telestrategies ra equant short 021102
TRANSCRIPT
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Synergies between Revenue Assurance and
Access Management at Equant - Case Study
Morten Sorensen, Global Billing, EquantHanno Allolio, Founder Allolio & Konrad LLC
Telestrategies, Revenue Assurance and Cost ManagementMarch 14th, 2002, New Orleans, LA
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Agenda
Introducing Equant
Case Study
Revenue Assurance
Access Management
Results
Lessons Learned
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Introducing EquantFacts and Figures
Equant Corporate Overview Equant is a member of the France Telecom Group, and is forecasted to have pro forma
revenues of more than $3 billion in 2001
Equant is a recognized industry leader in Global IP and Data services
Equant has unmatched global reach with a seamless data network, connecting key businesscenters in 220 countries and territories, with local support in 145 countries
Equant serves approximately 3,700 large business customers including nearly two-thirds ofthe world's top 100 companies
Equant Products
Equant offers the broadest portfolio of IP-based end-to-end managed network servicesincluding:
Equant VPN (MPLS-based IP service), which is used by more than 100 businesses and isfully operational in more than 125 countries
Equant Frame Relay, with service in 125 countries
Equant ATM, which has the industry's widest coverage with service in 55 countries
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Gartner Disclaimer
The Magic Quadrant is copyrighted by Gartner Group, Inc. and is reused with
permission. Gartners permission to print its Magic Quadrant should not be deemed
to be an endorsement of any company or product depicted in the quadrant. The
Magic Quadrant is Gartners opinion and is an analytical representation of a
marketplace at and for a specific time period. It measures vendors against Gartner-
defined criteria for a marketplace. The positioning of vendors within a MagicQuadrant is based on the complex interplay of many factors. Well-informed vendor
selection decisions should rely on more than a Magic Quadrant. Gartner Research is
intended to be one of many information sources and the reader should not rely solely
on the Magic Quadrant for decision-making. Gartner expressly disclaims all
warranties, express or implied of fitness of this research for a particular purpose.]
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Introducing EquantRevenue Assurance Challenges
Equants business positioning demands:
Paying and issuing invoices in multiple currencies. In many cases, the currency in which costis incurred does not equal the rating currency does not equal the invoicing currency.
Paying and issuing invoices and disputes in multiple languages and time zones
Complying with multiple national rules and regulations (taxation etc.)
Balancing the need for product and tariff standardization with the wishes of its MNC customer
base All major projects have an element of customization
Most major projects require the purchase of third party services (predominantly access)throughout the world
Many projects will require Equant to offer services that are not part of its core productportfolio
Many contracts have special clauses calling for volume discounts, penalties if SLAs arenot met, etc.
Equants market position imposes a great deal of complexity on thecompanys sales-to-cash process and requires diligent attention toaccess management and revenue assurance.
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Introducing EquantKey Revenue Leakage Risks in the Sales to Cash Process
- Invoice delay,- manual A/R entry
- poor reconciliation
Ordering Provisioning Billing InvoicingContract Collections
Aggregate Revenue Exposure
Customer
- No contract- Non Std
discounts
- Missing prices- No credit check
- Missing,incomplete or
inaccurateorders
- non standardservices not
supported
- Servicesprovisioned
differ fromorders,
- missing orders
- Inaccuratebilling profile,
- non standardpricing and
credits
- Missing orinvalid prices,
- manualadjustments
- No activecollections
- agingreceivables
SwitchAccountsReceivable
Mediation
- Loss of usagedata
- Traffic anomaly
- Serviceprovisioned without
formal orders- Service not
disconnected- Local loops not
disconnected
Cost avoidance:
Generally, other typical Telco areas of Revenue Leakage include: Fraud, Bad Debt
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Introducing EquantScope of Revenue Assurance Function
Revenue Assurance is incomplete without a well balanced focus in allthree areas
Equants corporate Revenue Assurance Organization is comprised ofthree functional areas:
1. Operational R/A Management: Drive a reduction in traffic anomalyvolumes through Port and Traffic analyses to identify mishandled
orders, unbilled services and order to bill inaccuracies.
2. Tactical Revenue Recovery Projects: Manage the successfulimplementation of identified revenue recovery opportunities.
3. R/A Solutions: Support product, billing infrastructure and businessprocess development programs to ensure the implementation of bestin class Revenue Assurance practices.
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Case Study
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Background
A study commissioned by Equant suggested that Equant wassuffering from revenue leakage in a particular Business area.
Both the access management and the revenue assurance function atEquant are continuously facing resource constraints.
The recent merger of Equant and Global One created a uniqueopportunity of improving revenue recovery and access cost control
Equant selected one of its business units to undertake a joint revenueassurance and access management effort.
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Framework
Re-ActiveRevenue Assurance
and Access CostManagement
Packaging For PortabilityEnsure Approach Can Be Replicated
Pro-ActiveRevenue Assurance
and Access CostManagement
SystemUpdates
The project presented has been a large tactical effort that focused onstopping the bleeding by re-actively recovering revenue leakageand access cost.
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Revenue AssuranceTypical Telco Sources of Revenue Leakage
Revenue
LeakageFraud Bad Debt
Unbilled
Revenue
Service
DiscrepancyPricing
Anomaly
The Revenue Leakage part of the project focused on recoveringunbilled and under-billed revenue for flat-fee data products
Pro-Active
Re-Active
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Re-Active Revenue AssuranceEquants Approach
CollectionLeakage
Validation
Leakage
Identification
Customer validation
Leakage validation
Leakagequantification
Approval
Invoice
preparation Invoice
distribution
Paymentmonitoring
Negotiation
Payment booking
Write-offs
Data source inventory
Data extraction
Data comparison
Leakage categorization
Service validation
Establish Knowledgebase requirements
Develop Knowledgebase
Populate Knowledgebase
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Re-Active Revenue AssuranceLeakage Identification
Services in Scope
All services that were installed in one business unit were consideredwithin the scope of the revenue assurance exercise, even if owned byother business units
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Re-Active Revenue AssuranceLeakage Identification
Proof of Invoicing
Services in Scope
The services actually provided were then compared against the servicesthat were invoiced
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Re-Active Revenue AssuranceLeakage Identification
Proof of Invoicing
Finally, the order management database was interrogated to provide proofof ownership for installed services that did not appear on the invoice.
Services in Scope
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Re-Active Revenue AssuranceLeakage Identification
Proof of InvoicingPossibly unbilled services
Services in Scope
All services that could not be found on a customer invoice but were foundon the network and that were either owned or supported by theinvestigated business unit were credible targets for leakage.
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Re-Active Revenue AssuranceLeakage Identification
Proof of Invoicing
Services in ScopePossibly Unbilled Services
Possibly Pricing Anomaly
or Service Discrepancy
Services that can be found in all data sources still need to beinvestigated for pricing anomalies and service discrepancies.
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Collection
Validation
Re-Active Revenue AssuranceLeakage Validation - Tool Support
The KB will be populated withall discrepancies identified
in the identificationphase
Customer validation
Discrepancy validation
Leakage quantification
Approval
Invoice preparation
Invoice distribution
Payment monitoring
Negotiation Payment booking
Un-collectable
2
3
1
Controlling the validation and eventual collection for thousands ofindividual leakage targets required the introduction of a workflow tool.
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Unbilled Revenue
Service Discrepancy
Pricing Anomaly
Quantify
Leakage
Confirm
Leakage
is Billable
Confirm
Service
Perform System Updates,
Disconnect Services on Network
Identified
Leakage
Targets
Re-Active Revenue realizationLeakage Validation
Confirm
Customer
Depending on the presumed category of leakage, the validation stepsvaried. Ultimately, both disconnects and system updates are required.
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Re - Active Access Management
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Re-Active Access Management - Synergies BetweenAccess Cost Reduction and Revenue Assurance Projects
In some instances it may be sensible to pool access management andrevenue assurance resources and to execute a project jointly.
Typically, the central objective of a re-active access management projectwill be the identification of superfluous circuits.
The central challenge during a re-active access management project isthe identification of the customer to which a circuit should be charged.Obviously, prior to disconnecting a circuit it will be necessary to confirmthat the circuit is not needed and not invoiced to an external (or internal)customer.
Determining to which customer a circuit belongs, and the status of thatcustomer requires very much the same information as is needed during arevenue assurance project.
It follows that to a large extent the same data sources are being used,and that for both types of projects the accuracy of these data sources isparamount.
Ultimately, both type of projects will require a decision on whether todisconnect or invoice services - and therefore circuits - that previouslywere not billed to a customer.
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Re-Active Access ManagementAccess Management versus Revenue Assurance
Priority 1 obsolete/unjustified access
Priority 2 obsolete/unjustified access
Possible Feature/Price Issues
Agreed
Inventory
Incremental
Revenue
Disconnect
Orders
Access Management Revenue Assurance
Proof of Invoicing
Possibly Unbilled Services
Possibly Pricing Anomalyor Service Discrepancy
Network
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Re-Active Access ManagementAccess Cost Reduction Levers
Were all local loops invoiced by a provider ordered by Equant?
Are all local loops purchased required by internal or external
Equant customers?
Is the provider invoicing the correct access specifications (speed
etc.)?
Is the provider invoicing at the correct price?
Cost
Reduction
Opportunities
ObsoleteAccess
AccessFeatures
AccessPrice
Alternative
Access
Providers
Alternative
Access
Technology
Access Cost Management is the Mirror Image to Revenue Assurance
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Re-Active Access ManagementWork Steps
It is relatively simple to identify mismatches between the PTT invoicesand internal data sources. Interpreting the observed discrepancies,however, is more cumbersome and will entail 80% of the workload
Cost Saving Category Target Identification Validation Impact
Obsolete Access
Access Features
Access Price
Easy Hard Large
Easy Medium Small
Hard Medium Small
Timing Differences Easy Easy Medium
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Re-Active Access ManagementTarget Identification Framework
Priority 1 obsolete/unjustified
access
Priority 2 obsolete/unjustified
access
Network
Possible Feature/Price Issues
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Re-Active Access ManagementCategorization of Cost Reduction Targets
Category: Action:
Network only Park
Order Tracking Park
only
Order Tracking Park+ Network Only
Order Tracking Validate
+ PTT Invoice
Network Validate
+ PTT Invoice
PTT Invoice Check for
+ Order Tracking Anomalies,
+ Network Discrepancies
OrderTracking
Network
PTTInvoice(s)
PTT Invoice Only Validate
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Results of Re-Active Access Managementand Revenue Assurance Project
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Project ResultsDefinition: Categories of Benefit
Monthly Incremental Revenue: Incremental monthly revenuecorresponding to services that were previously not invoiced.
Back billing: Previously unbilled revenue corresponding to past usageperiods that can be recovered and collected (typically six months).
Dispute Recovery: Recovery of invoiced but disputed charges thathave already been written of.
Monthly Access Cost Reduction: Monthly cost savings through circuitdisconnects, elimination of unjustified PTT invoice items, correctionof excessive circuit charges.
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Project ResultsNot everything that looks like gold...
Incremental Revenue A service was being provided to an internal customer.
A service was being provided in a bundled tariff arrangement.
A service was being invoiced by another business unit.
A customer terminated his business relationship with Equant.
The customer never ordered the service (no order documentation can be found)
Not collectible (customer insolvent).
Cost Saving
Loops listed as terminated in order management were actually still active and requiredbecause the customer had revoked the cancellation.
Loops listed as terminated in order management were still invoiced by the PTT because
Equant had signed a contract with a minimum duration longer than what was agreed with thecustomer.
Speed discrepancies were necessary because the PTT did not sell the speed offered to thecustomer.
During the validation phase, we found out that 80% of our costreduction and revenue leakage targets did not yield any benefit.
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Results
nevertheless, the tangible benefits have been substantial
Backbilling: 22 million dollar back-billed and 9.8 million dollarcollected
Monthly Incremental Revenue: 1.3 million dollar incremental revenuebilled per month resulting in 8.6 million incremental revenue collected
in 2001.
Dispute Recovery: 2.6 million of written-off charges collected
Monthly Access Cost Reduction: 31000 dollar and counting.
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Lessons Learned
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Lessons Learned General
Determining the correct scope is a major challenge for any revenueassurance and or access management effort, as it must becomprehensive yet manageable.
KPIs: Both revenue assurance and access cost management effortsmust be based on a commonly accepted definition how cost savingsand incremental revenue are reported.
Initial findings during the early stages of a revenue assurance and/oraccess cost project will significantly overstate the size of the problem.In many instances, there will be sound explanation for observedmismatches in source data.
When comparing data sources, it will always be challenging to
compare apples-to-apples as it will rarely be possible to obtainsnapshots of the data sources taken at the exact same moment intime.
Prior to embarking on a revenue assurance or a cost reductionproject, it is imperative to ensure that the inventory accuracy achievedat the end of the project can be maintained.
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Lessons Learned General
Risk Indicators
Business Processes with extensive manual activities
Geographical Business Units which operate in an atypical environment(regulatory, suppliers, market, historical development, acquisitions)
Non-standard customer services, Products and Services sold andimplemented prior to full productization
Use of incompatible systems or processes, hand-offs with automationgaps
Functional areas that suffer from high turnover of staff
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Lessons LearnedReactive Revenue Assurance
80% of the effort in any revenue assurance effort comes after theidentification of revenue leakage targets.
It is easy to underestimate the time required to collect recoveredrevenue. Frequently, negotiations with the customer will be requiredas contractual positions may be inconclusive. Plan for an effort thatlasts at least six months.
Normally, revenue leakage is not evenly distributed but occurs inpockets. These pockets are frequently characterized by high DSO,as underbilling tends to coincide with overbilling and disputes.
There are time constraints on how long a customer can be backbilled.Delaying a revenue assurance project therefore almost certainly
implies permanently lost revenue.
The pay back ratio in recovery initiatives can be very high (could be >10:1)
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Lessons LearnedProactive Revenue Assurance
Establish a Corporate Policy for Revenue Assurance - Insist that bestin class R/A practices are adopted throughout the Sales to Cashprocess in all Business Process and Systems developments andredesigns
Review and analyze Sales to Cash systems and processes on aregular basis to future proof them against revenue leakage
Conduct both monthly standard reviews of the network, order and billstatistics as well as selected tactical reviews of nominated products,services or business units
Use internal resources as much as possible thus retaining theinstitutional knowledge required to maintain the compliance pressureon all internal systems and processes
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Lessons LearnedAccess Cost Management
The key challenge during access cost management is to find at leastone reliable data source. One cannot disconnect a local loop until it iscertain that this loop is no longer needed. It follows that an accesscost effort is a natural follower to a revenue assurance project thatestablished a correct inventory of services sold.
The quickest win around access cost reduction has been an
improved synchronization of loop disconnects with customercancellations etc.
It is necessary to clearly define how changes in local loop cost overtime and volume discounts are processed throughout the accessmanagement process. Inability to reconcile PTT charges with amountsinvoiced to a customer may impair the ability to collect penalty
charges in the event of early service termination.
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Questions