Bucking the outsourcing trend: Focal launches homemade billing system

Sometimes you just have to go your own way. But in an environment where competitors and partners increasingly rely on outsourcing for their business solutions, going your own way can be risky and expensive. However, after trying outsourcing, Focal Communications decided to go it alone on a new billing system.

"We used to be in the same camp - outsource, outsource," said Joe Beatty, executive vice president and chief financial officer for Focal. "Our plan three years ago when we started was to buy major systems and spend a lot of time interfacing them and not be in the business of writing software."

Focal initially deployed an IBM billing system but soon required more from the system. IBM was developing a new system, but it could not meet Focal's growth and customization requests fast enough, Beatty said.

"Focal was worried about being a small fish in a big pond where their needs were not necessarily going to be met," said Jennifer Charters, a manager at Andersen Consulting.

After deploying the IBM system in New York and Chicago, Focal decided to bring the project in-house. "We built a mediation system of our own because [IBM] couldn't handle the rating the way we liked," Beatty said.

Focal rates the calls in its urban markets on a time and distance basis, called local measured service. Its system uses "very complicated algorithms that are different in every territory," Beatty said.

The rating engine in the new billing system enabled Focal to offer a new service called FocaLINK, which permits discounted billing for local calls that stay on Focal's network. The service also provides for discounted local service and local toll rates for calls made between a customer's separate locations.

Another byproduct of the new billing system is FocaLINK LD, which lets Focal offer discounted long-distance rates for calls between major Focal markets.

"That's a good example of when you build it yourself, you can build in things that are unique to you," Beatty said.

The billing system took about nine months to complete and cost between $3 million and $5 million. The cost was about the same as purchasing from an outside vendor, Beatty said. "It wasn't cheap. We had about 20 folks devoted to the effort in-house for about nine months or so. We had about as many outside consultants on site for the same period of time. So we definitely didn't do it for cost reasons," he said.

The effort paid off for Focal, though. "It was probably a bit more expensive to develop; however, it provided everything they needed. There is a cost/benefit trade-off," Charters said.

Other key benefits are the proprietary system's taxation software and its ability to do consolidated billing. Focal can consolidate the bills for customers with different service locations and provide detailed summaries of use.

Proprietorship also has other advantages - mostly competitive. When a vendor creates something unique, it can sell the product to a provider - and all its competitors. "We started looking at this as a real competitive advantage," Beatty said. "We didn't want to hand that competitive advantage over to others after teaching some billing engine company the intricacies of local measured service rating schemes."

Focal built the billing system on the same platform used for its provisioning system and integrated it with the provisioning database, which is a Sybase system.

The integration accounts for an estimated 25% to 30% improvement in processing orders, Beatty said. "When you do it yourself, you can stitch it very nicely into other systems."