in the process the target has also changed. Though the term “revenue assurance” remains common parlance, the practice has expanded beyond revenue, blurring the lines with business intelligence and morphing into what we should perhaps call business assurance. Rather than focus solely on revenue and cost, service providers in Europe and the United States are turning their attention to end-to-end business performance, looking at relationships across the organization rather than within individual silos or product lines.
A Bit of History
The history of revenue assurance in Europe derives largely from regulation and geography. Though European regulators are often criticized for being overly technocratic and bureaucratic, in the case of revenue assurance their aims appear to be in the best interest of consumers. In the mid-1990s, when both U.S. and European markets were liberalized, U.K. and EEC regulators saw fit to put controls in place that would prevent or deter market abuses in billing. Stringent rules were put in place for billing and metering accuracy to insure that over-billing practices were not pursued at the expense of consumers. These regulations have teeth: telecom providers can have their operating licenses suspended if they fail to comply. Naturally the introduction of these regulations garnered immediate executive attention because of the potential threat they could pose.
As European operators began investigating their billing accuracy, they found two surprises. The first was that their billing was grossly inaccurate. The second was that the inaccuracies were actually in consumers’ favor. Service providers found that they were consistently under-billing.
“If you are under-billed, why would you come back and say something about it?” asks Jean-Francois Jodouin, chief technology officer for Ace-Comm. “But if I over-bill you, you’ll be on the phone very quickly or leave for another supplier. If you accumulate that over time, the under-billing situation dominates, … and the pioneers of this realized that if you went for an accurate system that was more efficient, that created more revenue.” This was revenue that would not require significant investment in new network or customer acquisition to gain. It would also help to increase margins in areas like PSTN voice, where margins and revenue continue to erode. “So, all of a sudden,” says Jodouin, “you had great attention on revenue assurance with measurable results that in turn drove organizational change.”
In addition to regulation, the fragmented nature of European geography helped to advance revenue assurance. Because there are so many interconnected players among the various European nations, both interconnect billing and mobile roaming settlement are extremely complex.
“We didn’t have an AMA standard in Europe, and with all of the different record types it was tough to reconcile between parties,” says Andrew Doyle, general manager for EMEA at Lavastorm. “In wireless roaming you had various standards, and lost records could be very expensive because operators always had to pay the settlement amount,” he said. This complexity spawns opportunities for revenue loss, the magnitude of which drove executives to take an interest in revenue assurance practices.
In the United States, the regulatory environment is quite different. The Telecom Act of 1996 focused on creating competition in telecommunications markets, but did not single out billing accuracy as a priority. Incumbents spent significant dollars lobbying Congress to reduce their competitive requirements and change the vision of CLEC competition into the telco-versus-cable sort of competition we see today. Their focus did not shift to revenue recovery until the market downturn of 2001. “When the downturn hit, there was a dramatic shift in attention to the bottom line—they needed to squeeze out as much revenue as possible,” says Greg LeNeveu, senior vice president for the Americas at Subex-Azure.
This fundamental difference in the impetus for revenue assurance resulted in European providers gaining about five years’ worth of a head start over their U.S. counterparts. Up until about 12 months ago, U.S. providers were still tactical in their approach to revenue assurance, focusing primarily on fixing specific revenue or cost leakage problems within certain product or process silos. During the last 12 months, however, with the overwhelming influence of growing n-play offerings, and increasing attention to Sarbanes-Oxley compliance, the focus in the United States has shifted to more end-to-end concerns that do involve revenue but look beyond it, toward the bigger picture of overall business performance.
Driving the Shift
Generally speaking, European providers have better integrated revenue assurance practices across their organizations, so that the principles of revenue assurance are more a part of their corporate DNA than is perhaps yet the case in the United States. “In Europe, the organizations are well developed now. They have high-level, C-level or at least senior VP-level support,” says Doyle. Further, he says, the practice of revenue assurance has moved to understanding how efficiencies can help keep customers and measure the value of specific ones.
“I see this movement globally,” says Drew Rockwell, CEO for Lavastorm. “What management is looking for is whether the business is operating the way it is designed to operate. That could involve revenue, cost, fraud and order quality, but the common theme is to ask if the business is operating the way it was designed. It’s more of a true quality kind of message and not just focused on a silo like revenue,” he says.
This abstraction from a revenue focus to business operations is a natural outgrowth of the typical revenue assurance maturity pattern. Early efforts tend to focus on recovering low-hanging fruit, like assuring the validity of interconnect bills and invoices, but follow-on activities attend to identifying and repairing the root causes of chronic revenue and cost leaks. This shifts the focus to elements like data integrity, asset recovery and process optimization—a level of abstraction beyond pure billing. It seems logical that the next level of abstraction would focus on taking this information and relating it to the overall impact of business operations on customer experience, service uptake and other factors that affect revenue growth and cost. What’s more, the availability of detailed cost and revenue information that can be related to specific products and specific customers enables providers to pay closer attention to margins, supply-and-demand relationships and customer segmentation.
LeNeveu says he has also seen an increase in the number of RFPs for end-to-end business solutions. “The more forward-thinking stakeholders have seen that this data can be used for broader and more strategic purposes,” says LeNeveu. He says current interest revolves more around factors like the average margin per subscriber and maximizing margins across customer segments in order to drive as much revenue and profit as possible from the existing base. Additionally, focus has increased on risk management. Major mobile operators in particular are looking for ways to increase the amount of risk they can take on in order to expand their subscriber bases, LeNeveu says. They are combining risk management with revenue assurance to ensure that they understand all of the risk factors involved with certain types of customers, while also ensuring that they collect every last bit of revenue from day one.
Another clear global driver is the new service introduction with which the entire industry is infatuated, if not obsessed. Not only are controls being put in place on the front end, to measure performance in the introduction and life cycle of a new service, but controls are especially needed to oversee new partnerships. “There’s a whole new element of interconnect, or inter-party, emerging that has a major cost element to it. It asks the question, ‘What’s the benefit of this new program as compared to the new cost?’” LeNeveu says.
Additionally, metrics for service performance, subscriber uptake, impact of cross-platform marketing and other factors are becoming increasingly important to content providers. As content offerings become more sophisticated, major content developers will seek this kind of information—similar to what they receive from their retail distribution partners—to help them gauge if a new service concept is worth investing in, and to determine which carriers are providing them with the best sales and service channels and customer interactions.
Executive Attention
“With our customer base, we’ve seen fundamental shifts in the audience we are addressing,” says Subex-Azure’s LeNeveu. “It’s not just on the CFO’s radar, but it’s a strategic initiative. We’ve seen groups like product management, network operations and even the CEO and COO looking at metrics coming out of this, that show the health of the organization. These guys have not only a revenue assurance charter, but a revenue management and optimization charter and are reporting directly to the CFO.”
Perhaps the most telling evidence of change, however, is in organizational management. “You’re seeing shifts in the organizations where you have an executive with an umbrella over anything that has to do with revenue,” says LeNeveu. “Billing is being rolled up under these executives, and their responsibilities traverse the end-to-end revenue chain. [Revenue assurance] is being used to provide visibility and drive decision making at the strategic level.”
Sarbanes-Oxley compliance is also pressuring executives to focus on improving revenue, cost and operational visibility. While the connection between revenue assurance and SarbOx seems somewhat obvious from the outside looking in, executives don’t necessarily think of it that way. “In North America, if I asked about the importance of Sarbanes-Oxley, executives would say compliance is quite important and that they’d be in trouble if they did not have a strategic level initiative,” says Ace-Comm’s Jodouin. “But if you ask them if that’s revenue assurance, they’d probably say, ‘I don’t think so.’”
Compliance is pushing not just U.S. companies, however. Lavastorm’s Doyle says he’s been working on a SarbOx project with a European carrier that needs to be compliant because its stock is traded on a U.S. exchange. Rockwell says he sees similar projects in Asia because Asian operators “are trying to raise money in U.S. markets, so SarbOx compliance becomes crucial to access capital markets here, making the compulsion almost higher” than in the United States. Doyle adds that compliance is “an inducement for companies to discuss the wider concept of business assurance, but it’s also a stick to beat them with, because the executives are very concerned about it.”
Should We Rename Revenue Assurance?
The term “revenue assurance” may not be sufficient to describe the entirety of today’s practices. Certainly revenue assurance remains a key building block, but the bigger game appears to be end-to-end business assurance that keys off telecom-specific business intelligence. “I gave a discussion on business assurance recently,” says Doyle, “and people from T-Mobile and NTL came to me and said that it was exactly their thinking that revenue assurance was moving from a narrow focus on billing to how the business is operating. The core is the data and using the analysis of that data in a wider aspect across their business.”
If this is the common trend, then one must ask whether the term revenue assurance remains accurate. The answer is that revenue assurance itself is still a valid term, as far as it relates to the practice of assuring that all revenue earned is in fact billed. Cost management and process improvement—as they relate to billing—have shared this general moniker for some time as well. But clearly revenue assurance is becoming part of end-to-end business assurance fueled by business intelligence.
“The life blood that flows through all of this is data,” says Jodouin. “By performing business intelligence on the network, you are performing revenue assurance in all cases—regulatory, revenue recovery, improving the cost base and improving efficiency by taking a piece of data or process and fixing it.”
Vendors and consultants in the revenue assurance arena have moved with their customers into the greater business assurance realm, suggesting that the term business assurance may better reflect the real scope of activity as it has gained executive support, attention and funding. “I think we need to rename this space if you want it to be at the C level where it belongs,” says Lavastorm’s Rockwell. “The name I like is business assurance. Though it’s vague, one can define it as automating the analysis necessary to assure management that the business is operating as it is designed to operate and alerting them when the business is out of kilter.”
At Subex-Azure, LeNeveu explains it in the context of content offerings. “They are necessary to compete, but there is little margin, little room for error, risk or write-off. It requires a more holistic approach. You don’t want content to be a loss leader, but operators are taking losses now just to compete,” he says. The focus is now on finding models that drive greater margins for each service, and across multiple services. “The next level is pre-emptive,” says LeNeveu. “With new services, are people using them responsibly? Can we preempt abuse or misuse and improve the customer experience by managing risk proactively? You can’t look at any of these things in isolation to know the health of a given service.”
Further, bundling adds another level of analysis that asks whether a given bundle will result in an improved service as well as greater margin. “The shift we’re seeing is for operators to have that kind of visibility plus the controls in the organization to optimize the service and potentially the bundle,” LeNeveu says. “If you think about the trends we saw with CRM and the NOC, we’re seeing a similar trend occur around revenue maximization—with ad hoc controls moving to an ongoing, automated approach, and then the data being used to help drive strategic decision making.
“We’ve now seen organizations change where you have an executive high up reporting to the CFO, or is outside of finance and is tasked with maximizing the revenue chain, which has elevated the stature of revenue assurance. You’re not seeing ad hoc engagements, but standard controls and measures, plus people in operations.”
These kinds of organizational changes, as opposed to an increase in ad hoc efforts, are a telling sign that executives at U.S. service providers are prioritizing business and revenue assurance. Though European carriers are perhaps ahead of U.S. carriers in implementing the organizational aspects of assurance, the motivations today are the same on both sides of the pond. New business models, new services, new partners, increasing complexity, decreasing margins and Sarbanes-Oxley compliance are the common forces.
