It’s massive, it’s unavoidable and it’s got to be done now: minimizing revenue leakage will be a key competitive differentiator for operators in an increasingly complex, scaled telecom environment. From fraud to Sarbanes-Oxley compliance, revenue assurance – or RA – has growing ramifications on the global communications enterprise.
In fact, the magnitude of revenue leakage is staggering. According to various research reports, the degree of exposure lies in the range of 3 percent to 15 percent of operators’ gross revenue, depending on factors such as networks and services type, geography, carrier type and revenue assurance maturity level. In a $1 trillion industry, that’s a lot of leakage!
And yet, it hasn’t been fully addressed by carriers. Perhaps they are loathe to admit they’re hemorrhaging money. Also, it’s a cultural problem. Revenue leakage has dogged telecom operators since the beginning of the industry. It doesn’t matter if you’re in the wireline, wireless or cable space, all providers have experienced the pain of revenue leakage and the daunting challenge of putting the processes in place to stop leaks. It is often considered a hidden, uncontrolled and uncontrollable cost of doing business in the telecom industry.
That attitude has to go away. Operators have to be very proactive in terms of RA, especially when it comes to new services that require innovative ways of billing and dealing with customers. As you create these new services, the opportunity for revenue leakage just grows and grows. Concurrent engineering involves designing quality, testability and manufacturability into products right from the start instead of designing the product and then working out how to manufacture it. To be truly proactive with an RA practice for new services, operators need to design the RA processes as they design new services, rather than trying to bolt them on later.
Whether it’s downloading a video clip or music or playing poker online, the differentiator with these new services will be how you pay for them, rather than the characteristics of the service itself.
Many people think that revenue leakage can be attributed mainly to fraud, and indeed fraud is a serious issue for telecom operators. But in reality, it accounts for only a fraction of revenue leakage. In addition to fraud, reasons for revenue leakage include network provisioning, mediation and CDR errors, billing and interconnect inconsistencies, loss of data and corrupted files, fragmented support systems, incoherent databases, and manual or ill-defined business processes.
In other words, it’s incredibly simple to leak revenue – as simple as an operator forgetting to withdraw a 50 percent discount at the end of a promotional period. At that point, the customers have agreed to pay X dollars for a service, but the systems are charging them only a fraction of that amount. Interconnect settlements with other carriers are also a big challenge. Interconnect call rates set up incorrectly in the rating system, or misidentification of interconnect traffic classes, are common causes of leakage.
While putting an end to wasting money is an obvious reason for implementing an RA program, it’s also important to look at this whole area from a regulatory point of view. Operators must consider how implementing RA techniques can keep them in compliance with Sarbanes-Oxley and other regulations. These regulatory drivers have just as strong a motivating effect on senior executives as wasted revenue has, and without doubt have increased the urgency to address revenue leakage problems over the past three years.
The first step in addressing revenue leakage is akin to what any alcoholic has to do before he can overcome his problem – recognize that he has a problem. The main question for any business is not whether it leaks revenue, but rather how much. What level of leakage is acceptable? How can operations and systems be improved to minimize those leakages? At any given time, every carrier will suffer from some form of revenue leakage, as the complexities and rate of change are too great to ever completely eliminate it.
An effective RA process must ensure the integrity and synchronization of both data and processes across all the disparate systems and the network itself to sustain operational and financial efficiency. RA provides analysis of the relationship between network resources, services, customers and generated revenue, and enables the operator not only to detect revenue leakage (e.g. unbilled customers, misbilled customers), stranded assets and operational inefficiencies, but also to understand the reasons for these undesired occurrences.
Operators can first assess their RA maturity level using the five-step maturity matrix. Not only does this scale give operators a benchmark to measure their progress against other operators, but it also lays out a road map for their RA action plan. The five steps of RA are defined as:
- Initial: No RA process has been established.
- Repeatable: RA processes are developed at the level of individual projects, products and implementations. Flaws are identified and remedial action is taken.
- Defined: RA processes are developed for the whole organization. Organizational priorities for RA are understood and guide proactive deployment of resources.
- Managed: RA processes provide consistent quantitative measures. Measures drive planning and control.
- Optimized: The measures, planning and controls implemented to improve the business become themselves the subject of continual improvement.
Even after identifying where they are on this maturity scale and the road map to where they wish to be, many operators make the mistake of thinking that throwing software and systems at the problem will solve everything. It doesn’t. Processes solve problems; software helps you implement those processes. It doesn’t matter if you’re talking about car manufacturing or telecom. First you need to know what you want to do and what you want to achieve. You then map the processes out clearly and trial them. And only then invest in the systems to automate and improve them.
With any luck, operators will take steps to address this mammoth problem now, before the era of rapidly created and delivered converged services reaches its peak. Who can say no to keeping your money from going straight out the door? Left unchecked, revenue leakage will be the downfall of many.
Martin Creaner is CTO of TeleManagement Forum. He can be reached at mcreaner@tmforum.org.
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