CHARGING MODELS - Old wisdom, new business
As the telecoms industry embraces transformation - and all that implies - Alex Leslie
argues that billing, or the now more fashionable "revenue management", remains strategic in a deeply unpredictable marketplace
There are a few sayings that I remember from about ten years ago. A couple came from the revenue assurance managers - ‘Billing reveals the sins of the entire company'; ‘My billing processes were perfect - the day before we launched' and perhaps less amusing but very true was this: ‘Billing is where you implement the rules of the business'.
There are a couple of problems with this saying. The first is that billing is no longer billing, in the traditional sense, and second, knowing what your business rules are going to be in two, three or five years time is impossible in the current circumstances.
But the saying is still true, in spirit, even though billing has basically been redefined. Various people have spent much of the past 15 years redefining it - mainly in bars late at night, after a full day of conference sessions. We have now come to the conclusion that it should be called revenue management, whether that revenue comes from a prepaid, postpaid, sponsored or some hybrid transaction. The revenue management process is about assigning a value to a service or product, and managing that value so that it becomes revenue (and then profit, and then shareholder value). Ultimately revenue management is about the customer experience - presenting products and services to the customer in such a way that the customer continues to use your services, satisfied that he is getting value from the service and being charged correctly. The bill itself must become a value statement, not simply a demand for payment.
The reason that we do not know what the business rules are going to be in a few years time is that markets are changing, the pace of competition keeps increasing and the array of competitors and players keeps multiplying. Just a couple of years ago convergence was about services and payment methods converging onto one platform, putting the customer at the centre of our universe. It meant consolidating the many systems that supported single product lines onto one or two systems that enabled this move to a customer centric view to happen. But convergence now means that entire markets, entire eco systems, are changing around us. Google, Apple and Microsoft now represent the innovators of the communications industry, the new Service Providers - not the more familiar telecoms names. The very definition of service provider or communications provider is changing too.
Competition is coming from all directions, and the telecoms world is not as powerful as it was ten years ago, when it was twice the size of the media industry. If it is not careful and quick it will be marginalised. Some of these new players are quite prepared, even keen, to go round or ‘over the top' of the network operator, in order to offer customers what they want.
A symptom of this is that real time charging is now one of the topics of the year, a feature of almost every industry event. Not, I suspect, because the communications industry has decided it is about time to do something about the buzzword that has been around for ten years but because real time is the way that ISPs and content providers think and operate. Post paid is too slow, too traditional for the new world, and real time is now the answer. We must not be left behind and even though ‘real time' is only appropriate in some instances, not all situations, the capability must be in place.
So, if billing is now about managing value whilst enhancing the customer experience, and the strategy that defines the business rules changes so fast that you are not entirely sure whether your business should look like a supermarket or a gas company - what do you do?
Both business models are possible and valid. There has been much discussion about the communications company as a supermarket. You should be offering, or offering access to, a comprehensive range of products, some your own brand, some branded by others. You should have inventory systems that are second to none, partner/supplier relationship management systems to be proud of. You must have logistics capabilities to beat them all and a point of sale system that is seamless, easy and flexible. And of course it must be able to provide information and reports that support the management decisions that define the strategy. The comparisons are obvious between a value added communications provider and a physical supermarket, and the emerging ‘services' markets and frameworks are being set up to offer a huge range of services, simply and quickly.
Alongside this the loyalty schemes are emerging in the communications world, schemes that the big supermarkets are so good at - business intelligence is competitive advantage nowadays.
I often wondered why my supermarket offers me occasional vouchers for things that I have not bought from them. It took me a while to realise that the things that I did buy were being profiled against a particular type of customer (and not just ‘male', over 40), and that what they were trying to do was to get me to buy the things from them that I would normally go to another store to buy - garden tools (male, over 40), tee shirts with improbable slogans on them (male, over 40, probably has a teenage child), or motor bike accessories (male, over 40, planning a mid life crisis any day now). Their profiling is actually so sophisticated that I am probably a hundred times more predictable to a supermarket than I am to myself.
Or there is the gas company model - the slimmed down, lean machine that delivers bandwidth and access, without frills. Simple, clear tariffs and options, which is what the customer wants. Some companies will thrive on this business model.
Either way, or whichever way - there are many models and many choices to be made - the world of telecoms is going through a huge transformation, slimming down and getting as fit as it can as fast as it can, to be ready for whatever life throws at it - from whichever direction.
There was a survey done at a recent conference. A question was put to the audience about how many of their companies were planning, implementing or had implemented a business transformation project. Over 80 per cent of the audience of telecoms companies answered ‘yes' to one of those three options.
Which takes us back to the question of readiness. How do we get ready? What do we transform into? And if we do not know, how do we prepare? If a company is driven by strategy, that strategy must be supported by the processes and systems of the company. And even if that strategy is to be ready, flexible and able to react to market change and market opportunity, then the processes and architectures must be able to support that strategy and implement those as yet undefined business rules.
And the next question is this - do your processes and systems currently support the strategy of the company? It is quite likely that having upgraded or replaced legacy systems eight years ago and bought the software that solved the problem of the day - the race for market share, fast tariff change capabilities - now this is not what is needed in the new, customer centric as yet to be defined world. You and your management are nervous about doing it all again. The memories of sleepless nights may still be with you. I am sure that the inclination is wait and see, to play it safe.
And while time ticks away, you are probably working around the edges of the problem - automating pieces of processes (an absolute necessity), opening up new channels and payment methods, but the big problem is still there.
Ideally you are going to need something so flexible that whether your management says ‘gas company model' or ‘supermarket' or even ‘gas company that sells shampoo' you are there, proving my point of the last six years - that billing is strategic. You must be ready for the meetings with Marketing and Management, and able to offer suggestions for innovative products and bundles that could be presented to customers, now.
The other, bigger problem is that this is all very well for someone who writes articles, and does not get his hands dirty, to say you need to change, but it is hugely risky and the likelihood is that your management is risk averse.
The innovative software that is needed to be ready for the ‘next big thing' is generally produced by small, innovative companies, and we both know how popular that is going to be when you are putting the business case to management. But I also know that the worst scenario is the realisation that your processes would not be able to support the new product or service that your competitors just launched. There are ways round this of course, there are large systems integrators who are well aware that communications companies need to innovate, but also need to feel safe when doing so. They are addressing this problem. Your existing partners are also well aware of the challenges and implications, and are able to help.
But the bottom line is that innovation is essential, and soon. In this world, it only takes one of your competitors to be first and fast and successful and the game will change, and you will be struggling to catch up.
The saying may still be true - that billing, or revenue management is where you implement your business rules, but we do not have the luxury of knowing the whole strategy before we have to implement systems or processes that support the unknown rules of tomorrow.
We should prepare.
Alex Leslie is a Communications Industry Consultant, and can be contacted via alex.leslie@btinternet.com
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