Telestrategies RA Equant short 021102

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Synergies between Revenue Assurance and

Access Management at Equant - Case Study

Morten Sorensen, Global Billing, EquantHanno Allolio, Founder Allolio & Konrad LLC

Telestrategies, Revenue Assurance and Cost ManagementMarch 14th, 2002, New Orleans, LA


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Agenda

Introducing Equant

Case Study

Revenue Assurance

Access Management

Results

Lessons Learned


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Introducing EquantFacts and Figures

Equant Corporate Overview Equant is a member of the France Telecom Group, and is forecasted to have pro forma

revenues of more than $3 billion in 2001

Equant is a recognized industry leader in Global IP and Data services

Equant has unmatched global reach with a seamless data network, connecting key businesscenters in 220 countries and territories, with local support in 145 countries

Equant serves approximately 3,700 large business customers including nearly two-thirds ofthe world's top 100 companies

Equant Products

Equant offers the broadest portfolio of IP-based end-to-end managed network servicesincluding:

Equant VPN (MPLS-based IP service), which is used by more than 100 businesses and isfully operational in more than 125 countries

Equant Frame Relay, with service in 125 countries

Equant ATM, which has the industry's widest coverage with service in 55 countries


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Gartner Disclaimer

The Magic Quadrant is copyrighted by Gartner Group, Inc. and is reused with

permission. Gartners permission to print its Magic Quadrant should not be deemed

to be an endorsement of any company or product depicted in the quadrant. The

Magic Quadrant is Gartners opinion and is an analytical representation of a

marketplace at and for a specific time period. It measures vendors against Gartner-

defined criteria for a marketplace. The positioning of vendors within a MagicQuadrant is based on the complex interplay of many factors. Well-informed vendor

selection decisions should rely on more than a Magic Quadrant. Gartner Research is

intended to be one of many information sources and the reader should not rely solely

on the Magic Quadrant for decision-making. Gartner expressly disclaims all

warranties, express or implied of fitness of this research for a particular purpose.]


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Introducing EquantRevenue Assurance Challenges

Equants business positioning demands:

Paying and issuing invoices in multiple currencies. In many cases, the currency in which costis incurred does not equal the rating currency does not equal the invoicing currency.

Paying and issuing invoices and disputes in multiple languages and time zones

Complying with multiple national rules and regulations (taxation etc.)

Balancing the need for product and tariff standardization with the wishes of its MNC customer

base All major projects have an element of customization

Most major projects require the purchase of third party services (predominantly access)throughout the world

Many projects will require Equant to offer services that are not part of its core productportfolio

Many contracts have special clauses calling for volume discounts, penalties if SLAs arenot met, etc.

Equants market position imposes a great deal of complexity on thecompanys sales-to-cash process and requires diligent attention toaccess management and revenue assurance.


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Introducing EquantKey Revenue Leakage Risks in the Sales to Cash Process

- Invoice delay,- manual A/R entry

- poor reconciliation

Ordering Provisioning Billing InvoicingContract Collections

Aggregate Revenue Exposure

Customer

- No contract- Non Std

discounts

- Missing prices- No credit check

- Missing,incomplete or

inaccurateorders

- non standardservices not

supported

- Servicesprovisioned

differ fromorders,

- missing orders

- Inaccuratebilling profile,

- non standardpricing and

credits

- Missing orinvalid prices,

- manualadjustments

- No activecollections

- agingreceivables

SwitchAccountsReceivable

Mediation

- Loss of usagedata

- Traffic anomaly

- Serviceprovisioned without

formal orders- Service not

disconnected- Local loops not

disconnected

Cost avoidance:

Generally, other typical Telco areas of Revenue Leakage include: Fraud, Bad Debt


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Introducing EquantScope of Revenue Assurance Function

Revenue Assurance is incomplete without a well balanced focus in allthree areas

Equants corporate Revenue Assurance Organization is comprised ofthree functional areas:

1. Operational R/A Management: Drive a reduction in traffic anomalyvolumes through Port and Traffic analyses to identify mishandled

orders, unbilled services and order to bill inaccuracies.

2. Tactical Revenue Recovery Projects: Manage the successfulimplementation of identified revenue recovery opportunities.

3. R/A Solutions: Support product, billing infrastructure and businessprocess development programs to ensure the implementation of bestin class Revenue Assurance practices.


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Case Study


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Background

A study commissioned by Equant suggested that Equant wassuffering from revenue leakage in a particular Business area.

Both the access management and the revenue assurance function atEquant are continuously facing resource constraints.

The recent merger of Equant and Global One created a uniqueopportunity of improving revenue recovery and access cost control

Equant selected one of its business units to undertake a joint revenueassurance and access management effort.


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Framework

Re-ActiveRevenue Assurance

and Access CostManagement

Packaging For PortabilityEnsure Approach Can Be Replicated

Pro-ActiveRevenue Assurance

and Access CostManagement

SystemUpdates

The project presented has been a large tactical effort that focused onstopping the bleeding by re-actively recovering revenue leakageand access cost.


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Revenue AssuranceTypical Telco Sources of Revenue Leakage

Revenue

LeakageFraud Bad Debt

Unbilled

Revenue

Service

DiscrepancyPricing

Anomaly

The Revenue Leakage part of the project focused on recoveringunbilled and under-billed revenue for flat-fee data products

Pro-Active

Re-Active


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Re-Active Revenue AssuranceEquants Approach

CollectionLeakage

Validation

Leakage

Identification

Customer validation

Leakage validation

Leakagequantification

Approval

Invoice

preparation Invoice

distribution

Paymentmonitoring

Negotiation

Payment booking

Write-offs

Data source inventory

Data extraction

Data comparison

Leakage categorization

Service validation

Establish Knowledgebase requirements

Develop Knowledgebase

Populate Knowledgebase

1 32


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Re-Active Revenue AssuranceLeakage Identification

Services in Scope

All services that were installed in one business unit were consideredwithin the scope of the revenue assurance exercise, even if owned byother business units


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Proof of Invoicing

Services in Scope

The services actually provided were then compared against the servicesthat were invoiced


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Proof of Invoicing

Finally, the order management database was interrogated to provide proofof ownership for installed services that did not appear on the invoice.

Services in Scope


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Proof of InvoicingPossibly unbilled services

Services in Scope

All services that could not be found on a customer invoice but were foundon the network and that were either owned or supported by theinvestigated business unit were credible targets for leakage.


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Proof of Invoicing

Services in ScopePossibly Unbilled Services

Possibly Pricing Anomaly

or Service Discrepancy

Services that can be found in all data sources still need to beinvestigated for pricing anomalies and service discrepancies.


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Collection

Validation

Re-Active Revenue AssuranceLeakage Validation - Tool Support

The KB will be populated withall discrepancies identified

in the identificationphase

Customer validation

Discrepancy validation

Leakage quantification

Approval

Invoice preparation

Invoice distribution

Payment monitoring

Negotiation Payment booking

Un-collectable

2

3

1

Controlling the validation and eventual collection for thousands ofindividual leakage targets required the introduction of a workflow tool.


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Unbilled Revenue

Service Discrepancy

Pricing Anomaly

Quantify

Leakage

Confirm

Leakage

is Billable

Confirm

Service

Perform System Updates,

Disconnect Services on Network

Identified

Leakage

Targets

Re-Active Revenue realizationLeakage Validation

Confirm

Customer

Depending on the presumed category of leakage, the validation stepsvaried. Ultimately, both disconnects and system updates are required.


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Re - Active Access Management


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Re-Active Access Management - Synergies BetweenAccess Cost Reduction and Revenue Assurance Projects

In some instances it may be sensible to pool access management andrevenue assurance resources and to execute a project jointly.

Typically, the central objective of a re-active access management projectwill be the identification of superfluous circuits.

The central challenge during a re-active access management project isthe identification of the customer to which a circuit should be charged.Obviously, prior to disconnecting a circuit it will be necessary to confirmthat the circuit is not needed and not invoiced to an external (or internal)customer.

Determining to which customer a circuit belongs, and the status of thatcustomer requires very much the same information as is needed during arevenue assurance project.

It follows that to a large extent the same data sources are being used,and that for both types of projects the accuracy of these data sources isparamount.

Ultimately, both type of projects will require a decision on whether todisconnect or invoice services - and therefore circuits - that previouslywere not billed to a customer.


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Re-Active Access ManagementAccess Management versus Revenue Assurance

Priority 1 obsolete/unjustified access

Priority 2 obsolete/unjustified access

Possible Feature/Price Issues

Agreed

Inventory

Incremental

Revenue

Disconnect

Orders

Access Management Revenue Assurance

Proof of Invoicing

Possibly Unbilled Services

Possibly Pricing Anomalyor Service Discrepancy

Network


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Re-Active Access ManagementAccess Cost Reduction Levers

Were all local loops invoiced by a provider ordered by Equant?

Are all local loops purchased required by internal or external

Equant customers?

Is the provider invoicing the correct access specifications (speed

etc.)?

Is the provider invoicing at the correct price?

Cost

Reduction

Opportunities

ObsoleteAccess

AccessFeatures

AccessPrice

Alternative

Access

Providers

Alternative

Access

Technology

Access Cost Management is the Mirror Image to Revenue Assurance


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Re-Active Access ManagementWork Steps

It is relatively simple to identify mismatches between the PTT invoicesand internal data sources. Interpreting the observed discrepancies,however, is more cumbersome and will entail 80% of the workload

Cost Saving Category Target Identification Validation Impact

Obsolete Access

Access Features

Access Price

Easy Hard Large

Easy Medium Small

Hard Medium Small

Timing Differences Easy Easy Medium


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Re-Active Access ManagementTarget Identification Framework

Priority 1 obsolete/unjustified

access

Priority 2 obsolete/unjustified

access

Network

Possible Feature/Price Issues


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Re-Active Access ManagementCategorization of Cost Reduction Targets

Category: Action:

Network only Park

Order Tracking Park

only

Order Tracking Park+ Network Only

Order Tracking Validate

+ PTT Invoice

Network Validate

+ PTT Invoice

PTT Invoice Check for

+ Order Tracking Anomalies,

+ Network Discrepancies

OrderTracking

Network

PTTInvoice(s)

PTT Invoice Only Validate


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Results of Re-Active Access Managementand Revenue Assurance Project


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Project ResultsDefinition: Categories of Benefit

Monthly Incremental Revenue: Incremental monthly revenuecorresponding to services that were previously not invoiced.

Back billing: Previously unbilled revenue corresponding to past usageperiods that can be recovered and collected (typically six months).

Dispute Recovery: Recovery of invoiced but disputed charges thathave already been written of.

Monthly Access Cost Reduction: Monthly cost savings through circuitdisconnects, elimination of unjustified PTT invoice items, correctionof excessive circuit charges.


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Project ResultsNot everything that looks like gold...

Incremental Revenue A service was being provided to an internal customer.

A service was being provided in a bundled tariff arrangement.

A service was being invoiced by another business unit.

A customer terminated his business relationship with Equant.

The customer never ordered the service (no order documentation can be found)

Not collectible (customer insolvent).

Cost Saving

Loops listed as terminated in order management were actually still active and requiredbecause the customer had revoked the cancellation.

Loops listed as terminated in order management were still invoiced by the PTT because

Equant had signed a contract with a minimum duration longer than what was agreed with thecustomer.

Speed discrepancies were necessary because the PTT did not sell the speed offered to thecustomer.

During the validation phase, we found out that 80% of our costreduction and revenue leakage targets did not yield any benefit.


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Results

nevertheless, the tangible benefits have been substantial

Backbilling: 22 million dollar back-billed and 9.8 million dollarcollected

Monthly Incremental Revenue: 1.3 million dollar incremental revenuebilled per month resulting in 8.6 million incremental revenue collected

in 2001.

Dispute Recovery: 2.6 million of written-off charges collected

Monthly Access Cost Reduction: 31000 dollar and counting.


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Lessons Learned


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Lessons Learned General

Determining the correct scope is a major challenge for any revenueassurance and or access management effort, as it must becomprehensive yet manageable.

KPIs: Both revenue assurance and access cost management effortsmust be based on a commonly accepted definition how cost savingsand incremental revenue are reported.

Initial findings during the early stages of a revenue assurance and/oraccess cost project will significantly overstate the size of the problem.In many instances, there will be sound explanation for observedmismatches in source data.

When comparing data sources, it will always be challenging to

compare apples-to-apples as it will rarely be possible to obtainsnapshots of the data sources taken at the exact same moment intime.

Prior to embarking on a revenue assurance or a cost reductionproject, it is imperative to ensure that the inventory accuracy achievedat the end of the project can be maintained.


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Lessons Learned General

Risk Indicators

Business Processes with extensive manual activities

Geographical Business Units which operate in an atypical environment(regulatory, suppliers, market, historical development, acquisitions)

Non-standard customer services, Products and Services sold andimplemented prior to full productization

Use of incompatible systems or processes, hand-offs with automationgaps

Functional areas that suffer from high turnover of staff


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Lessons LearnedReactive Revenue Assurance

80% of the effort in any revenue assurance effort comes after theidentification of revenue leakage targets.

It is easy to underestimate the time required to collect recoveredrevenue. Frequently, negotiations with the customer will be requiredas contractual positions may be inconclusive. Plan for an effort thatlasts at least six months.

Normally, revenue leakage is not evenly distributed but occurs inpockets. These pockets are frequently characterized by high DSO,as underbilling tends to coincide with overbilling and disputes.

There are time constraints on how long a customer can be backbilled.Delaying a revenue assurance project therefore almost certainly

implies permanently lost revenue.

The pay back ratio in recovery initiatives can be very high (could be >10:1)


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Lessons LearnedProactive Revenue Assurance

Establish a Corporate Policy for Revenue Assurance - Insist that bestin class R/A practices are adopted throughout the Sales to Cashprocess in all Business Process and Systems developments andredesigns

Review and analyze Sales to Cash systems and processes on aregular basis to future proof them against revenue leakage

Conduct both monthly standard reviews of the network, order and billstatistics as well as selected tactical reviews of nominated products,services or business units

Use internal resources as much as possible thus retaining theinstitutional knowledge required to maintain the compliance pressureon all internal systems and processes


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Lessons LearnedAccess Cost Management

The key challenge during access cost management is to find at leastone reliable data source. One cannot disconnect a local loop until it iscertain that this loop is no longer needed. It follows that an accesscost effort is a natural follower to a revenue assurance project thatestablished a correct inventory of services sold.

The quickest win around access cost reduction has been an

improved synchronization of loop disconnects with customercancellations etc.

It is necessary to clearly define how changes in local loop cost overtime and volume discounts are processed throughout the accessmanagement process. Inability to reconcile PTT charges with amountsinvoiced to a customer may impair the ability to collect penalty

charges in the event of early service termination.


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Questions

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Telestrategies RA Equant short 021102

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