Posted: 8/2003

Take a Load Off!
A Review of Outsourced Billing Options

By Edward J. Finegold

Outsourced
billing, once the domain of massive service bureaus, today offers more and
increasingly flexible options. While there still is need for the high-volume,
low-customization offering, others aim to address speed to market, cost
management and partnership with service providers. Billing is a natural for
outsourcing. It has become more active, more critical to product introduction,
and has had more real-time demands placed on it, and outsourcing vendors have
had to adjust. The key to success in choosing an outsourced billing service is
understanding the vendor’s approach, the purpose of its product’s core
architecture, and whether its expertise adds real value to the business at hand.

There are many reasons service
providers choose to outsource billing or any complex IT system. Their goals
include reducing operational costs and maintaining focus on their core business
by sending critical, but overly complex, systems management out to trusted
experts. "I have a certain amount of capital and would rather spend it on
customer-generating revenue than infrastructure. I’d like to pay as I go,"
says Mike Kallet, CTO of ICG Communications Inc.

With capital markets extremely tight
and most carriers mandating budget reductions, there is a need to shift the
expense of IT systems from a fixed cost to a variable cost. This shift helps
carriers protect their cash position and reduce the risk of tackling and
supporting any IT project in-house.

Once the decision is made to
outsource, the goal becomes finding the best and most suitable option among many
now available. Here are some variations on the theme:

Classic. The classic role of
the billing service bureau is relatively straightforward. Classic service
bureaus take loads of raw data, rate it and manage the invoice creation and
delivery process. This model still works well today for high-volume services,
like voice calling, where pricing is straightforward and relatively standard
across a subscriber base. "For business-critical functions, you want a Mack
truck," says Dwayne Ruffin, executive director of product
management-broadband, for CSG Systems Inc. A Mack truck, in billing terms, is a
mainframe system that can crunch huge volumes of data with better than 99
percent accuracy. Though some see this as older technology, it is in fact mature
technology that does its job well and makes sure traditional revenue streams,
like voice, are billed consistently. Many of the established service bureaus
have opened up their mainframe systems, however, to offer better data access.
"A mainframe is effectively a huge server," explains Ruffin, "so
as long as you can get in and out of the server [through open APIs] with
third-party applications, you’re all right."

Web-enabling. As a service
provider’s need for customized billing, bundling and pricing grows, and customer
care’s access to critical billing and product data becomes constant, the
outsourcing model doesn’t change as much as the technology underlying it. At the
opposite end of the computing spectrum from the mainframe lies the n-tier, Web
application. Such an application can be a very reliable foundation for billing.
Its strengths will be realized, however, when it comes time to roll out new
products, change prices and support multiple roles for sales, customer care, and
product management in a multichannel business.

If the billing piece is rock solid,
the Web application can offer the best of both worlds for billing. From the
user’s point of view, it doesn’t matter where the application is physically
located. Having the application on a server somewhere in a secure, hardened
facility can be an advantage in terms of diversity and disaster recovery, and is
something carriers can’t always offer to themselves. For the user, however, it’s
having access to information and functionality that matters. This is where Web
architecture proves its worth.

A system designed for a Web or
network environment, like those that use Microsoft’s .NET, can offer ubiquitous
access and provide the plumbing for secure, network access and transactions. A
Web-oriented, n-tier system also can present different user interfaces tailored
to different roles. More nimble systems leverage object technologies and tools
to permit simpler customization in process, product and pricing. An application
shows its true flexibility when it can tolerate continuous changes without
changing code.

Partnering. If the vendor
only sees itself as a technology provider, however, the application’s strength
is minimized. The vendor should be part of the customer’s team, and offer
"a dynamic service that’s involved in your business," says Don Culeton,
president, Info Directions Inc. "Technology is an enabler," says
Culeton, "but it’s more about having a high-quality, certified IS
organization that stays current and has good practices. It’s about hiring the
best people doing operations and training them on how to use your product and
make it work for your customers’ needs."

From the service provider’s
perspective, there are several common expectations that drive vendor selection.
"The bill has to be right 99.99 percent of the time. If I introduce a new
feature or change my pricing, I need it done fast. They have to be flexible, so
that if I need something that’s off the beaten path, (they can) keep up with
me," says ICG’s Kallet. These all are systems considerations and thus
merely table stakes. If a vendor’s system can’t meet these requirements, it will
be the wrong choice for a carrier that anticipates many changes to its service
offerings. All things being equal, if the system can provide the functionality,
the question shifts back to the quality of the organization. "The key is
that your success is dependent on choosing the right partner," says Kallet.

Bundling. For carriers with
multiple lines of business, billing usually is handled through more than one
system. As carriers enter new markets, they take on new operational
responsibilities that carry time and risk with them. It takes time to develop
expertise and systems in-house — time carriers often can’t afford when they
want to expand into new markets. The risk comes from tackling new and
challenging sets of processes and working out the bumps. This is especially true
in UNE-P markets where element unbundling is extremely challenging because of
the systems and processes involved. In such cases, billing is just one critical
component of the operations needed to launch in a new market.

Z-Tel Technologies Inc., for
example, is making a business out of dealing with UNE-P complexity by offering a
full-service solution to other carriers. Sprint Corp., for example, uses Z-Tel’s
offering to enter local markets. "We can, from the date we sign a contract,
have someone in 47 states, supporting consumer and small business services, up
and running with provisioning and billing in 90 days," says Chuck
McDonough, CTO for Z-Tel. Z-Tel’s offering brings its own expertise in dealing
with the intricacies of local service together with Telution Inc.’s billing,
provisioning and order management capability, and Accenture’s Launch Now
service, which deals with reformatting orders and translating protocols for
interactions among ILECs.

Building In, Managing Out.
Another increasingly common approach for outsourcing is one that lets a service
provider maintain control of application development, but sends application
maintenance out. "It’s not systems outsourcing, it’s operations
outsourcing," says John Konczal, vice president of product marketing and
management for Telution. "One of the main concerns any service provider
tends to have when selecting a vendor is whether its product can support its
need for constant change." Sometimes even the best n-tier applications just
aren’t flexible enough to meet a carrier’s specific need. However, it may make
economic and business sense, in terms of maintaining focus, for the service
provider to outsource. In such cases, service providers often will look for a
vendor partner that can take an application developed in-house and support it
with world-class facilities and experts. "Our competency is running a
network; billing is not my deal. Billing is a necessary thing, and if I do it
really well it’s a competitive advantage. But I’d rather partner with a company
that does billing really well," says ICG’s Kallet.

A good partner is one that will take
a hard look at the service provider’s business, understand its assets and
competencies, and create a complementary offering. Mark Farmer, director of
product marketing for Amdocs Ltd., says the trick to being a flexible outsourcer
is "working out a deal that optimizes the strengths of the carrier
organization with the strengths of the supplier." He cites an example where
Amdocs and Bell Canada created a joint venture to build a billing service that
would support all of the Bell Canada companies. The joint venture meant the
vendor was taking on a significant amount of risk and putting its reputation on
the line to earn an opportunity. Amdocs is now purchasing the outsourcing
venture outright and has earned an extended contract from Bell Canada.

Managing Overflow. Another
outsourcing model along these lines deals with overflow. "Everyone [in your
operations group] is productive and busy, but your peaks become
outsourced," explains Kallet. This type of model allows the carrier to
control operations costs while having the flexibility to grow when necessary, as
opposed to spending money to meet estimated growth predictions and managing
float. This model also depends on finding a partner that has the flexibility and
knowledge to deliver when called upon to do so, even if it’s not a daily part of
the team.

Edward J. Finegold is general
partner, Stylus Telecommunications LLC, which helps communications service
providers find the commercial B/OSS solutions that suit their specific needs and
also provides support for marketing, sales, business development and strategic
planning for solutions vendors and integrators. He can be reached at [email protected]

Making it Work: 4 Tips for
Choosing a Vendor

 Because an outsourcing
relationship is as much about partnership as it is technology, there are many
factors to consider in choosing a vendor partner. Amdocs’ Mark Farmer explains
his four key considerations:

1. The vendor’s system capabilities
   and business practices must be aligned with business goals. Different
   vendors have different strengths and weaknesses. Some questions include:
   What intellectual capital does the vendor offer? What do their offerings
   look like? Is their organization able to align with your business?

2. The vendor must have the
   specific domain knowledge necessary to be an effective extension of the
   carrier’s organization. Some key questions include: What domain expertise is
   the vendor bringing to bear and how deep does it go? Do they have 20 years
   in telecom, or is it new for them? Within their telecom expertise, are they
   experts within the specific business segment – such as local versus long
   distance or data versus mobile?

3. The vendor’s product has to be
   designed for the task at hand. What are the products that will deliver the
   flexibility and the pricing models? Is it the best product available in the
   world to deliver those capabilities? Also, consider the risks involved, like
   whose product is it? Is the vendor the outsourcer, or is the outsourcer
   dealing with someone else’s product?

4. The vendor must offer
   flexibility in its own outsourcing business model. What will the engagement
   look like? To structure a deal that will work it requires great flexibility.
   What scope and what expertise will the service provider utilize? How do you
   work out a deal that optimizes the strengths of the carrier organization
   with those of the supplier?