By Khali Henderson

Posted: 07/2000

Convergent Billing
the ASP Way
By Khali Henderson

Small and startup telecom service providers have long availed themselves of the cost and time-to-market advantages of outsourcing their billing services to a third-party service bureau as an alternative to developing an in-house billing system. Now, there may be a middle ground.

Changes in computing technology and the proliferation of the Internet are transforming service bureaus and billing
platform providers into ASPs, offering telecom service providers hosted and managed billing services over the Internet or private networks.

“The problem many providers are running into is they don’t have enough financing or they did not put enough thought into the billing process. They do not have the $500,000 or $750,000 to spend to do it right,” says Dunn Carroll, vice president of operations for billing and customer care provider Teleflex Systems Inc.
(www.tele-flex.com).

To bridge the gap, he says Teleflex has become an ASP. “Smaller startups can use Teleflex software and hardware and run that off our site coming in through the Internet, and they can focus most of their effort on marketing and on their
networks,” he says.

Teleflex is in good company. Billing service bureau Integretel Inc.
(www.integretel.com) and software provider Info Directions Inc.
(www.infodirections.com) announced
DirectIMPACT, a joint hosted billing service in late March. In May, billing software provider CustomCall Data Systems
(www.customcall.com) rolled out CustomCall ASP, and EUR Datacenter Inc. selected BillPlex by Daleen Technologies Inc.
(www.daleen.com) for its hosted billing service.

Under the ASP model, vendors say service providers get one browser-accessible window into a central database for a range of users within its operational departments, including customer service personnel, field support personnel, sales representatives, sales agents and end users. Accessibility via the web also allows for a mobile or widely dispersed workforce.

Applications Delivery

The ASP model is made possible by thin-client computing, which is fast becoming the standard conduit for commercial enterprise and e-commerce. The reason is simple: Transferring local applications from the desktop to the server may result in hardware and software cost savings, ease of maintenance, a leaner workforce, flexible access and increased performance.

Unlike the fat client (one-tier) approach, in which applications reside on local workstations tied to a database on the server, the
thin-client (two-tier) configuration puts applications on the server housing the database. A thin-client configuration also can have three tiers, wherein the application and database reside on separate servers. One of the best examples of a thin client is a web browser. It is so thin that it can connect to myriad applications of which it has no prior knowledge and still provide a suitable user interface.

It is the web-enabled thin-client approach to outsourced billing that is relatively new–tendered within the past six months, explains Derrick Van Grol, vice president of sales and marketing for Info Directions.

Whereas the traditional service bureau required telecom service providers to dial into the billing system from a workstation with proprietary software installed, the ASP allows them to access the billing application through a web browser from any computing platform and operating system, he explains.

“The rules have not changed,” Van Grol says, “The medium has.”

He adds that the proliferation of packetized networks also has been key to the evolving ASP model, making it possible for large amounts of data generated by billing systems to be sent across networks efficiently–something that was not easily done with circuit switching.

Service level concerns, however, remain a concern to billers who have not embraced the web-based ASP model completely. Randy
Minervino, vice president of sales and marketing for billing and customer care service bureau Profitec Inc.
(www.profitecinc.com), says direct access between the client and server remains the fastest, most reliable way for carriers to get their data. His company has
web-enabled end-user access to billing and customer service for its customers, but will delay converting the whole system to a web-based ASP model for about a year, or until Internet access becomes faster and more reliable.

CustomCall, while offering the ASP model using a web browser, continues to offer its carriers the thick-client arrangement with access to its web servers via a high-capacity Internet connection.

One of the byproducts of this emerging web-based model is that it allows software service providers and service bureaus to bring their own products to a wider audience without the expense of software distribution and updates. It also allows billing service bureaus to pair with best-of-breed software service providers to deliver a hosted and managed solution. The service bureau no longer has to serve as a developer, and the developer no longer has to become a service bureau; each can focus on its core competency to the advantage of its carrier customers.

ASP Billers

Service bureau
Integretel, for example, has begun to offer InfoDirection’s CostGuard billing software as an ASP. “Our unique value-added ASP billing service is an exciting enhancement to our robust service bureau offering,” Integretel CEO Joe
Lynam said in announcing the alliance. "DirectIMPACT enhances the value to our existing clients who need direct billing and provides a simple and complete billing
solution for those offering cutting-edge technologies and bundled solutions within the Internet and telecommunications markets.”

A similar alliance has been made between EUR Datacenter and
Daleen. EUR will deliver Daleen’s BillPlex customer management and billing solution for
ICPs.

“The ASP delivery model is an ideal fit for the rapid growth and changing industry needs in the ICP market,” says Creedin
Paulus, president and CEO of EUR Datacenter. “By outsourcing non-core functions to
EUR, providers can focus on their core competencies and strategic business priorities.”

ASP billers offer a range of “non-core” telecom functions, such as rating, taxing, invoicing, reporting, debt management and lock-box processing, web-enabled customer service for customer setup and inquiry, order entry and order status, and bill viewing and payment.

“With ASP, our clients get our full suite of software applications, equipped and
ready to go on our Internet servers,” said Frank Peregrine, chairman and CEO of
CustomCall. “Our company’s experience as a service bureau gives us a unique advantage in being able to provide excellent software developed by us, as well as the data center management skills to run a large complex application. Our customers get these benefits without the need to procure these valuable resources independently.”

Benefits

By definition, the ASP handles all
management functions, such as system and environmental maintenance, software upgrades and data backup–one of the many advantages of the ASP model.

“Using an ASP for customer management and billing services allows integrated communication providers to focus their growth on strategic imperatives such as
marketing and network expansion, while utilizing the infrastructure and expertise of the ASP to support their unified communications offering,” says Paul Hughes, a research director with The Yankee Group
(www.yankeegroup.com).

Table: HOSSted Interconnection

He adds that this model “opens up the door for ICPs by helping to reduce or eliminate the outlay of upfront capital.”

The total cost of ownership for an entry-level solution from InfoDirections, for example, is in the $150,000 range, with intermediate solutions in the $225,000, $335,000 and $800,000 range, says Van Grol. At the high end, he says InfoDirection’s Oracle suite of products starts at $1 million and can reach as high as $1.7 million.

While some billing software vendors, like InfoDirections, have been sensitive enough to build an affordable migration path for their customers, the ASP model provides an alternative. Integretel’s DirectIMPACT, for example, gives users the CostGuard solution on a per-subscriber fee basis, which varies based on volume and level of service provided. It runs from $1.50 to $2.25 per subscriber with a setup fee ranging from $5,000 to $10,000.

A Stepping Stone

The ASP model is ideally suited to small and startup carriers intent on avoiding or delaying the upfront cost and/or operation of a billing system.

“In general, ICPs that prefer to outsource their billing are strongly sales and marketing oriented and do not want to carry the infrastructure of large billing or IT departments. As such, providers are willing to earmark a constant portion of their growing volume to service bureaus,” says Van Grol. “ICPs that already have a development slant are looking to in-house solutions with extensible development engines that will allow better control of billing cycle times as well as a competitive advantage in providing differentiated lines of service. These two ends are often difficult to achieve in a service bureau or ASP setup.”

Rich
Aroian, vice president of marketing for the software systems division of ADC (www.adc-oss.com), which offers a billing software and service bureau solution, agrees. He says some service providers are reluctant to relinquish what they consider too much control over such a critical business function.

“At the end of the day most people would prefer to have the operations in-house,” Aroian says. “Every penny of their revenue goes through those systems. All the information about the services they are offering goes through there and so most like to have that in-house. I would say 10 percent of new entrants want to go with an ASP model.”

For the ones that need it, vendors say the ASP model offers a logical migration path to bringing the solution in-house. In many cases, the exact platform used by the ASP can be used by the carrier. As their needs change and grow, service providers using Integretel’s DirectIMPACT service, for instance, can purchase InfoDirection’s CostGuard solution directly and, through a “seamless” installation, assume direct control of the product pricing and customer account information.

Interestingly, changing and growing needs are among the reasons carriers also might choose to stay with an outsourcer. Minervino says service bureaus tend to do well when the market is very dynamic and carriers are concerned that their purchased billing software might not be adaptable.

This is certainly a real concern.

Ever-Changing Data

Billing systems, vendors say, need to be pliable enough to address new and ever-changing data requirements resulting from the introduction of nontraditional products and services (e.g., content), package pricing, promotional incentives and performance metrics.

“I am seeing usage beginning to be sold in packages and a great amount of promotional incentive to purchase additional products from the same carrier,” Minervino says. “Another thing we see a lot is the application of incentive programs to higher margin traffic, where if you buy long distance from me and you use more than $1,000 per month, I will give you X percent off on other services.”

“Traditional voice is falling, and what will replace that is content-based services,” says Aroian. “There are going to be requirements for more sophisticated billing services to provide remuneration for that. We are just a couple of years away from an exploding market for value-added services, and your billing system will need to determine who pays for what.”

Aroian also says he sees a movement to integrate QoS information into billing, so customers can be billed not only for what they use but also for how the service performs during use. Service providers, he and others say, also will be able to use QoS information to promote premium services such as real-time videoconferencing and super-secure data channels.

Jim Hansen, president of Carmel Solutions Inc.
(www.carmelsol.com), a billing solutions provider in Oceanside, Calif., says he advises all clients to prepare for a billing future that only vaguely resembles the per-minute, time-and-distance billing practices of the past. “We came from the wireless space where the rating was always pretty wild, so we look at this as pretty normal,” he says. “The idea of putting free minutes on a long-distance plan–you are just starting to see that now. We see pooled minutes shared between numbers with a
single customer. We are seeing promotional pricing based on Super Bowl ads. Rating is going to be as weird and wild as anyone would think, so you have to have a system that will let you do whatever you want.”

Robert Sullivan, vice president of billing systems for APEX, says his company has taken that mantra to the point at which it is even providing billing systems for products that have nothing to do–at least not directly–with telephony. “We have a group in England that is billing T-shirts as well as phone calls,” Sullivan says.

Jim Lazeroff, director of marketing for Info Directions agrees in principle. His company’s CostGuard solution, he says, is software that is usage-based, meaning that as long as the services are broken down into some measurable metric (duration, distance, enumeration), the software can apply adjustable unit pricing. Unit-based pricing, he says, will become important to even the smallest providers as they expand into new service offerings.

Khali Henderson is editor-in-chief of PHONE+ magazine. Peter Lambert and James R. Dukart contributed to this report.