Revenue assurance is an upstart. For about a decade, this tyrannical tyro has busted its way into every telco, challenging both managers and systems to eliminate the errors that cause revenues to leak. It has spread globally, like a virus. Along the way, it has extorted increasing headcount and budgets from reluctant execs. However, most products and services follow a pattern of growth and decline. Circumstances change, requirements alter, rivals may conquer. Seasonal advertising will remind us that Coca-Cola is popular around the globe, 123 years after it was first made. But for each evergreen success like Coke, there are many VHS video tapes, instamatic cameras, Rubik’s cubes, insurance brokers and ashtrays. Many innovations are forgotten, like Terry’s chocolate apple, predecessor of the successful chocolate orange. Others are only remembered because their best features were copied, like the interface from the Xerox Star. Might revenue assurance be headed the same way?
Before we dive into the data, it is worth commenting on a crucial driver of RA’s rapid growth. Software start-ups spent heavily on marketing the idea of revenue assurance at least as much as marketing the functionality of their products. In some cases, this was out of necessity; anyone suckered into buying vapourware will understand why. Whether the product was good or bad, whether it used software to reconcile large volumes of CDRs or hardware to make test calls, a wide range of players contributed to the collective education of the telecoms industry. These start-ups were backed by investors willing to suffer losses in the hope of turning big profits as the market matured. Their losses were effectively a subsidy to telcos. Whilst helping telcos to significantly improve their bottom line, they often priced projects below cost.
Now those vendors face a problem. They promised their investors a return through future growth and future profitability. However, the last few years has seen a decline in their collective revenues. Some of those firms are still in start-up mode, have struggled to turn cash positive, have not been listed on a stock market and seem unlikely to be subject of a profitable trade sale. Though the facts cannot be made public, it is well known that some businesses with capital have been approached about buying software developers whose capital has run low. In recent years, the response has not been positive. Well-capitalized firms like TEOCO and WeDo have opted to expand in other directions, buying their way into fields like RAN optimization and network cost savings respectively.
The signs of decline are obvious enough, if people care to look for them. Connectiva Systems provided the most spectacular demonstration so far. Despite some major contract wins with telco groups like MTC, the Indian vendor burned through a substantial venture capital investment then collapsed in 2012, leaving employees unpaid and customers furious about broken promises. Other firms have been quieter and cleverer about reducing their costs, but astute customers will still be aware of cutbacks by suppliers.
Connectiva’s customer base has been gobbled up by jubilant rivals, who were also relieved to have one fewer supplier driving down prices on competitive tenders. However, even this short-term boost cannot disguise how the RA market has contracted overall. In 2013, we learned from public accounts that Subex, the former market leader, had seen their annual sales slump to USD61mn. This was less than half of their 2008 total. There was also persuasive evidence that VC-backed cVidya, number three supplier in the market, has seen its revenues decline by 20%, to roughly USD40mn. WeDo, the Portuguese vendor, bucked the trend, with revenues growing impressively, to reach USD70mn. As a consequence, WeDo overtook Subex to become market share leader. But WeDo exercises a useful advantage over their peers. Leveraging their parent conglomerate, the Sonae Group, helps them to win work in the face of market headwinds, without needing to sacrifice margins. They have been particularly successful at making new sales of their assurance software to customers from outside of the telecoms sector. And WeDo’s gain is not sufficient to account for the losses suffered elsewhere.
The troubled performance of the biggest vendors is also underlined by a dearth of press releases announcing new contracts. A few years ago, a firm like Subex might have announced several multi-million dollar contracts within a single month. These days, the year-old implementation of an RA system in Afghanistan might merit publicity. Vendors will defend themselves by observing telcos are not keen to publicize the purchase of fraud management systems, or any of the outsourcing deals they increasingly enter into. Even so, there is no changing the basic maths which says that once a telco has purchased its first RA system, it is unlikely to want to spend larger amounts on subsequent upgrades of functionality.
On one level, none of this need affect telco employees. To put it crudely, you do not fire the bus driver because you cannot afford to change the bus. The tools remain the same, and RA practitioners still have work to do. But I think it is naïve to assume the downturn for vendors will have no adverse impact for telco staff. To begin with, vendors are making much less effort to sell the concept of RA, which means staff need to do more to justify their own pay packets. More importantly, the vendors have subtly shifted from being natural allies of telco employees to becoming a different kind of competitor. The vendors always were competing with telco staff, whenever a telco used home-brew tools instead of an off the shelf product. Now vendors are increasingly pushing functionality which is meant to increase automation, reducing the staff workload. Rajeev Davé of Verizon gave a brilliant presentation at Subex’s recent user conference, explaining how Verizon had streamlined and automated their revenue assurance. In the final reckoning, Rajeev’s project delivered a 45% reduction in the RA team’s manual workload. And whilst vendors are developing enhanced automation as one way to bolster software sales, they are also increasingly keen to expand their revenue base beyond software licensing, to encompass long-term outsourcing contracts. In many ways, the downturn in vendor sales will accelerate the push of lower-cost alternatives to telco employees.
How should RA practitioners react? Some managers will go with this natural flow, maintaining a strong focus on shareholder value like Rajeev does for Verizon. In such cases, a cut in the revenue assurance budget is considered not only likely, but desirable. They will concentrate on finding ways to do more with less. Other employees and managers have a natural reluctance to follow this path. The employee will fear losing their job, whilst the manager will defend his department’s headcount because it is a measure of his status. However, I think this goes against the grain of good revenue assurance. It may be hard to measure the value added by revenue assurance, but its raison d’être has always been to add value. An RA team does not maintain networks, or speak to customers, or negotiate supplies of handsets. If it is not adding value, it is not doing anything of value.
Some practitioners may think the ‘trick’ of revenue assurance lies in the difficulty of measuring the value it adds. As real sources of value begin to dry up, they may dive into obfuscation, making more extravagant claims about the benefits they deliver, and using the word ‘risk’ as a bogeyman to frighten execs into paying for surplus controls. I think this approach is unlikely to work. Execs were won over to revenue assurance despite the difficulties in calculating the benefits, precisely because good practitioners were able to show compelling data. Execs became less sceptical about revenue assurance, but they are still sceptics at heart. They will not spend money on mystical hoodoo about badly measured (and probably exaggerated) risks. On the contrary, if execs ask RA people to manage risks, these are likely to be narrowly defined and well understood risks, where it is clear how benefits will flow from improved assurance. Otherwise, the RA practitioner should think twice about making extravagant promises to step up, and reduce risk. Some execs may be looking for a cheap in-house insurance policy, lining up a scapegoat to take the fall when things go wrong.
It has become axiomatic that good RA practitioners intend to put themselves out of a job. That represents a pioneering spirit. They venture into new territory, tame its wild excesses, then move on. This is a good mentality for any staff currently working in revenue assurance, who are worried about budget cuts. Once again, telco employees can find common ground with vendors. Looking to diversify their revenues and find new sources of growth, some vendors have returned to the challenge of educating the market about unfamiliar products and services. This also encourages new opportunities for staff who have the imagination, optimism and versatility to promote and deliver new ways of adding value.
Whilst I have often been critical of the influence of vendors over the practice of revenue assurance, I see the re-engagement of vendors in developing and communicating new forms of assurance as broadly beneficial to telco employees. For years, I have engaged with programs that sought to develop best practice in revenue assurance, partly to balance the sway of vendors. In those bodies, my mantra was always to talk about what people should do, because we knew the vendors could be relied upon to explain what their products can do. There are still a few bright spots of activity in the constellation of bodies that encourage telco staff to collaborate. For example, Rob Chapman of TMNG has done much to reenergize the UK RAG, the world’s longest-running regular meeting of RA staff. However, the declining output of other bodies suggests a lack of fresh ideas. This only invites and encourages budget cuts from execs who have consumed the low hanging fruit and lose patience when costs remain static but benefits fall.
The agenda for the RA meeting at the TM Forum’s Team Action Week is an example of revenue assurance taking its existence for granted. It suggests a tired entity, stuck in the past and lacking inspiration. They have only two programs of work, which begs the question of why any telco employee would board a long-haul flight to participate. The team’s main activity will be revising the RA maturity model which I presented at the very first TMF RA meeting, called by Hugh Roberts in 2004. The success of a strategy is measured over many years, so whilst this strategic model needs tinkering with, changing a maturity model that applies to the whole business is hardly going to suggest new opportunities for the average RA employee. The first maturity model explicitly projected cuts in departmental headcount as a consequence of maximizing efficiency, so it would be an act of gross intellectual dishonesty if the new model guts that aspect just as leading telcos are realizing the highest level of maturity.
The other item on the TMF RA agenda is a review of their RA survey results, for the umpteenth year in a row. Rumour has it that the deadline for submitting survey responses was extended because of a fall in the number of participating telcos. I can hardly blame telcos for their apathy. Once you have a good impression of how your RA metrics compare to telcos in general, there are diminishing returns in tracking the movements from year to year. This is not least because many telcos misreport their metrics, and the kinds of metrics produced by a carrier-to-carrier wholesaler bear little relationship to those coming from an MVNO selling SIM-only deals to low-end retail customers. If repeating and revising old work is all the TMF’s RA team can offer, then they will not interest telco staff wanting to show something new and engaging to their bosses. Hence, the groundbreaking work being done by some vendors has arrived just in time. And most interestingly, it shows the vendors are headed in different directions, even whilst they all fly to the TMF’s Team Action Week to talk about what they have in common.
The RA budget can decline, whilst new projects attract funding and staff who used to do revenue assurance. In fact, the decline of RA budgets may be a good thing, just as the decline in revenues for RA vendors can be a good thing, if it motivates evolution and innovation. For example, Subex’s bold push into network asset assurance needs to be complemented by telco staff with the right knowledge and mindset to see how value can be added by assuring capital expenditures and utilization of the network. The TMF’s role in fostering the development of asset assurance also shows how it is a broad church, able to engage with exciting new developments even though it is also home to initiatives that have lost their sense of purpose. Some aspects of the network asset challenge are common to RA, whilst other aspects will be unfamiliar to a practitioner whose experience is built around CDRs and bills. RA people have a chance to be doing such work for their telcos, but it is not guaranteed. They will have to take a lead, if they want to conquer new territories like these.
And WeDo’s executive team want RA people to imagine themselves travelling further still. WeDo is evolving from a business that sells assurance to telcos into a business that sells assurance across a range of sectors, including utlities, retail and banking. At their annual user event, WeDo CEO Rui Paiva openly talked of the need for some of the audience to leap out of their career in telcos and to secure employment in other kinds of business, taking their experience of telco revenue assurance and reapplying it to new challenges. So whilst RA budgets may decline in telcos, that may actually spur the increasing expenditure on assurance in other sectors, as the assurance pathfinders demonstrate the value they can add to a myriad of business models.
Is it time to cut revenue assurance budgets? I think so. Ten years is long enough for the best telcos to reach the highest level of maturity, executing assurance with a level of efficiency that permits good results to be delivered at lower cost. We had some good ideas, but there is nothing new to explore within the core of revenue assurance. Like the chocolate apple and the Xerox Star, the telecoms industry can have good ideas without thinking it reached perfection at the first attempt. Shifting resources away from revenue assurance is a good thing, if we preserve the best of what we developed, and combine it with new techniques to reach bigger markets. Smart companies and smart people move on, like Terry’s did, when making the chocolate orange. Those who stand still are overtaken, and become redundant. Xerox did not profit from the interface they developed for their Star workstation, but Apple and Microsoft certainly did. For both vendors and staff, revenue assurance has secured its niche, discovered its limits, and will deliver diminishing returns. As we reach the end of 2013 and look toward the future, now is a good time to welcome change.
Great column, Eric, but what else should I expect? Points well taken, and the fact of the matter is that some of our largest and most experienced service provider members had already raised the issue of whether the Maturity Model was running out of utility by assuming a low-maturity profile for many adopters, given that many of our members have adopted our best practices. Additionally, part of the objective of the re-look was to attempt to account for the new Digital Services environment. This all may be somewhat abstract for practitioners, but the Maturity Model approach has proven to be very effective as an assessment and planning tool by the industry, so making it useful in the current era seems a worthwhile effort.
Also one note on your point about our survey, the open response period has, in fact, been extended, but not entirely for the reason you stated. The RA team, maybe in an excess of enthusiasm (of course!), set for itself the goal of significantly exceeding the response rate of last year’s survey (one of the most widely-responded in TM Forum’s experience, partly due to issuing it in 6 languages), shooting for 100 respondents and we want to hit our target (also of course!).
Very good article Eric, I personally believe that RA is part of the Business Assurance function, which in my view should be implemented throughout an organization that has to adapt to faster changing environments and therefor its complex integrated processes and systems. RA focuses on one area only. Since Telco revenues will continue to dwindle until new added value for customers is found, cost reduction is and will be the C level tactic to continue the value for shareholders. And in cost reduction Business Assurance has a great future, in Telco’s and a lot of other businesses. BA specialists should be entrepreneurs and analysts that focus on optimization (or at least visualization) of processes and systems, in my personal view.
Putting aside the vendors, who will indeed always need to find ways to add real value in order to stay afloat, “real” RA departments could possibly simply shift to other modes of operation. For example, a statement that I believe is crucial to the correct establishment of RA is that it is not a department it is a organization-wide function. If the correct culture, maturity and priorities are set in an organization then I assume that each operational owner can handle their part of the revenue risk with a centralized small RA team to support and collect this information. I obviously do not have the experience or insight from multiple organizations, so this is all guesswork. However, I would tend to agree that setting RA in a more general scope of process improvement/quality control would be a more solid foundation to build on.