Magnus Lindgren, Vice President Business Development, Sergel/TeliaSonera

Convergent Experiences from Outsourcing –

A viable alternative to in-house billing?

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Sergel – TeliaSonera Sweden A billing service bureau (€39M / €9,5M) Wholly owned subsidiary of TeliaSonera 215 employees, headquartered in Stockholm Target customers are Operators, SP:s,

MVNOS and utilities Currently doing rating and billing services

for Telcos and SP:s like Chess, BT, Vodafone,

Eniro and TeliaSonera Vast experience of migrations from most of the

major systems on the market

””Outsourcing isn’t your ordinary Outsourcing isn’t your ordinary marriage. If anything, it’s like a marriage. If anything, it’s like a

marriage between two parties who marriage between two parties who both have been married before and both have been married before and both have kids from their previous both have kids from their previous

marriages! ”marriages! ”

Free translation of Swedish quotation

Magdalena AugustssonViveca Bergstedt Sten

“Outsourcing av IT-tjänster”

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Modularity – The key for transition to convergence

In replacing the “parallel monoliths” – Don’t replace them with a new monolith

Instead, replace them with a modular environment consisting of best of bread

Often, people think that convergence means doing all billing in one billing system – True, But….

From Multiple Monoliths to Modularity

Mediation

Rating Billing A/R

Mediation

Rating Billing A/R

Mediation

Rating Billing A/R

Fixed

Mobile

Internet

PriceLists

Prod.Catal.

Cust.Data.

PriceLists

Prod.Catal.

Cust.Data.

PriceLists

Prod.Catal.

Cust.Data.

Mediation

Rating Billing A/R

PriceLists

Prod.Catal.

Cust.Data.

FixedMobileInternet

FixedMobileInternet

FixedMobileInternet

FixedMobileInternet

Why is modularity important for convergence?+ Best of breed+ Stand alone systems are built from the ground up to work in any environment+ Easier to achieve convergence+ Easier to integrate+ Easier to upgrade and replace modules What car would you chose?

ALT 1

A car from Skoda

Tires from Skoda

A CD-player from Skoda

Fuel from Skoda

- Several technical platforms may be required- Not many products are real stand- alone products that supports this idea

ALT 2

A car from Ferrari

Tires from Michelin

A CD-player from Pioneer

Fuel from Shell

Business requirements on the billing services

Outsourced (The Service

Bureau)

Modular design Customers entering and leaving the

process where they want to

Convergence Limit the number of systems

Ease of change to rules Multiple customers with different

requirements and new services

Enable short-term and ad-hoc

relationships

New data sources New customers – different formats

New customers – New data types

In-house (The IT-department)

Modular design Ability to change and replace systems

without replacing the whole

infrastructure

Convergence Ability to benefit from offering the

customer different services

Ease of change to rules Ability to launch new products, services,

discounts and price plans

constant stream of change requests for

the BSS systems

New data sources New product lines – New businesses

The billing requirements on the Service Bureau

Outsourcing – Short Summary

You can Put your efforts on the parts of the value chain where you’ve got your

competitive advantages

A good service bureau offer of today does not mean a lot of hidden development costs

Lower investment costs and tied capital

Increased control over costs

Service Level Agreement

Access to expertise

The outsourcing paradox… Are you outsourcing the right functions? Loss of core competence Invisible costs

Does the partner REALLY listen to you Decision may influence your company culture Sometimes it’s as difficult to be a competent buyer as it is to perform

the tasks in-house…

The Pros

The Cons

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Transition through Augmentation

Q What’s the definition of a “legacy” system?

Q How do you leverage all the invested money and thousands of man-months invested in the legacy systems?

A With Adjunct Solution Components.

A A system that is: Installed Working Paid-for Fully Interfaced Users Trained IT Trained

Mediation Rating Billing Accounts Receivable

FACT: We won’t get rid of the legacy systems in the blink of an eye

What is Augmentation with an ‘Adjunct’ Solution? Allows the operator to leverage a significant portion of its existing infrastructure. Adjunct solutions are also known as ‘legacy transformation’ solutions.

Rather than replacing the whole infrastructure, an adjunct solution uses this infrastructure to better support existing processes on the road to convergence

UnbilledUsage

NetworkElements

UsageRecords

Mediation Rating

RatedRecords Bill

Preparationand

Generation

Billing System

CustomerAccounts

TariffsOther

BusinessData

RatedRecords

stand-aloneRater

Example:Augmentation with adjunct rater

Augmentation as a convergence transition strategy

Very Long

Very High

High

High

High

Very High

Long

Medium

Low

Low

Very High

Medium

Short

Low

Low

Low

Low

Low

Option 1Forklift

Replacement

Option 2IncrementalModification

Option 3Augment with Adjunct solut.

Area of Impact

Duration

Cost

User/IT retraining

Disruption to proven business processes

Risk to current revenue stream

Overall Risk

Strategic Buyer Business Benefit

Chief Financial Officer

VP of Marketing / Pricing / Strategy

VP of Operations

VP of Development

Good for Whom? – The Strategic Buyers

Leverage Existing OSS Infrastructure Low impl.cost / Improved Cash Flow Future Reduced Operational Costs

Enabled Rapid New Product Creation Create Products That Can Not Immediately be Replicated by Competitors Reduce Time to Market for New Products Reduce Competitive Response Time Sensible way to renew the environment Future Reduced Operational Costs

Better Support of Internal Customers Time to Market for New Products

Two cases…

2. The upstream model:Implementing convergent billing

through a bypass

1. The downstream model: Implementing convergent billing through a billing distribution

layer

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Case one – The downstream model To keep up with the smaller and faster competitors, TeliaSonera

needed a fast solution for convergent billing New Geneva convergent billing system expected to be

implemented no earlier than within 24 months Sergel introduced the Billing Distribution Layer (BDL)

One invoice to thecustomer

New Print-file

Print-file

Print-file

Print-file

Med. BillingRating

Consolidation of print-streams

Fixed

Internet

Mobile BDL

The downstream model - ChallengesCreating one invoice from three print-files

Different formats (said to be impossible)! Mobile print-files in line-data

Fixed- and Internet print-files in AFP-format

File Converter proved the opposite!

Read and Interpret the formats

Normalize the formats A/R Data will be wrong!

Unable to match customer payments and A/R data

Create A/R file based on the

convergent invoice Suppress the old A/R-files

Self Care and Customer Care will se the

wrong invoice and the wrong data! Send convergent invoice to viewer

Suppress the old invoices

Customer identifier different in different

product lines Hard to know what subscription belongs to the

customer in the mobile-, fixed and Internet world

A common identifier must be

selected In this case, the social security- or

organization number

The technical solution

OrderSystems

BillingSystems

TeliaSonera

A/R

TeliaSonera

G/L

View Direct(view

invoice)

BILLIONAIREBilling

INOBIZFile

ConverterInterpreter

Acc

ount

ing

Acc

ount

ing

Acc

ount

ing

Fix

ed P

rint-

file

Mob

ile P

rint-

file

Inte

rnet

Prin

t-fil

e

Convergent Print-file

A/R

-file

A/R

-file

A/R

-file

RecalculationF

ixed

Bill

ing

Mob

ileB

illin

g

Inte

rnet

Bill

ing

Reassembling

Reassembling

Recalculation

Inter-pretation

Enhanced downstream model

The invoice specification file contains an out print of rated CDR’s A modern rater working regardless of transaction type can

recreate the transactions from the specification file, enabling: re-rating according to a new pricelist creation of new discounting balances as a basis for new offers cross product discounting and bundling

Applying business logic to the Billing Distribution Layer

The downstream model - Pros and Cons

No changes to the existing BSS environment Can be implemented immediately (3-6 months)

Extremely fast and simple way to convergence and still…

…Some long term benefits With a more flexible distribution interface you can expose your

printing partners to competition

No new interfaces to Reference Data sources All you need is in the print-files!

No major investment costs

Also allows for several accounts on one invoice

It’s more of a “stapler-solution” than actual convergence Bringing three invoices together is just administration Doesn’t necessarily support bundling, Cross Product Discounting etc

The invoice isn’t the only output from billing… A/R – files, G/L – files, Accounting and CRM interfaces need to be handled

The downstream model - Pros and Cons

The only cost saving Is going from many invoices to one

Some limitations: Preferably all convergence clients in the same bill groups (3 monthly

and one quarterly)

Customer need to be marked in all Customer Databases

Difficult if one invoice is incl. VAT and one is excl. VAT

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Case two - The upstream model

None of the Fortum rating and pricing engines were able to

rate all the transactions from the new product lines Fortum were therefore unable to derive the competitive

advantages from it’s broad range of telecom and utility products Sergel introduced the adjunct rater as a service bureau

One invoice to thecustomerPrint-file

Mediation BillingRating

Fixed

Other

Internet

AdjunctRater

The technical solution

Self Care

BILLIONAIREBilling & CRM

Rating

Fix

edM

edia

tion

Inte

rnet

Bill

ing

Mob

ileM

edia

tion

Rated CDR’s

Internet

CustomerDatabase

Price Db

Fix

ed

CD

R’s

Inte

rnet

C

DR

’sAggregation

FileConversion

MobileCDR’s

FortumRating

Fortum Billing

Prod. cat

Convergent Print-file

Invo

ice

Line

s

Alternative upstream model

CDR’s from all product lines can be filtered out by giving them a

virtual Service Provider marking Separate rating and billing for all convergent customers

Creating a convergent invoice instead of delivering

invoice lines

Unable to achieve convergence with legacy systems

Internet

The upstream model - Pros and Cons

Allows for all the business benefits of convergence Creating offers based on Cross Product Discounting, bundled products

and volume discounts

Few or no changes to existing billing infrastructure Fast and simple way to convergence

Can be used for more than convergence With more flexible rating and billing systems, you can create more

pinpointed offers and

A sensible path to upgrading the billing environment

The upstream model - Pros and Cons

Billing system need to be able to receive

imported invoice lines

Separate solution for customer wanting

convergence

More useful when adding new product lines When applied on existing product lines, the CDR’s for the convergence

customers needs to be filtered out Interfaces needed to several reference data sources

Slave version of necessary customer data and price data

Agenda

Introduction Background - Convergence

Implications on the billing environment The service bureau perspective

Transition strategy Augmentation Two alternative models

Case 1 – Downstream model Case one: TeliaSonera

Case 2 – Upstream model Case two: Fortum

Conclusions

Summary – and some conclusions Modularity is key

For outsourcing as well as for convergence Another monolith will just create the same problem again

Transition strategies While struggling to replace the old legacy systems, service bureau

outsourcing might help over bridge the transition period There are fast ways to achieve convergence without major investments

The End!

The upstream model+ Enables launch of cross product discounts- More reference data needed

The downstream model+ Extremely fast way to convergence+ “Stapler” without enabling business logic