Revenue lifecycle: Maximizing Revenue

In every business topline, revenue is critical to shareholder value-creation. This is especially so for a telecom

company, which operates in an environment of significant upfront capital expenditure, fast technological

obsolescence, high fixed operating costs, and low variable costs. Moreover, with increasing competition, declining prices, and the rapid erosion of protection from

geo-political borders, the revenue-assurance function has become critical to a telecom operator’s competitiveness.

American telecom operators are said to be losing approximately 2-5 percent of their revenue through revenue leakage across their entire value-chain. By all accounts, Asia-Pacific telecom operators lose substantially more than that. From our experience, we have come across revenue leakage in excess of 30 percent. This translates to tens of millions of dollars for each telecom opeator annually, and not surprisingly, has a direct and significant impact on the telecom operator’s competitiveness and market-valuation.

While telecom operators in Asia-Pacific have been quick to bring in the latest in telephony technology and products, they appear to be lagging behind their American and European counterparts in implementing rigorous internal processes to protect and maximize their revenue. Measuring revenue leakage is fraught with difficulties. Most of these opportunity losses, unbilled revenue and billing errors are not captured by the telecom operators’ historical cost accounting system. Hence, it is easy to ignore the problem as it usually does not show up on the operator’s report card.

Revenue leakage in a telecom operator can take the form of opportunity loss like billings forgone through unconnected calls or from actual

loss like bad debts, fraud, and billing errors. Leakage can take place throughout an operator’s revenue cycle. Traditional risk management

and audit approaches are not effective in preventing the leaks, let alone identifying and addressing problems in an ongoing, proactive way. Therefore, telecom operators need a revenue-assurance process that covers the entire revenue cycle from end to end. This process should not only continuously identify, quantify and plug leaks, but also identify significant new revenue opportunities.

Part of the problem is the prevailing, traditional view of revenue-assurance as a relatively narrow set of activities surrounding the billing

and management of the network. While a great deal of leakage does occur around billing and the network, it is not just a billing department or network problem. The roots of the problem lie across the revenue life cycle, from new product development to sales, provisioning of customers, getting the invoices out to the customer and collecting the cash. All of these areas should be included in the efforts to maximize revenue.

The key is to create a revenue maximization function that knocks down functional silos and is inter-departmental in its scope. But how do you win senior management support? The answer is, through revenue–that is, by quantifying lost revenue in every part of the business and using this as the reported measure of success, not in terms of the number of invoices verified, but in terms of actual dollars saved. Today, several American operators are stemming the flow of leaked revenue by taking a more holistic view of revenue assurance. They are focusing on opportunities throughout the revenue lifecycle to maximize revenues by adopting new processes, tools and performance indicators. They are turning the revenue-assurance function into a profit

centre.