Billing is a critical point not simply because of its position in the revenue chain but because it often is the sole point of contact between the customer and the carrier.
With the merger machine working overtime, many carriers are faced with not just integrating their business plans, staffs and services, but also with the esoteric job of figuring out how to merge their operational support systems.
New Paradigm Resources Group Inc. (www.nprg.com) in its CLEC Report 2000 counts 204 current or future facilities-based providers, but says as many as several thousand entities have received certification to provide local service. Nancy Bedard, a CLEC market analyst for the Yankee Group (www.yankeegroup.com), says the market can't sustain the number of competitors, so mergers are likely to continue, and will probably escalate when it comes to competitive carriers.
Bedard predicts that, as ILECs and RBOCs begin to make moves outside their regions, one good way for them to expand quickly to new markets will be by lapping up CLECs.
More mature CLECs also will be looking to expand beyond their regions and will be looking to merge or form partnerships that will give them a national presence, she says. Leading the pack in that respect, Bedard says, is McLeodUSA Inc. (www.mcleodusa.com), which has already bought Splitrock Services Inc., Ovation Communications Inc. and Dakota Telecommunications Group Inc.
The Options
Surprisingly, Jason Briggs, a senior analyst in Billing and Payment Applications Strategies for Yankee Group, says many carriers are leaving their billing systems as is because it reduces the risks that go into migrating customer information from one system to another. "If you don't touch it, it'll keep going as it did in the past and you'll not disturb the customers," Briggs says. "That's pretty big." The drawback, of course, is that a carrier ends up managing several different billing systems instead of just one. "That within itself is a huge task," Briggs says.
A second option is to migrate customers from one of the merger partners' billing system to the other's. In considering this, carriers should consider the scalability of the billing system to which customers will be added, whether it can handle the additional customers and whether those customers can be effectively migrated to the new system. "Also, if the acquisition is, say, a CLEC acquiring a data LEC [DLEC], like a DSL provider, obviously the first question you ask yourself is can your billing system handle that billing in addition to voice billing," Briggs adds. "Usually, the systems that most CLECs have in place today probably can't handle that type of transition, especially the ones that have been around a while."
Briggs says bringing in an entirely new billing system may be the best solution. However, he says this is the least likely option because carriers are unlikely to want to go through the merger process while also going through the billing system selection process.
"That's just one extra headache to add to the mix," Briggs says.
A Seamless Change
Of course, however a service provider deals with OSS issues following a merger or acquisition, a prime concern must be how the customer is affected. With all the new service providers entering the market, unhappy customers have the option of jumping ship if they become unhappy due to unreliable or otherwise faulty service or billing. Any changes to the OSS must be as seamless to the customers as possible.
"It is very critical that you make the transition well," says Liz Ellis, senior vice president of information technology for Choice One Communications Inc. (www.choiceonecom.com). Choice One, an ICP headquartered in Rochester, N.Y., in August completed a merger with US xchange, a facilities-based CLEC headquartered in Grand Rapids, Mich. Choice One has been going through the planning of how it's going to bring US xchange customers into its systems.
US xchange had its own billing system that had been developed by a consulting firm. Choice One had been using ADC Telecommunications Inc.'s (www.adc.com) Saville billing platform since February of 1999.
"I think probably the first thing you go through is trying to decide which system becomes the main system, or whether you run both separately," Ellis says. "Does it make more sense to run separately or more sense to run an integration and migration process?"
Ellis says Choice One's decision on which system to keep was relatively easy because, with the Saville system, Choice One had a billing platform that fit the industry standard and was more robust in features and functionality.
In order to ensure Choice One's customers remain comfortable during the entire process, the company is making a point of letting them know what is going on. Billing is a critical point not simply because of its position in the revenue chain but because it often is the sole point of contact between the customer and the carrier. Marketing decisions, therefore, will be made on how best to help customers become aware of what will be taking place with their monthly bills.
"You've got to make them feel confident that they're not losing anything," Ellis says. "What people don't like to react to is surprises."
The Service Offering
Among other considerations are what the product is going to look like, Ellis says. That includes asking whether to simply transition everything over to the system as it is or to create on the billing system a whole new product set that mirrors what US xchange had.
"I feel pretty confident that Choice One can come up with a rate structure that can meet or beat what [US xchange offered]," Ellis says, adding that it's important for the customers to feel no worse off, if not better off, after the merger than they were before.
Ellis says US xchange will continue to bill those customers temporarily using the existing system, with plans to move them to the Saville system by the end of the year.
Ellis adds that it's possible that information required on the Saville system wouldn't have been required on US xchange's, "so you've got to make good decisions on what information needs to populate the new system if it's not already there." Part of the migration process involves "cleansing" the data to eliminate as many errors as possible, Ellis explains. This includes simply checking the spelling of a person's last name, finding lines that were left off of an order in one system or the other, or checking whether a customer changed an order just before the actual cutover and ensuring that information is entered into the new system.
A Star Is Born
In another look at service provider mergers, BiznessOnline.com (www.biznessonline.com), an ISP based in Wall, N.J., acquired the Johnstown, N.Y.-headquartered CLEC Telecon Communications Corp. and its ISP affiliate, Telesupport Inc., in April. Like US xchange, Telecon had its own billing system, called Constellation, which it had developed internally.
"Our heritage had always been billing, and we have always operated it with our own customized systems," says Joseph Sullivan, COO for BiznessOnline.com and Telecon's former vice president and general manager.
BiznessOnline had been looking to outsource its billing at the time of the acquisition but scrapped those plans after looking at Constellation.
"When we did the final analysis, [it was] felt that Constellation was superior to what they were looking at, at that time," Sullivan says.
The actual migration of BiznessOnline customers onto Constellation was relatively easy, Sullivan says.
"A fixed-cost product is a very easy commodity, or a very easy process, to bring into [the Constellation] billing system because the devil is in the details around the long- distance, cellular and local dial-tone and the associated services," Sullivan says.
Like Minded
Sometimes the fact that two potential merger partners have similar back-office systems can help seal the deal.
Prior to making its decision in June to merge with TriVergent Communications Inc. (www.trivergent.com), executives at Gabriel Communications Inc. (www.gabrielcom.net) had taken a look inside its back office to see how compatible they would be.
"I wouldn't say it was a major driver to the decision [to merge], but we most definitely looked at the systems they're using," says Jerry Howe, president and COO of Gabriel, a St. Louis-based ICP.
With the merger's completion, which was expected by the end of August, the transition from two companies to one should be less problematic because the two ICPs share a number of back-office systems, including order management from MetaSolv Software Inc. (www.metasolv.com), billing from Daleen Technologies Inc. (www.daleen.com) and network surveillance from Micromuse Inc. (www.micromuse.com).
"We do expect that it will facilitate the integration of our operations," Howe says. "They're familiar with the same systems we're familiar with, and we're both confident in the systems we have."
Howe says the merged company, which had yet to be named as of press time in late August, will continue using the same products but the respective customer databases will be combined. To help with that process, expected to take about 60 days, the merged company plans to bring in an outside consultant.
Because of the similarities between the respective systems, customers are unlikely to see much of a difference, other than a change in the name on their monthly bills. Howe says the two companies plan to combine those things with which each has had success to provide customers with improved performance. For example, he says, TriVergent customers will be able to take advantage of the electronic bill presentment and payment (EBPP) offering that Gabriel customers already had available to them.
Choice One's Ellis says the transition of billing and OSS systems is more than a simple IT problem; it crosses all departmental lines.
"It impacts the entire organization," Ellis says. "Part of that is there are different ways you can talk about doing conversions of information. Do we want to do it market by market? Do we want to do it product by product? Or do you want to do almost like a flash conversion, so that you do all of the processing over a weekend, and on Monday morning you walk in and everything's on one platform?"
