Channel Partners

February 29, 2008

14 Min Read
Not Your Dads Revenue Assurance: New Programs Drive Profitability

Though revenue assurance traditionally was perceived as an internal, numbers-crunching function, it will increasingly become a customer-facing function that will either drive loyalty or foment churn for resellers.

Market consolidation has complicated, not simplified, revenue-assurance practices. “Consolidation” has become somewhat of a misnomer, as a fair number of startups and Tier 2 and Tier 3 providers are cropping up to increase competition. As resellers fight to differentiate themselves from the 800-pound gorillas and the growing number of burgeoning players, they have cultivated a “do-what-it-takes” approach to deliver on customer requirements across the board. Resellers, consequently, partner with dozens, if not scores, of wholesale partners to deliver telephony, access, IP, data, installation and service bureau products and services.

With 10, 20, 80 or even 100 wholesale partners to oversee, its easy to see how resellers struggle to manage product offerings that include growing numbers of features and subfeatures. As the number of amendments and exceptions to master contracts grow, there exists a greater need for transparency in the ordering and provisioning process for revenue-assurance functions to be effective. Without the necessary planning and automation, cost-accounting and revenue-management problems will mount and eventually burden smaller service providers.

To stave off revenue losses and to head off customer attrition, forward-thinking resellers are finding that revenue assurance must switch from a mindset of just recovering losses from revenue leaks, to now driving profitability and improving margins with a proactive set of business practices.

“Resellers have to automate or partner with technology partners in order to address the cost and payment side of their business. Its necessary, even if they dont have IT groups or back-office support,” says Tom Nolting, senior director of Vertek Corp.s financial assurance organization.

He notes that often, there exists no rigorous process to validate or track costs within small resellers, because they lack the resources. “Smaller companies will struggle to manage multiple rate books from multiple carriers across far-flung regions so they can get paid,” he predicts.

Just how the mechanics of revenue management will change for resellers overall remains to be seen. If sophisticated services around MPLS, private VPNs and other complex technologies continue to pick up momentum, they could further confuse the product mix offered by resellers. Already, some resellers have thousands of products in their catalogs, which means they cannot efficiently administer and map the costs.

For that reason, resellers will have to consolidate product catalogs, which will require either homegrown systems (if IT departments exist), or COTS or service bureau offerings. The goal will be streamlining product sets and automating the flow from ordering and provisioning to assurance and billing.

As resellers inherit similar products from multiple carriers, they will have to become more creative in how they add features without adding products. “They have to find commonality among, say, all their MPLS products. And rather than add something like encryption as a whole new product, perhaps they can add it as a feature to another product,” suggests Nolting.

By offering options to products, as opposed to mapping thousands of products to their portfolios, there is a better chance to improve margins through consolidation.

To achieve healthy margins, resellers have to map universal service order codes (USOCs) to products on the revenue side of their businesses. That becomes complicated as rates change and features evolve. That is the reason so many resellers possess thousands of products, of which only hundreds are actually billed.

“As margins become more important, resellers will have to be able to pinpoint where their profitabilities are and where they are not, so that they can cut services that are costing them more than they make,” says Nolting.

For fees to be passed through and recouped on the revenue side, network charges have to be traceable to individual customers. “You might have SS7 signaling charges from a carrier, so you want to match charges for delivering the service against the revenues generated for that service,” explains Nolting.

Tying “costs” to “revenue” requires more logic than is possible with spreadsheets. Resellers will have to be able to see the distribution of costs grouped around USOCs. Those costs have then to be associated with circuits and the customers whose records are coming in through the billing systems from underlying carriers. In other words, a reseller selling a service requiring leased circuits for dedicated access will have processes and systems in place to associate particular circuits with particular customers. Only then can they understand with what they are charged in terms of fees for multiplexing, mileage, local access and transport.

That requires a logical view of circuits, which makes it possible to see if USOC fees on circuits match fees on revenue systems. “With automation, there is often a surprise that you are paying more for the circuit than you recovering from the customer,” says Nolting.

Resellers will have to be able to gather usage files of any type, and guide them to the appropriate billing, order-management and revenue-assurance systems so that records avoid becoming “recycle” or “unbillable” files. Tying records to customers and to circuits will help eliminate charges for customers that no longer reside on the network. Only with visibility into networks can trace-backs occur to original service requests so that disconnects, upgrades or changes can be understood.

Whether through COTS, hosted solutions or homegrown systems, there is no doubt resellers will have to devise schema and rules for rationalizing cost to revenue so they can balance cost with profitability.

Susana Schwartz is a contributing editor for Billing & OSS World magazine.

A Closer Look: New Horizons Communications

One reseller embarking on broad automation initiatives is New Horizons Communications Inc. Like a handful of other resellers, such as AireSpring and MetTel, New Horizon is working to bundle multiple wholesale contracts with carriers onto one invoice. The goal is to assure not only that the company has been billed accurately for services, but to ensure it can bill out on a retail basis to compensate for what it has been charged by wholesale partners.

“We had 110 separate invoices every month from 30 different carriers from which we buy services,” notes Steve Gibbs, president of New Horizons, a reseller of UNE products from Verizon, as well as from AT&T, PAETEC, One Communications, Broadview Networks Inc., XO Communications Inc. and Covad Communications. He points to the fact that back-billing and mistakes would become more prevalent on invoices if managing multiple carriers in an unconsolidated manner. “Sometimes, things show up that you didnt order, and you cant manually comb through thousands of pages of paper invoices to see why you got something like a one-time $20,000 charge for back-billing from a particular wholesaler,” says Gibbs.

It was also becoming apparent that operational folks handling the conversion of lines in UNE agreements could possibly miss underlying features, such as call forwarding, directory listings and voice, when flipping customer service records to our New Horizons billing platform.

To ameliorate those issues, New Horizons set out to consolidate multiple carriers to one invoice, and back it with sophisticated customer service and account management. The key to carrying out that mission was the creation of an operational platform on top of which multiple carriers could be managed by a single account team.

Preparation included streamlining of product codes to create consistency in how services were named and reconciled against usage data. The company also brought up the sophistication level of its Web portal with its MANSA (managed account network service access) initiative. Started 18 months ago, MANSA now gives agents and customers a consolidated view of an account, which enables “live” tracking of repair tickets and information about services being provisioned.

Where a reseller like TMC (see sidebar below) decided to go with a homegrown system, New Horizons went with a hosted solution from Vertek, which had interfaces and experience with multiple carriers invoice formats (e.g., paper, CDs, Web transfers). Vertek worked with New Horizon to electronically scan every invoice coming in PDF or paper formats, and then worked to massage and merge data into reports (see graphic, Vertek Financial Assurance System, above). “We wanted reports to appear in a user-friendly format so that agents could readily see the rates, the services ordered, and the services that were provisioned all variables that had to be checked against one another to make sure we had been billed accurately by underlying carriers,” says Gibbs.

The reports from Vertek now allow auditors to look into New Horizons Info Directions billing system to see what, if anything, might have been missed. To achieve that, Vertek has been granted access to the billing system so that every month, it can perform analysis of billing feeds and wholesalers billing feeds.

As Verizon invoices were the first to be addressed, it is expected that new reports will be up and running in the February time frame. “The second stage will involve all the remaining invoices, expected to be completed in April,” says Gibbs, adding that a third stage will be margin analysis in the May-June time frame. For the latter, Vertek will provide margin-analysis tools to help New Horizon drill down to the product, service or customer level. “That will enable us to make comparisons of what we are billed out versus what we bill end retail customers,” says Gibbs. “The expectation is that margin analysis will help the company determine where margins are flipping for one carrier partner over another from a cost and pricing point of view.”

Thus far, margins have already improved, with New Horizons gaining 2 percentage points in 18 months. “That two percent every month adds up not only across our Verizon business, but across all of our carrier partners,” notes Gibbs. Additionally, the company has reduced churn to less than half a percent, even though the volume of invoices continues to grow.

A Closer Look: TMC Communications

“Where revenue assurance started out as a recognized process for recovering as many dollars as possible, it now is expanding to be a process of attracting and keeping the most profitable dollars as possible,” contends Sarah Graham Linares, vice president of product development and revenue assurance for TMC Communications Inc., which resells services from Qwest Communications International Inc., AT&T Inc., PAETEC, Global Crossing, ANI Networks and Broadwing (now Level 3 Communications) to provide a full portfolio of voice, data, switched, dedicated and local services, conference calling and calling card services to more than 20,000 enterprise customers.

For three years, TMC has focused on improving margins on the products and services it offers. The first step was examining how its “refuse to lose” mantra could potentially create opportunity for revenue losses and customer attrition. “Because we encourage agents to do whatever it takes to accommodate new or existing customers, agents sometimes have to stray from standard rates and products to win deals,” acknowledges Linares, explaining that something like waiving an installation fee can sometimes clinch a deal.

Resellers also try to accommodate customers and, in turn, grow their agents business by infusing more robust product and feature sets than typical TDM voice services. “If a reseller bolsters a dedicated services plan with features such as control of their toll-free routing through resporg access, LATA pricing, least-cost routing via underlying carrier diversity, etc., you may please the customer up front. But, without the protocols and systems in place to ensure promised features make it to their invoice correctly, and in a plain-to-understand fashion, you can end up disenchanting customers in the first bill cycle,” explains Linares.

The same can be said on the wholesale side of the reseller business, where reconciliation is increasingly complicated by new fees. Something like a new SIP service added to a VoIP offering might create fees for “extras” that confound both internal revenue-assurance teams and wholesale partners.

For these reasons, the actions of the ordering and provisioning process have to be understood by the revenue-assurance folks in charge of evaluating whether or not bills and fees are correct. At TMC, it is a four-member revenue-assurance department (known as “RAD”) that is responsible for examining every vendor, carrier and customer bill. “Its our job to ensure margins are acceptable, and to make sure fees and charges are accurate on our wholesales partners invoice and on the bill we send to our customers ,” says Linares.

That responsibility has grown in complexity, as the number of deals done on an individual basis (ICBs) has mounted. “As the exceptions in the presale order process grew, the risk of losing those exceptions in the flow through to the customers order form had increased,” concedes Linares. To head off any trouble, RAD worked first to create new forms to accompany specialized orders so there would be visibility by revenue-assurance teams to any exceptions. “When there was a 0 marked on a form for something like an installation, we wanted to ensure there would be an explanation about why,” says Linares.

RAD also worked with TMCs IT organization to build a homegrown system around its Oracle database. The database now acts as an ICB “log” for tracking exceptions, which enables RAD to ensure vendor and customer billing is correct, and to handle disputes. The IT department also helped RAD develop SQL tools and scripts so that the team could track the growing number of contracts, CDR feeds and information sources. “The tools were designed to close process gaps in the presale order process so we could foster continuity in how exceptions were recorded, as well as ensure ICBs made it through with orders,” says Linares.

The tools and automation spawned the creation of a “Premier Program,” under which account managers examine reports for unusual variances, and then proactively call customers whenever unusual trends might upset customers. “We recognize that it takes significant money to acquire a customer, so we do whatever we can to keep that customer. The longer we can keep that customer, the more successful we consider the revenue-assurance practice,” says Linares. She believes that the more TMC automates, the more customers will trust the company in its provisioning of services, and vendors in reconciliation with the reseller.

The personalized attention and automation seems to be working to impress customers. TMC has already pushed down customer-attrition numbers a couple of points. “If a customer is about to leave, we now act on it and incorporate what we learn to prevent others from leaving for the same reasons,” says Linares.

Based on what they learn, the internal IT teams and developers continue to work with RAD to create rules and decision trees that “kick out” exceptions for further scrutiny when there is any danger of upsetting a customer. “Through hundreds of information tables, we can track all orders through to provisioning and billing to ensure the products and services are delivered and billed correctly for every customer,” says Linares. She notes a separate database has been built to house more detailed customer information, and yet another to track CDRs.

To build on its success, RAD currently is working to define and automate key performance indicators (KPIs) that affect the revenue-assurance practice, such as sales growth, margins, new orders by product, number of collection accounts and percentage of bad debt.

Additionally, the organization will automate further how it provisions switched orders, where customers are allowed to choose a preferred carrier to save money on their bills. “We have to make sure that even if there is a lower-rate premium, that we provision these order quickly and efficiently,” says Linares, who plans to automate that process now that volumes have grown enough to make manual processes obsolete.

The company also continues to work with partners to try and tame the “paper monster,” still created by wholesale partners. “Through acquisitions, many carriers plan to have beautiful electronic invoices in the future, so right now we try to entice them to go to digital invoices, so we can gain visibility into circuit charges, loop charges and things like toll free features,” adds Linares. With so many formats used by different wholesale partners, the RAD team uses FTP for downloads of files so it can better analyze usage among carriers.


New Horizons Communications Inc.
Oracle Corp.
TMC Communications
Vertek Corp.

Read more about:

Free Newsletters for the Channel
Register for Your Free Newsletter Now

You May Also Like