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Backoffice & OSS
Telecom Business Transformation
Don’t Forget About the Revenue!
by Keith Willetts, Chairman & CEO, TeleManagement Forum
I spend a lot of time talking about how operators can take their
businesses to the next level. Business transformation, which focuses on
the network, business processes and innovative new services, is
absolutely crucial for providers to survive.
Senior executives are beginning to get the notion that it’s not only the
external aspects of their business that need to be transformed. Sure
things like the market image, logo and service offers are very important
to show that the operator is in the 21st century. But the way the
business works inside also needs to change, and you’ll have seen me wax
on about this in this column from a number of angles. But one area
where operators still seem to be deeply in denial is a key business
transformation area: stopping revenue leakage (or should that be
hemorrhage!)
By many accounts, revenue leakages from operators are astronomical.
Between 5 and 10 percent of total provider revenue is lost due to
leakages of various sorts. Even if that’s way off, we’re still talking about
billions in revenue that would drop straight to the bottom line if it were
fixed and much more impacting on corporate earnings than new service
revenues.
An Industry in Denial
Why is it that Wall Street and major shareholders of these operators are
not going crazy about this money going out the door? Why is it that
CFOs and CEOs aren’t going nuts about it too? There is an obvious
culture of denial on this subject that goes all the way up to the top,
which is alarming because we’re talking here possibly of up to $100 billion
spread out over the world’s phone companies!
If you look at just the U.S. market, which makes up 30 percent of the
worldwide market, you’re still into tens of billions of dollars that simply
fall by the wayside.
The numbers may say one thing, but my experience has been that
operators talk about revenue leakage as something that happens to
other people. People don’t want to admit their faults, and CFOs certainly
don’t want to admit they’ve got a revenue leakage to their shareholders.
Its hardly new - since the days of the telecom monopoly, companies
have seen revenue leakage as the cost of doing business, and since
they were making loads of money anyway does it make sense to make all
the effort to plug the holes?
I would group operators into three categories based on their attitudes
toward revenue assurance (RA). The first group is in complete denial,
and isn’t doing anything about it. The second group publicly puts on the
face of playing it down, but quietly behind the scenes they are running
around and working on the problem. The third group, of which I can’t say
I’ve met anyone that falls into this category, admits it’s a big problem
and is really doing something about it.
I suspect most companies fall into the second category. They are doing
a lot of work quietly, but it’s not the kind of thing they want to talk
about because that would be an admission that they’ve been wasting
billions of dollars in shareholder money.
But when the market is in constant flux - and many operators are looking
at flat or even declining revenues - every bit of that lost money that is
recovered goes straight to the bottom line.
To put it plainly, an operator that makes 20 percent net margin on its
sales will have to sell 5 times that amount in new service revenues to
have the same effect on their bottom line.
So it’s absolutely beyond me why revenue assurance is not at the top of
the agenda and why it is not discussed at the very highest levels within
an operator.
Stemming the Revenue Leakage Flood
Unfortunately for the telecom industry, there isn’t a magic bullet out
there that can clean up revenue leakages. Because there are many kinds
of revenue leakages, there are many ways to prevent it.
It takes good detective work and going through each stage of your
business process to make sure that the major leaks are getting trapped.
Good software can play an important role as well. There are companies
out there all the way from big accounting firms to small software tool
vendors who are gearing up to help.
At the TeleManagement Forum, we recently released the first-ever
Revenue Assurance Guidebook for service providers. It’s the industry’s
first step-by-step guide for RA, delivering both definitions of RA business
processes and leakage points, as well as strategies for solving today’s
most significant new RA challenges. Because revenue leakage problems
typically span multiple departments within service providers’
organizations, having a common language for defining problems and
solutions saves substantial time and money in execution of day-to-day
RA processes and in procurement of RA applications.
The Guidebook is just one step on the road to creating defacto RA
standards for operators.
Another way of taking on RA head-on is through a new concept that’s
being floated around called the Revenue Operations Center (ROC). Like a
network operations center, where you can see the entire health of your
network from one location, a ROC would bring a business level view of
your company to a central point.
It would be a place where you could bring together all of your RA and
fraud management activities—functions that normally happen in various
places around the organization.
Besides monitoring the entire revenue chain, the ROC would also help
with troubleshooting problem areas and collecting relevant data for use
in analytic systems.
A lot of RA involves knowing where to look for leakages and recognizing
the symptoms. Operators should concentrate their resources and
software tools and make RA a center of excellence but also something
that needs to be monitored in real time.
And it’s only going to get worse for CFOs. If you leak revenue on
network services and you own that network, you could argue that while
it’s a revenue opportunity lost, it hasn’t actually cost you anything since
the cost of the network is largely fixed. But on application- or content-
based services, where you may be paying a 3rd party for use of their
material, you could end up paying out royalties but not collecting the
revenue – a BIG meat-in-the-sandwich problem. And will media
companies - well used to worrying about licensing and payments - be
comfortable in the first place with using a telco as a content distributor
that can’t show good control over revenue leaks?
Revenue leakage is going to grow as a bigger and bigger issue for the
transforming telco. Maybe those companies moving into my third
category will prove a good indicator of who really is changing their spots
and becoming a transformed lean operator.
When will we see this? Who can say? Maybe revenue is like drilling for
oil – only when you have exhausted the easy-to-get-at stuff do you
start drilling in places like Alaska or out in the ocean. Maybe the world’s
service providers have to experience a bit more pain before they really
take RA seriously!
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