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> Detecon Executive Briefing

Dr. Andreas Amann Jawahar Sajjad


Andreas.Amann@detecon.com Jawahar.Sajjad@detecon.com

Turning to Revenue
Assurance
Addressing the needs of
the industry with tangible
and sustainable Revenue
Assurance results
In the current economic climate, many telecom operators are resorting
to Revenue Assurance (RA) to drive their revenues and to streamline
their revenue management through more effective processes.
Revenue Assurance aims at ensuring that the maximum share of
revenue reaches the company in question. The traditional approach to
Revenue Assurance is taken with the intention of achieving immediate
results, but does not establish Revenue Assurance as a sustainable
process in the organization.
This Detecon Executive Briefing provides insight into an alternative
RA methodology and the ways in which it improves upon the more
standard RA operational model. In order to take full advantage of the
benefits of this alternative, a multilevel approach towards the setting
up, implementation and control of the company’s Revenue Assurance
operations is needed.

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The need for Revenue Assurance


In order to sustain and increase profit margins, there are two universally popular
approaches: boosting revenues through the provision of new products or aggressive sales,
or reducing costs through technological advancements and improved efficiency. Even before
the current financial crisis, the telecoms industry had been undergoing a massive overhaul
due to the need for new, more attractive and value-added products to prop up falling ARPUs.
To support a more complex yet flexible product structure, operators have been investing in
Next Generation Networks, IP-based products, and Next Generation billing.

The combination of market saturation, declining growth in revenues from voice products, and
unstable financial conditions has left few options open to the industry. The clear focus now is
on improving the efficiency of operations. The biggest investments during this period are
being made to optimize production operations. However, despite such efforts, the cost
reductions being achieved still don’t compensate for the dramatic fall in revenues seen over
the last few years.

This is where Revenue Assurance steps in. A study of around 100 global telecom operators
carried out by Analysys Research UK in 2007 explains the plight of the whole industry. The
total revenues from the global industry in 2007 were estimated at around $1.6 trillion. Out of
these revenues, an estimated $218 billion were not realized. The trend over previous years
is even more alarming; the lost revenue has risen from 11.6% in 2005 to 13.6% in 2007. In
addition, when these losses are broken down into geographic regions they can be seen to be
as high as 20% in some cases, such as in organizations in the Middle East and in Africa. By
deploying efficient Revenue Assurance strategies and methods in their organizations,
telecoms companies can hence ensure that revenue leakages are rectified and prevented,
and thus that their losses are reduced significantly. Revenue Assurance enables them to
collect the maximum share of revenues.

Once they are convinced of the need for Revenue Assurance, operators often move straight
on to the implementation stage. The standard approach to Revenue Assurance is twofold:
first buy best-in-class software to identify leakages, and then hire a team of IT specialists
who dig deep into the billing process or monitor the usage patterns of fraudulent customers.
This is a common, but rather primitive and limited, understanding of Revenue Assurance as
it focuses on the direct and visible consequences of revenue leakages with an emphasis on
looking for immediate results, but does not establish Revenue Assurance as a sustainable
process in the organization. This paper argues for a more mature approach and presents a
set of measures and steps to be taken to pave the road towards the successful realization of
Revenue Assurance within your organization.

Detecon International GmbH z 05/2009 2 www.detecon.com


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The road towards successful Revenue Assurance realization


The following model suggests a complete Revenue Assurance unit. A cornerstone of
successful Revenue Assurance is the involvement of the top executives in promoting the
message all across the organization that revenue streams must be managed effectively if
results are to be maintained or improved. On the other hand, while setting up the
operations it is necessary to consider that it is only possible to deal successfully with all
kinds of different leakages using a standardized and systematic approach.

Thus the need is to address Revenue Assurance at not one but two levels: strategic and
operational. The diagram below shows the core Revenue Assurance operations structured
in phases and the support being provided through an (outer) steering process which requires
management attention and involvement.

The Detecon Revenue Assurance Cycle


A Planning E Recovering

B Detection F Reporting

C Evaluation G Review
Continuous
Aligning
D Fixing Review
Enterprise Goals
& RA

Fix

Setup
Training
&
Establish RA
Developing
Infrastructure

Run
Design
Controls & KPIs

Figure: The Detecon Revenue Assurance Cycle

The strategic side of Revenue Assurance

Strategic aspects are often overlooked when making key decisions; and this is not any
different for Revenue Assurance. The return on investment is often considered as the single
most important performance indicator for Revenue Assurance. But what cannot be
measured using this metric are the durability and non-monetary benefits to be yielded from
an investment. Therefore, it is essential that the steps already mentioned are followed from
the start.

Detecon International GmbH z 05/2009 3 www.detecon.com


Turning to Revenue Assurance
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Q Establish Revenue Assurance as a multidimensional process: The most typical


perception to break away from is that Revenue Assurance is one-dimensional, i.e. only
the financial perspective is influenced by Revenue Assurance. As a cross-functional
topic, Revenue Assurance not only provides benefits to other business units but also
depends on them for support. From the commercial business units to human resources,
quality assurance, or internal auditors – Revenue Assurance is important and relevant to
all. For such a broad-based topic it is important that a coherent strategy is defined to
effectively translate management expectations into a set of operational procedures.
Management models such as the Balanced Scorecard can help in this regard.

Q Consider non-monetary measurement: The qualitative assessment of the non-monetary


investments and benefits requires an approach that is standardized and measurable.
Surveys used to study and benchmark a company RA maturity against available industry
standards maybe of use here.

The operational side of Revenue Assurance

The focus of Revenue Assurance is the optimization of revenue-related operations. But


before digging into the operations, the first step is to find out where to dig – to understand
and predict which business units are likely to have revenue leakages. Only once these areas
have been identified can the next step of fixing the leakages be implemented. Here is a
summary of the critical ways in which operational knowledge of Revenue Assurance can be
acquired and extended:

Q Rely on standards and best practice: Revenue Assurance is still a new subject, yet some
industry standards already exist. When developing operational models for the business
unit it is helpful to base work on the existing foundations of the common industry
standards. The standards commonly include the New Generation Operating Systems
and Software (NGOSS) framework from the TMForum, as well as other standards such
as specialized certifications (e.g. Grapa). Best practices as delivered by ITIL also provide
useful and efficient measures with which to avoid common pitfalls.

Detecon International GmbH z 05/2009 4 www.detecon.com


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Q Foster experience and leakage profiling: Perhaps the most important prerequisite for the
continuous improvement of Revenue Assurance operations is experience. This can be
acquired by employing specialists in the subject. Such people, with expertise in handling
different kinds of leakages in different business setups, can lead the way in fixing
leakages and recovering revenues. Over time similar experts will also be identified and
develop within the company. Of course, the option of hiring external consultants who
specialize in Revenue Assurance services is a popular way of acquiring the necessary
tools and skills in the short term. In any case, with experience it will become easier to
classify new scenarios of revenue leakage and to archive them for future reference.

Q Rely on knowledge sharing: In order to develop a common Revenue Assurance


knowledge database of implemented controls and resolved leakages, active participation
in a regular exchange of knowledge with external parties is necessary. Consultancies
that carry out industry benchmarking are the ideal partners as they can not only compare
the company’s Revenue Assurance performance with that of its peers, but can also
provide updates on the current controls and KPIs used to monitor these operations in the
industry.

Q While there is general consensus about the core operations to be carried out by a
Revenue Assurance business unit, there is still a need to establish support for making
Revenue Assurance an enterprise-wide utility. Industry standards, and expertise and
knowledge sharing in combination with a strong strategic focus provide a good starting
point for moving away from the conventional concept of Revenue Assurance.

Detecon International GmbH z 05/2009 5 www.detecon.com


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Conclusion & Recommendations


Considering the current difficult economic climate, Revenue Assurance is now –more than
ever - the need of the moment. But even greater is the need to understand how Revenue
Assurance can be implemented in a more profitable and sustainable manner.

The essential points to be considered for achieving tangible and sustainable Revenue
Assurance results are as follows:

Q Rely on and adapt industry standards: The existing industry standards such as eTOM,
SID and TAM should form the basis for understanding and ‘managing’ the bigger picture.

Q Build or buy experience: Know-how about both typical and non-typical leakages within
each revenue stream is critical. This know-how should be acquired through employing
experts or hiring external consultants, or developed organically through company
experience.

Q Exchange knowledge: In order to benchmark, analyze and improve operations, one has
to be open to an exchange of knowledge. This would also serve as an underlying
motivation for the continuous improvement of Revenue Assurance.

Q Endorse the Revenue Assurance culture: The understanding that the positive impact
of Revenue Assurance is not limited to the Balance Sheet makes it so important that it
becomes embedded in the company culture itself.

The stereotypical understanding of Revenue Assurance fails to see the potential benefits
that can be realized by adopting this new approach to the topic. In times of recession, the
need for improvements in Revenue Assurance can only be brought about by an
improvement in its understanding.

Detecon International GmbH z 05/2009 6 www.detecon.com

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