Plug Up Revenue Leakage

Dramatic technological, structural and regulatory changes sweeping through the industry are prompting many carriers to weave intricate revenue webs -- interconnected business processes, information flows and alliances with external entities -- as they offer new products and services to capture higher revenues.

As you spin these revenue webs, you face growing risks of revenue leakage and margin reduction, which are estimated at between 5% and 15%. Recently, KPMG documented revenue losses of $6 million in a single year at one wireless company, due to improper reference-table maintenance and control. Another carrier deleted call records because its network did not account for downstream impacts, resulting in an estimated $9 million to $13 million loss in one year. A third carrier leaked $45 million due to a combination of credit and collection problems, inadequate table management and poor unbillable management. Such leakage not only represents wasted opportunities, it also undermines customer confidence and can lead to swift management changes.

As you grow your business, you must build stable structures that can support your enterprise for years. When transforming a revenue stream into a revenue web, it is critical that you know exactly what you need to change.

SPIN THE REVENUE WEB As you introduce new products and services, you weave extensive interconnections between processes, process flows, control points and external entities. These new offerings are increasing call volumes, transactions and revenue flowing through the revenue stream. Furthermore, they are changing fundamental concepts of wireless rating and billing such as: who to charge for the call, what unit to bill by (per page, minute, message, packet or character), when to charge the customer for the call, when to pay services and apply that payment, and what method to use to provision services.

A typical revenue stream just five years ago was relatively simple, consisting of only nine primary processes, 14 control points and three external entity types (customer, clearinghouse and switches). Almost all products and services were billed through the same high-level processes that occurred fairly consecutively, albeit at different time intervals. Today, carriers are introducing products and services such as prepaid, calling party pays, wireless termination access charges, voice mail, paging, landline, long-distance and Internet access. With these additions, some carriers can have 26 processes, 47 control points and eight external entity types in the revenue stream.

The revenue-loss risk associated with this additional complexity has increased significantly. The revenue stream has turned into a revenue web.

As you transform revenue streams into revenue webs, you'll notice several changes. The most obvious change is the increase in the number of control points. Managing risk at 14 control points is much easier than managing risk at 47 control points. Your revenue-loss-risk priorities change and new revenue-loss risks emerge. What's more, the risk of revenue loss increases exponentially.

Creating webs has significant implications for revenue-assurance techniques. First, the algorithms behind the revenue-assurance procedures become more complicated. This happens because the number of places a call record can go once it enters the revenue web increases. All call records used to go to the same process after mediation, usually call processing. But in the revenue web, the call records are split (or copied in some cases) and sent in different directions for further processing, depending on the call's direction.

In addition, by creating a revenue web, you eliminate certain existing revenue-assurance techniques. This is mainly because the technique no longer mitigates the revenue-loss risk in question, or you have reduced the priority of a given revenue-loss risk relative to the other revenue-loss risks present.

As the revenue web expands, you must make changes to the existing revenue assurance procedures. For example, carriers usually develop trend lines to warn them of potential revenue leakage. When trend lines exceed certain thresholds, it alerts you that revenue may be leaking. For traditional processes, you would establish an average of one or two trend lines at each control point to help mitigate revenue-loss risks. In today's more complex environment, however, you must establish enough trend lines to mitigate revenue-loss risks without adding so many that revenue-assurance procedures become unmanageable.

These new revenue-assurance techniques minimize new revenue-loss risks and mitigate existing risks that traditional procedures can't control effectively.

STABILIZE THE REVENUE WEB Making sure that all of the components and interconnections work well and do not leak revenue is a daunting task. You must take aggressive steps to ensure that revenue does not slip through the cracks.

First, you should reassess revenue-loss risks. Then, you should re-examine the revenue-assurance procedures currently used to control these risks and stabilize your revenue web. Many of the procedures established in the days of simpler revenue streams are not adequate for controlling the risks associated with today's more dynamic business environment. In reassessing revenue-loss risks and re-examining revenue-assurance procedures, you face two crucial questions: How do you determine what has changed? How do you decide what to change?

The key to answering these questions lies in understanding the numerous connections in your revenue-web architecture: its business processes, process owners and technology. With this understanding, you need to scrutinize your control points, embedded revenue-loss risks, and revenue-assurance procedures. Unless you understand these complex connections, you can't make informed decisions about which risks you should address and which you can safely ignore. For example, do you need to mitigate the following risks?

* Revenue-stream filters may not reflect your policies for billable calls.

* Processing might lose usage information.

* A switch may misrecord or may not record calls.

* Isolated silos of process knowledge may exist throughout the revenue stream.

* Revenue may be locked up in the edit error/recycle file.

The decision to mitigate risks such as these will differ from carrier to carrier. You should base the decision on maintaining the appropriate balance between the potential revenue that you could lose against the cost of performing revenue-assurance techniques.

As you grow your business, your ability to build a stable, secure revenue web can spell the difference between success and failure. Once you lose control, it can take six months to a year, plus substantial resources, to re-engineer business processes and regain control.

If you do not weave a structurally sound revenue web, potential revenue could escape. Carriers that construct strong revenue webs can feast on the opportunities in today's exciting new business environment.

As carriers add new products and services, they change revenue streams in order to bill and support these products and services. These changes can take several forms:

* Change the existing revenue-stream processes and system modules to incorporate service functionality. This is not the easiest option because many legacy systems are not flexible.

* Migrate to a new billing/customer-care system that is flexible enough to bill for all new products and services within the same processing modules. Many carriers may not consider this an option. It is difficult to change billing systems once you launch basic service.

* Add addition processes and modules to the revenue stream to bill new products. Several carriers already have taken this option.

* Reassess revenue loss risks.

* Re-examine revenue-assurance procedures.

* Understand connections in the web architecture.

* Scrutinize control points.

* Decide which risks to address.