Consider this: The COO and CFO of a large telecoms service provider are concerned by falling voice revenues and more specifically the need for the firm's wholesale business to maximise sales and curb revenue loss.
The COO wants the CFO to carry out a review and to get some answers. The discussion covers areas such as managing the financial risks of trading decisions, using capacity to improve profitability, measuring and controlling traffic through the network, ensuring quality of service commitments and identifying different types of revenue leakage. As the CFO scribbles notes, the impact of converged and next generation services and the rapid growth in the number of partners is discussed; the enormity of the task is taken to a new level.
This is a situation in which many service providers today find themselves. Intercarrier billing represents one of the most significant costs of providing service to customers but can equate to a large percentage of revenues. It is essential that service providers adopt best practices in interconnect billing and wholesale business management to future proof operations; especially as all the challenges of managing revenue are greatly compounded by the complex nature and increasing volumes involved in intercarrier billing particularly in the new world of IP enabled services and digital content.
The COO and CFO aren't quite sure where to go to find the answers, never mind how to solve the issue of optimising the wholesale operation. In fact, the ideal approach would be to first get insight amongst the management team to what the relationships between supplier agreements, revenue management, billing integrity and process efficiencies are, before getting technical about the flow of CDR information from switches to billing systems. The approach recommended by many system integrators to solve this problem typically involves a large revenue assurance audit and end-to-end overhaul of existing processes by identifying the major leaks. This approach is time extensive and covers almost all aspects of the operation from product design and credit checks, to ordering, provisioning, mediation, billing and settlement etc. It requires database audits, statistical analysis, file analysis and monitoring of business critical processes including settlement and collections. Sounds like the right thing to do - but how do you solve these types of problems not only for short term payback and gains but to ensure that your business processes actually continue to work optimally and offer you that strategic-edge?
A New Approach to Improve Operational Flexibility is required
Dramatic changes in the telecoms industry require a new approach to process control. The move to next-generation networks and services represents not only a challenge but an opportunity to improve operational flexibility and revenue management, accompanied by incentives to manage opportunities more effectively. However, the telecom sector's traditional approach to wholesale management, plus stories of failing IT projects and weak internal controls, is making the challenge all the more problematic. Over the years many carriers have rushed to respond to opportunities found in new technology advances and customer requirements in order to address competitive threats. Many operators are still using discrete applications, (even spreadsheets), to manage the business silos of buying, routing, provisioning, pricing, selling, billing and partner relationship management. This has left them weakened by a mixture of legacy infrastructure and poorly designed business processes and systems. So what's the impact?
After an in-depth, cross-functional review of wholesale business operations the CFO documents his findings:
The headline business issues:
- Limited up-to-date analysis of business operations or visibility of route cost and margin. This is resulting in unprofitable interconnect agreements, inadequate comparison and selection of supplying carriers, and traffic being carried over loss making destinations
- Complicated systems and discrete business processes are resulting in inefficiencies (Backlog of rate information; Lengthy billing cycles; Out-of-date business information; Not meeting sales goals and Difficulty in measuring profitability)
- The inability of existing billing systems to deal with emerging accounting and revenue share models. This includes handling the differences between IP-based and traditional services and effectively managing, rating and billing for a wide range of multiparty settlement models
- Legacy business practices are weak at managing the increasing number of interconnect and content partners. This includes the implementation of new operator and content provider agreements, value chain complexity, and rising costs in managing agreements
The collective results of the management team also demonstrated that the impact of these business challenges flowed throughout the entire wholesale business organisation:
- Buying - High risk exposure and lead times largely caused by the time required to process supplier's rate sheets and numbering plans, inaccurate data held in different computer systems and the inability to manage rate changes and opportunities
- Routing - Declining margins associated with routing decisions, because it takes too long to obtain data and tailor routing parameters, capacity is constrained by overflow on individual trunk groups and switches and it is too difficult to implement new and differentiated routing services
- Routing Provisioning - Cost of termination on certain routes is excessive due to conflicts between commercial and technical routing decisions, high degree of manual intervention required to determine optimal carrier selection and the limited transparency of routing orders and their status
- Pricing – Low margins and low revenues as a result of not being able to accurately predict termination costs, limited visibility of margins on products, agreements and destinations and an increasing amount of resources required to manage all the parameters for a growing product range
- Selling – The sales team are not meeting their sales targets due to a lack of data to support negotiations and monitor sales process and margins, time involved in updating rate sheets and distributing new prices to customers and the inability to access up-to-date information on customer profitability by destination or product
- Billing – A high % of revenue loss due to limited financial summarisation of traffic for detailed analysis, time required to manage discrepancies and disputes and systems in effective at making changes in agreements and billing processes
- Partner relationship management – Rising cost of managing partners due to an increasing number of partner relationships and requests for information, limited transparency of agreements and pricing structures and unreliable partner information
The Vision Perspective
The CFO made a recommendation to investigate how to integrate discrete business processes and combine wholesale billing, settlement, trading, routing, and mediation pre-processing capabilities into a coherent process solution. This was well received by the management team:
- VP Carrier Relations: "If when managing contracts, my team could remove unproductive and time consuming processes such as the loading of rates and dial codes, the management of contracts and the definition of destinations and numbering plans, so we can capitalise on data to monitor and improve business performance, then we can reduce our risk exposure and lead times."
- Network Manager: "If when transforming commercial decisions into effective network activities we can take into consideration load-balancing / load-sharing and capacity constraints, and if when provisioning we can control the quality and transparency of the routing process, so we can streamline processes and improve the ways we work, then we can increase our margins."
- VP Sales: "If when calling customers, my salespeople could have access to up-to-the moment information to support negotiating, the monitoring of sell prices and margins and customer profitability, so we can analyse opportunities per customer, destination and product, customise offers for customers and market segments, and make delivery commitments that we can honour, then we can achieve our sales goals."
- Interconnect Manager: "If when doing financial analysis, my staff could turn to their PC, select any summarised information, drill down into detailed data such as cost formulas, cross product / partner discounts, and performance indicators and trends, so we can react quickly to financial opportunities and changing network conditions, then we can improve our revenue performance."
In summary, better controlled, more efficient processes give your wholesale business operations the ability to add value to your organisation and to achieve sustainable performance. The challenge is to do this without manually intensive and complex technical infrastructures, and to have a constant picture of the complete wholesale trading, routing, billing and partner management lifecycle.
The scenario we have presented in this article is drawn from our experience of some of the typical wholesale business management issues, the problems these issues cause and most importantly the steps that operators can take to resolve them.
Author: Simon Dadswell, Advanced Solutions Marketing Manager, Intec.