Decision time is here. GRAPA has thrown down the gauntlet and put its standards and certification program to a vote. There are only two hitches. First, you have to already be registered with GRAPA to vote. There is no way to vote ‘no’ unless you are first added to the list of members - a list which is itself used to legitimize GRAPA to the unwary. Second, no minimum threshold has been announced for the vote. No matter how few votes there are, the result will be final. That means that if only four people vote for the program, and none vote against, we can assume the program will still be ‘ratified’, even though such a ratification would be meaningless.

It is no surprise that GRAPA has once again failed to follow best practice. This time, they have done so by holding a public vote without any transparency or oversight. Even if the ballot is only taken by GRAPA members, they could have easily have improved its credibility by involving an independent body in the management or supervision of the vote. Add to that the fact that, whichever way people vote, it is inevitable that Papa Rob will keep asking the question until he gets the ‘yes’ he is looking for. With an approach like that, perhaps the EU should draft GRAPA in to help run future referendums…

That leaves only two questions for you. First, will you register with GRAPA and vote? And if so, will you vote for, or against?

“There’s a sucker born every minute” - Phineas T. Barnum

Okay, those of you familiar with my previous blogs know what I think of Papa Rob Mattison and Global Revenue Assurance Professional’s Association (GRAPA). For you, there is no need to read on unless you enjoy a good Mattison-bashing (I know many of you do). The rest of you should and must read on. It is the only way to hear the other side of the story, the side you will never hear from GRAPA, because GRAPA is not a democracy, and not a genuine professional association.

Papa Rob Mattison, the lifetime President and Grand Wizard of GRAPA, (also known as the owner of GRAPA and its related commercial enterprises) has written some new stuff on the “news” page of his new-look GRAPA site. It essentially says you should pay him (and/or other members of his family) for a certificate because GRAPA will really show you, as a person, how to do your revenue assurance job. It also says that GRAPA is not really in competition with the TMF because the TMF, unlike GRAPA, only works for its members and not for the industry as a whole. Also, Rob says the TMF only writes standards about computers and KPIs and has no advice about how people do their jobs. Is this true? No. But some suckers might believe it.

Here is a quick recap of the history of GRAPA so far. Papa Rob wakes up one morning and says to himself, “I have written lots of books on lots of topics, but I need more money. How shall I get it?” He decides to set up a website, calls it a professional association, and uses it to promote his training courses. He calls himself “President”. People who go on his training courses will get a ‘certificate’ endorsed by his professional association. Somehow, by a miracle not properly understood by anyone outside of the Mattison family, the syllabus of the training course they previously wrote is a perfect match to the certification requirements that the ‘industry’ (in the shape of GRAPA) independently decides. What a fortunate coincidence! Otherwise Papa Rob would find himself disagreeing with what the ‘industry’ thought or having to rewrite his training courses.

Lack of knowledge is not an obstacle to Papa Rob. He express views and writes books about many topics, claiming to be an expert at all of them. Ignorance certainly does not prevent Papa Rob from giving some insights about the TMF’s work on revenue assurance. Even though he admits he has no actual involvement with the TMF (although his consulting business does sell business advice about TMF standards) he is still prepared to give a detailed comparison between the work of GRAPA with that of the TMF’s RA team. There is only one problem: he does not know what the TMF’s RA team are working on. I am in the team, and even I find it hard to keep track unless I dial in to the regular team conference calls. The team’s material gets developed over many years by dedicated individuals (not some self-appointed President, not by people who sign up over the internet and instantly expect their first comment to become part of a professional standard). The TMF team’s material only gets released following a stringent multi-stage approval process. So if Papa Rob says that the TMF is only concerned with software and systems, you can trust him… to not know what he is talking about. By the way, I know that the TMF’s RA team works on plenty of other things. I spent four years, several of those whilst I was an employee of telcos, helping the team construct a self-assessment of revenue assurance maturity. The idea that the TMF is only interested in computer systems and KPIs is a lie, pure and simple.

On the GRAPA website, Papa Rob also shared a list of the companies that work in the TM Forum. His analysis concluded that, in the TMF, telcos have insufficient involvement. He got the list from the TMF’s website. Now, every so often [sigh] I moan to the TMF why they do not do a better job of updating their website, but I guess they are busy with other things - you know, things like actually building an industry consensus and running a real international organization and time-consuming stuff like that. According to Papa Rob, only one telco actually works with the TMF’s RA team. WRONG! That list is out of date. That list stems back to when the team was first formed in 2004. I should know, I was working for that telco and joined the TMF’s RA team when it first formed. Back then the comparable list of GRAPA members was… none, because GRAPA did not exist in 2004. So, in 2004, if the TMF had only one telco working on RA, it was still one more than GRAPA had. Since 2004, the TMF has added a lot more active telco members! But Papa Rob does not know that, because he has never been involved. Unfortunately, that does not stop him forming an opinion and sharing his (lack of) knowledge with the rest of the world.

This new ‘letter’ from Papa Rob is an example of his research. Is this the quality of research you would expect from a professional? If he makes unjustified and inaccurate claims about others, can you trust the rest of his research, and can you trust what he says about himself?

If you do not believe that the TMF has got more than one telco actively engaged, just look at what people are doing in the industry. My last blog was about an article written by Einar Nymoen of Telenor. I know Einar because we worked together on the revenue assurance maturity model. Einar eloquently explains how Telenor used the maturity self-appraisal and other TMF guidance to implement benchmarks across its international group. Was Telenor on the list of telcos mentioned by Rob? No! The reason is that Papa Rob used a list that is out of date. Do the benchmarks used by Telenor only relate to computer systems. No! The maturity appraisal alone covers all the aspects of revenue assurance: people, organization, process, tools and influence. So where does Papa Rob get his information from? If he wants to do some research about what is happening in revenue assurance, he should begin by reading talkRA - a site that gives real information away, for free, with no selling of certificates, and no need to register your email address and get spammed forever after.

According to Papa Rob, his information came from “several GRAPA members who also belong to the TMF”. Who are these people? Instead of seeing Papa Rob writing on the front page of GRAPA’s site, we should see what these people have to think. For example, perhaps these TMF members should explain how GRAPA managed to get industry consensus amongst so many telcos so quickly, when the TMF finds it hard and slow to get agreement? Is it because they have some special way to reach this consensus, or is it because their consensus is a sham?

Papa Rob is right about some things (gasps of amazement!) The TMF is slow. Being slow is sometimes the price for letting people have points of view and disagree with each other. The TMF is also poor at marketing its revenue assurance work. For the TMF, revenue assurance is part of something much, much bigger - a view of all telco processes and systems. I agree that the TMF has too few telcos actively involved in its RA program, but it has more active involvement than GRAPA will ever have. GRAPA, unlike the TMF, is fast. They market heavily on the internet and by email and can promote their work very quickly. They claim to have reached industry consensus on certification in less time than it would take a dozen people to agree the best way to make a cup of tea. They then do a deal with Papa Rob’s training company, which sells the training and certification on behalf of GRAPA - what a clever way to ensure GRAPA is “not for profit”! GRAPA is cheap, because they intend to make money from training and certification, so they cannot afford to wait years for people to actually reach agreement. GRAPA has lots of members, including people in telcos, if you measure the number of email addresses that get registered as users, but which never log on again. GRAPA has very few active telco members, if you look to see who is actually participating. I notice that the executive committee of telco members is no longer listed on GRAPA’s site. For years the website listed people in jobs who, when I asked them, said they never spoke with Papa Rob or anyone else on the so-called committee. What kind of committee is that? Some of them had changed their jobs, but kept on being listed under their old titles. That tells you what you need to know about GRAPA’s membership and how it is run.

Everybody around the world knows what a President is. The world saw what a new President looks like after the recent US election. The USA voted for a black President, Barack Obama, for the first time. In a real democracy, things can change. One of the founding fathers said this of the United States:

“Here, sir, the people govern; here they act by their immediate representatives” - Alexander Hamilton

GRAPA has a ‘President’ as well. Presidents are supposed to represent their members. So ask yourself, GRAPA members, did you vote for your President? When will you next get to vote on the President? If you, as a professional, disagree with Papa Rob, is your voice heard? Can you stand against him in an election? If the syllabus of his training course is wrong, can you get it changed? Or do you just pay your money for your certificate, and take what you are given from your masters, without having any voice, or any vote? Just how valuable is that certificate, if everyone else can buy it too? Are you a member, a sucker or a slave?

Alexander Hamilton was talking about a democracy that, 200 years later, selected a black man to be President. In a democracy, things can change. Men, once treated as slaves because of the colour of their skin, can become Presidents. So if you believe in GRAPA, and think it is a democracy, I encourage you to change it. Start asking questions. Start proposing your own changes to the syllabus. Ask why only Mattison’s training company is affiliated to GRAPA, and why other training companies are not welcome. Ask where the money from certification is going - they offer certificates in auditing after all! Ask what you benefits you will receive when you are certified. Do not be slaves, or suckers. Be free men. People like me cannot change GRAPA from the outside, and I am not allowed to join. Yes, I tried to join GRAPA! I hate GRAPA, but I tried to join it, because you can only change things if you participate. But the family Mattison, who control GRAPA and decide everything for it, would not let me join their “industry consensus” party. In a democracy, there is freedom of speech. That is why I am not a member of GRAPA. GRAPA is not a democracy, and that needs to be said.

Look here for a great article by Einar Nymoen of Telenor. He explains how the Telenor Revenue Assurance Program (TRAP) has adopted strategic measures for revenue assurance across the Telenor group. These measures include a KPI for revenue coverage and the TMF’s Revenue Assurance Maturity Model.

Programs like Einar’s are proof that systematic modeling of the performance and evolution of revenue assurance is not just talk and theory - it is industry best practice.

Israeli revenue assurance vendor ECtel has announced, with its Q3 results, less optimistic guidance for its annual revenues. The new forecast range for FY08 revenues is US$26M-28M, down from the previous guidance of US$29M-US$31M. Q3 quarterly revenues were US$7.1M, up 22% year-on-year and up 6% compared to Q2. Gross margin and net loss for Q3, whether accounted for according to US GAAP or the company’s preferred non-GAAP basis, were both the same as for Q2. Per GAAP, the operating loss for Q3 was US$2M.

With US$19.3M in cash and cash equivalents, marketable bonds and securities, ECtel has no immediate finance concerns. However, ECtel does need to turn a corner and become a cash generative business within the next two years. During the quarter, ECtel’s operating activities burned just over US$3M cash. The critical link between customer credit management and a vendor’s liquidity was underlined as trade receivables went up from US$8.8M to US$11.8M over the course of the quarter. On the flip side, there was a US$1.3M fall in the balance for other receivables. If ECtel can keep the level of debts owed by customers at a steady level, its assets can sustain the current approximate burn rate of US$2M per quarter for a couple of years, but not a lot longer.

Of more immediate interest is ECtel’s place in the stock market. Its NASDAQ-listed shares are trading at a historically low level, thanks in no small part to the recent economic meltdown. At around a buck per share, ECtel’s current market cap is fluctuating about the US$17M mark. That means the market cap is less than the tradable securities, cash and cash equivalents on its balance sheet. American investors Diker have been gradually building their holding in ECtel over the last year, and now owns nearly 16% of the firm. If a purchaser paid US$19M for the entire company, they could recoup all the costs from ECtel’s own cash and investments. That comes before putting any value on ECtel as a going concern. Consolidation with a business that could utilize ECtel’s customers, products and intellectual property would make a deal even more attractive. They say that this is the time when investors with money can buy some real discounts. In a depressed market, will somebody be tempted by ECtel?

To analyse the quarterly results from Portuguese revenue assurance vendor WeDo Technologies, you need to dig into the consolidated reports of its parent group, Sonaecom. The Sonaecom FY08 Q3 announcement suggested that WeDo had a very mixed quarter, when compared year-on-year to Q3 FY07. WeDo increased its international footprint, with the Portuguese market generating 40% of its revenues. Sales are up by almost half, year on year. Orders for the year to date are up 33% compared to the first three quarters of FY07, and have already surpassed the total taken for the whole of FY07. These orders are in line with current sales, with 60% coming from outside Portugal. According to the announcement, WeDo represents about 70% of its immediate parent company’s service revenues, which means that WeDo’s Q8 revenues are roughly US$14M. However, EBITDA margin is well down year on year, falling from 15.3% to 8.9%. This was blamed on the integration of WeDo’s acquisitions, Cape and Praesidium. However, acquisitions only take so long to integrate, and the reports made no mention of how much the acquisitions have been responsible for driving revenue growth. There is no doubt these additions to WeDo have played an important part in building revenues, especially those earned outside of Portugal. The open question is whether costs can be further reigned in, or whether growth will keep on being paid for with lower margins.

The publication of the FY09 Q2 results from Bangalore revenue assurance provider Subex will generate a mixed reception amongst investors. As the press release points out, product revenues are well up year-on-year. Product revenues for Q2 were US$26M (Rs.1,127M), up 57% compared to the same quarter last year, and slightly up compared to Q1. Consolidated revenues were US$33M (Rs.1,421M) up from US$24M (Rs.1,030M) in FY08 Q2. However, the press release does not say much more. Looking at the figures, it is easy to understand why. As anticipated, revenues from services continue to decline. There has also been a further reduction in operating costs. EBITDA before exceptionals is relatively healthy at US$5M for the quarter. However, the growing cost of interest accounts for more than half of that figure, highlighting that Subex will have liquidity challenges if it does not sustain its success in winning orders and converting them into cash. The biggest dent to the numbers came through exceptional exchange losses of US$16M on Subex’s FCCBs. After exceptionals and tax, Subex’s loss for the quarter was US$17M (Rs.717M), taking the loss for the year so far to US$32M (Rs.1,373M).

Going back to the forecasts for FY09, we see that Subex is still on course for its revenue projection of US$125M, having generated US$66M in the year so far. Although the management cannot be held responsible for foreign exchange fluctuations, Subex would now need a dramatic helping hand from world markets if it is to meet its forecast of US$12M profit after tax. The bad news about exceptionals may lead the careless investor to miss one key point: Q2 profit before exceptionals and tax was still slightly under US$1M. After the last two quarters’ results, Subex’s management has each time promised that investors will see the benefits of reduced costs following successful completion of integration. They cannot say that a third time. Yet, if Subex has now cut costs back to the minimum, a profit before exceptionals and tax of US$1M per quarter is still well short of what would have been needed to deliver the forecast US$12M profit after tax for the year. Given that revenues have been solid so far this year, it does not appear that the underlying business is as profitable as it needs to be to return a US$12M profit after tax over US$125M sales. EBIT before exceptionals was only slightly over 10% in Q2, making the forecasted returns unattainable as soon as you add in the real cash costs of interest and tax. Just to improve the underlying performance of the business to the point where quarterly results are in line with the profitability promised in the annual targets, Subex would need to generate US$3M profit after tax each quarter. It now needs to do significantly more in the second half of the year if annual profit targets are to be met, ignoring exceptional items. To deliver profits in line with expectations, Subex will need to further reduce its cost base, and healthily beat its forecast for revenues. For example, if Subex could reduce its staff costs by a further 5%, and if it could grow quarterly revenues by another 3%, then Subex’s underlying profitability would be roughly in line with that needed to generate annual profits of US$12M over sales of US$134M. The question is whether Subex is reaching a point where cost-cutting and sales generation are reaching a limit. If it is, then the targets cannot be realized, and investors will have to get used to the idea that Subex may be a viable business, but will not be as profitable as hoped. If, on the other hand, further cost-cutting and sales can be realized, this may lead investors to grow impatient with a management team that is turning the business around a lot more slowly than they originally promised. Losses on exceptionals are just one of many headaches for Subex right now.

Bangalore-based Subex, suppliers of revenue assurance software, are due to release their half-yearly results soon. There will be a keen interest to see what they reveal. After bad figures and missed forecasts last year, investor confidence needs to be bolstered. Subex must show they have finally completed the integration of the acquisition of Syndesis and turned the corner with genuine improvements in operating results during Q2. In the run up to the results announcement, it is interesting to see the recent press coverage they have garnered, which may give some clues about how Subex’s management will present their recent performance. This relatively positive article focuses on how Subex is reducing its reliance on BT, its largest customer. However, with BT still contributing 18-20% of total revenues, compared to 21-22% last year, there is no sign of a significant improvement in the diversification of its customer base. If anything, this modest improvement only serves to reinforce how much Subex’s turnaround depends on a continuation of big orders from a few customers. As the article points out:

Unlike most companies in the IT services sector, Subex is over-dependent on its top-10 clients. The top-10 clients contribute close to 85 per cent of its revenue.

It is also interesting to note that this article hints at a reduction in income from Subex’s software services division. Subash Menon, founder and CEO, was quoted as saying:

“The services business we do is essentially body-shopping and requires a lot more onsite activity, where the margins are as low as 6-7 per cent of EBITDA. Five years ago, 70 per cent of our revenues were coming from services. Today it is less than 20 per cent. Our plan is to bring down the revenue contribution from services to 5-6 per cent in the next three years.”

Menon’s spin on this disguises an important shift of emphasis. Whilst software services may have represented 70% of revenues five years ago, back then Subex was a much smaller business. During those 5 years, Subex has grown through acquisition. Revenues have multiplied several-fold as a result of ever larger takeovers. During that time, it was inevitable that the proportion of revenues from software services would be diluted if those services only grew organically. In contrast, nobody is expecting to Subex to continue its spending spree in the coming years. Subex’s forecasts for the full year emphasize increased profitability, not increased revenue. That implies any further reduction in the share of revenues from software services must come through an absolute reduction in those revenues. In order to improve overall margin ratios, it would make sense to downscale a division which earns low margins in general. However, unless Subex is hoping for improbable levels of overall growth, the plan must be to reduce the software services division to a third of its current size. That will mean headcount reductions amongst the 250 staff currently employed in that division. What makes this news particularly interesting is that previous press speculation has been that the software services division would be sold off. A depressed market with reduced credit may have eroded Subex’s confidence that they will find a buyer, causing them to change their approach.

Worse news for Subex was highlighted in this story. This article reiterates how the falling Indian stock market and falling Indian currency have hurt those companies that borrowed in US dollars. Subex has a large FCCB hangover, having used them to pay for acquisitions. Although these convertible bonds are not due for redemption for a few years yet, unless there is a tremendous turnaround in share performance, investors will not convert them into equity, and Subex will not be able to secure new debt at as cheap a price. Although Subash Menon has already been upbeat in the press about his company’s ability to cover its finance costs, the article highlighted Subex’s main worry:

CLSA [an equity research firm] in a report said Subex… face[s] high liquidity risks once FCCBs come up for redemptions, unless there is significant rally in stock prices.

Investors will no doubt have plenty of questions, and be expecting good answers, whatever numbers Subex are about to report. Keep an eye on this situation, because if Subex continues to struggle, or if it makes further cuts, the impact will ripple throughout the rest of the revenue assurance industry.

Letters asking for proof of identity. Computer mismatches. Bad data and confused processes. This story has it all. However, this is not about customer collections management or revenue assurance. The story is about how the United States manages its registers of voters. It seems even the most powerful democracy in the world has its issues, with something as simple as keeping a list of who is eligible to vote. Is it any wonder that so many companies have a hard time keeping a track of who their customers are?

It is an oddity of ‘revenue’ assurance that so many practitioners have little or no knowledge of what the word ‘revenue’ means. Paradoxically, if they are working for a CFO, they will be working for someone with a very thorough understanding of the word. Revenue is not just a simple function of sell more, get more revenue, company makes more profit, gets more cash, and everybody is happier. In fact, I have often seen RA people embarrass themselves by their ignorance in front of CFO’s, sometimes without realizing that they made fools of themselves. Ironically, these same people often talk about the need for support and sponsorship from the top, and will even give sermons about the importance of their job. Well here is a newsflash for those people: if you want the CFO to understand your job, it is a good idea that you first show some understanding of the CFO’s job.

Imagine the following scenario: the CFO is reviewing, yet again, the results for the year so far. He looks at the actuals, and the forecasts, and tries to know the reason for every variance. It looks like results are on target. Then the Head of RA strolls in to his office for a meeting to explain what benefit his team has added over the year. There was no target for this Head of RA, but the Head of RA goes on to explain how his team added a few hundred million of revenue to the company. Would it be surprising if the CFO was sceptical? Everything he was measuring was on target. He is looking closely at the results on a regular basis. Everybody’s numbers come back to him. They all add up and he has explanations for everything. Yet, as if by magic, a team in his own directorate pops up and claims to be adding huge benefits that were not even part of his forecasts. Then imagine the scenario continues as follows: the CFO is impressed and is glad to see this level of return from his RA team. So he wants to ensure RA is managed like everything else - by forecasting the returns from RA that will be enjoyed in the next financial period. All of sudden, the Head of RA wishes they could leave the room. He is confronted by one of two choices:

• RA focuses on work that is predictable and easy to forecast. Work becomes dull ‘handle-turning’, dealing repetitively with the same symptoms of the same known problems, but never fixing the root causes.
• RA has to make wild guesses on the value it will add, without knowing what the leakages are, and without knowing if it will be able to push the necessary fixes through. In addition, this work must be done in a way that can be shown to be genuine when properly scrutinized by the CFO.

Either way, from now on the CFO expects to see the numbers, will expect that they are incremental to all the work performed elsewhere, and he will be disappointed if the numbers come short. Self-indulgent ‘measures’ of RA’s success created by the RA team but not reviewed by anyone else may be usual in immature telcos, but the telco’s RA maturity cannot increase without proper measures. Remember, spending a lot on software may give people jobs, but it will not help the business if nobody can measure if value is being added. Like any team, RA’s reports of its performance needs to be properly and impartially reviewed to prevent the RA team giving a biased view of its own success. Which brings us back where we begun - with not understanding the word ‘revenue’ and hence being prepared for that scrutiny.

I question whether any revenue assurance department deserves that name unless they employ at least one person with a good technical understanding of the principles of revenue recognition and a detailed knowledge of the policy adopted by in their company. Otherwise, their job is not about ‘revenue’ but about ‘data’. If they do not understand revenue, these teams should be called data integrity teams, because they may understand the data but not what it is ultimately used for. You can check data without understanding its purpose. The shortcoming is that if you only partly understand the purpose of data, the checks may not be optimized for the needs and risks faced by the business. To claim to assure revenues, you have to know what they are, and all the factors that will influence the revenue numbers as scrutinized by the CFO and reported to shareholders. Yet lots of RA teams contain not a single person with more than a cursory understanding of the complexities of revenue recognition. Take a look here for a very well-written article on how revenue recognition policies do matter.

Assuring revenues means understanding revenues, and revenue recognition is a complicated discipline in its own right. RA people would do well to remember that. If your RA team is not going to assure revenues, then best not make claims that the CFO will see through. Instead, RA should be honest, and explain the limits of what is done. When it comes to putting a value to the benefits added, RA departments takes a chance when calculating their own numbers if they do not also understand revenue recognition. Some get lucky, others do not. To avoid the danger of having those numbers ripped apart at a senior level, RA should work with somebody in the business who really understands revenue recognition. Then, when the numbers are presented to the execs, they will be more robust. They may also be smaller, but if you want executive support, it is better to have a smaller and reliable number than a big number that the CFO does not trust.

This post is not really about revenue assurance, but I think it will provoke a giggle or two. The Mattison clan have branched out from their overpromising and underwhelming Global Revenue Assurance Professional’s Association and the RA Academy to start yet another business venture from their garage in Oakwood Hills, Illinois, USA. This one promises to train anybody in telecoms about anything in telecoms - an ambitious goal. The new website has all the usual Mattison hallmarks: talk about being global, lots of sales spin, not much substance. One thing did catch my eye though. Take a close look at the website’s banner:

Before they conquer the world (yet again) perhaps the family Mattison needs to invest in a dictionary. That is not how you spell ‘conveniently’ - not even close! I know they are Americans, but before they become educators, perhaps they should go back to school and revise their English :P