Dan Baker, research director and owner of the Technology Research Institute, has released his new report into telecoms business assurance. The 635-page report provides a comprehensive guide, covering revenue assurance, cost management and fraud management, as well as the newer assurance activities that have evolved in the business assurance hothouse. Aimed at both vendors and managers working in telcos, the report includes research gathered from around 70 interviews with industry experts, and presents profiles of all the significant players in the market. And talkRA is very pleased to make the report available to our readers. To review the extensive table of contents and the deliverables included with the report, please take a look at our very own dedicated micro-site.

WeDo, the Portuguese business assurance vendor, has secured a UK and European patent for a new data collecting technology; see their press release here.

The new product is described as a “Communication System with Distributed Risk Management Solution (DRMS)”. Details are limited, but the purpose is to gather data about communication activities using a novel technology that is suited to decentralized IP networks. By the sounds of it, the technology will be levered to enable IP network variations of offerings for revenue assurance and fraud management, and possibly also for legal intercept of traffic and management of content.

The importance of securing patent rights has been underlined by the intensity of recent patent battles between big high-tech corporations, and also by the increasing threat posed by patent trolls. Depending on the existence of alternatives to WeDo’s new data gathering technology, this little story may be revealed as a big factor in any future valuation of WeDo’s business. It definitely shows that WeDo are thinking ahead by investing in R&D.

cVidya, the Israeli revenue assurance vendor, is seeking an injection of between USD10M and USD15M, and is possibly looking to attract buyers, according to Globes.

Let me lay my cards on the table. cVidya says a lot of things about how great they are, but few of them add up. Past experience of their actual products have made me wary of the claims made publicly by cVidya and its employees. I approach this latest news with my spin set to counter that of cVidya’s PR representatives. On February 15 they told us the following:

London, February 15, 2012 – cVidya Networks, (www.cvidya.com) a global leader and innovative provider of Revenue Intelligence solutions for Telecom, Media and Entertainment service providers, announced today that the company has seen growth of 25 percent in revenues and 20 percent in sales compared to 2010.

But there was no mention of profits, or cash generation. Searching for another USD10M in finance suggests cVidya are still fundamentally a loss-making and cash-burning outfit. When cVidya completed its merger with ECtel at the start of 2010, they inherited ECtel’s cash pile – and their burn rate. If nothing changed, ECtel’s cash reserves would have lasted 18 months. Now, 26 months later, cVidya needs more cash. This suggests they slowed the burn, but after 12 years in business they still have not turned cash-positive.

Also, the story of growth is not as good as it first sounds. The thing about announcing growth is that, even with an unlisted company that does not present reliable and transparent numbers, the good news given in the present day can be compared to the good news given in former times. When cVidya and ECtel merged, I speculated that the pre-merger cVidya generated similar revenues to the pre-merger ECtel, and hence that their combined annual revenues would be USD40M. My analysis was prompted because cVidya claimed to be the market leader at that time – a claim I thought unlikely given the more transparent revenue numbers available for WeDo and Subex. Soon afterwards, cVidya CEO Alon Aginsky publicly stated that the firm’s combined revenues were ‘in the area of USD50M’; see here. He also reiterated the claim that cVidya was the largest vendor by revenues and customers. I still think that was a bare-faced lie, and I take this most recent press release as corroboration. Whilst nobody else is claiming growth rates like cVidya, cVidya has stopped claiming to be the largest vendor and has now reverted to saying it is a market leader. Furthermore, the numbers make little sense, unless we assume low or negative growth during 2010. Currently we are told that the 2011 revenues were 25% higher than they were for 2010, and Globes tell us they are in the (very broad) range of USD60M to USD70M. Notice something? For 2009, the combined revenues were USD50M according to Aginsky. So, considering the stellar growth in 2011, what was the rate of growth in 2010? Was it nil? Was it small? Did revenues fall in 2010? Even if we take the top of the range for 2011 revenues, at USD70M, then a 25% rise means 2010 revenues must have been USD56M. At the bottom of the range, for just USD60M revenue in 2011, then a 25% rise means 2010 revenues were only USD48M… which is ‘around’ USD50M but only just. So perhaps there was revenue growth, but we can also say, with some certainty, that this company’s growth is far from steady or consistent. Also, we do not know how foreign exchange movements alter the USD-stated figures. For example, the US dollar fell 7% against the shekel during 2011; has the influence of extraordinary gains on forex been stripped from cVidya’s reported growth?

It should also be noted that the Globes article repeated their earlier report that revenues doubled as a result of the merger with ECtel. ECtel’s 2009 revenues were USD20M, something we know because ECtel was publicly listed. So was I wrong when I said combined revenues would be USD40M? How did USD20M ‘double’ to USD50M? Now the range for revenues is somewhere between USD60M to USD70M. I am willing to hypothesize a kind of consistency here. The real revenue number is always going to be around 10M less than the top number that cVidya touts publicly.

Anyhow, now that we learn cVidya is looking for a buyer, at a reported price of between USD150M and USD200M, the thinking behind their press release is clear.

Since their acquisition of ECtel in January 2010, cVidya has shown a consistent increase in its global customer base. In 2011, cVidya added 26 new customers, including some tier-1 CSPs in Europe, Africa and the US. In addition, cVidya extended its offering to include Analytics and Sales Performance Management beyond its traditional Revenue Assurance and Fraud Management solutions.

This ‘consistent increase’ in customers was not matched by consistent growth in revenues, for the reasons given above. More importantly, it seems that over the last two years cVidya can only name one of the new CSPs buying its products: Alaska Telecoms. Why are the other 25 customers so shy?

During 2011, cVidya has launched ProactiV™, the first solution that incorporates risk management methodologies within Revenue Assurance and Fraud Management, which has been deployed at several operators in North America, Europe and APAC.

Do not get me started on this. A well-meaning employee of a telecoms operator goes to the TM Forum, donates his intellectual property, and soon afterwards this is twisted into a justification to bolster the sales price of cVidya. Another round of applause for Gadi Solotorevsky, shameless pirate… I mean ‘selfless contributor’ to revenue assurance.

In addition… [snip the waffle about this new product and that new product, all with unnamed customers]… In 2011, cVidya has also introduced its cloud offering and already deployed its FraudView®/Cloud solution at leading providers such as Alaska Telecom.

Like I told you, Alaska Telecom is the one new customer whose name they can mention in public. So they did.

In addition, cVidya has managed to become the leader in expert training for Revenue Intelligence when launching the Education Center with its eLearning courses in Revenue Assurance and Fraud Management to address the market demand.

How peculiar. When this freebie was launched I was told it was not a blatant attempt to pirate TM Forum intellectual property into a training course that competes with TM Forum training courses. The weak explanation was that, supposedly, cVidya had no intention of aggressively competing in the field of training. Now they say they are the ‘leader in expert training’. Still, there is some comfort in hearing that Pirate Gadi is more popular than Papa Rob. Now he just needs to back up the hyperbole by showing stats to justify his claim to more members/trainees/certificates/courses/whatever than Papa Rob’s GRAPA.

“2011 was a fantastic year for cVidya,” said Alon Aginsky, CEO and president of cVidya. “cVidya has kept growing and continues to stay ahead of the market by extending its offering and entering new markets. While we have seen a slowdown in our marketplace, cVidya has kept driving and continues to stay ahead of the market. We continue to look forward into 2012 and foresee more positive improvement and progress.”

Slowdown? Excuse me? Cut through the waffle, and this quote says three things:

• cVidya “continues to stay ahead of the market”.
• There was a “slowdown”.
• cVidya “continues to stay ahead of the market” (again).

This tells me two things:

• This press release is a bodge, and was not properly proofed before it was issued.
• In the middle of the bodge, cVidya let slip something they should not have mentioned – they are suffering some kind of slowdown.

Unfortunately for us, this deepens the mystery about cVidya’s future, but offers no clues to solve it. We are told everything is ‘fantastic’ for cVidya. On the other hand, I would say investors should be wary of buying companies that concentrate on a market suffering a slowdown. This is how I interpret current events: people like to sell when they can get the highest price. cVidya is a business that has been running for 12 years. For most of that time, cVidya has told people that it is a start-up, even though the claim got more preposterous each year. Indeed, in 2009 Globes said cVidya was the 10th most promising start up in Israel. cVidya has never been profitable, and never generated cash. There is no possibility of an IPO; circumstances are even worse than when ECtel was listed, and the problems at Connectiva have highlighted how exaggerated growth estimates for the RA market are no guarantee that investors will get their money back. With no reason to be optimistic about a reversal in the ‘slowdown’ – a euphemism for the realization that actual market size is not as great as cVidya has previously promised its backers – cVidya’s top team spent one year trying to boost revenues by selling any and every barely connected offering they could think of, with the result that these additional sales had little synergy to their core offerings and hence did not contribute to profits. The news of revenue growth could then be turned into their last and best opportunity to sell the business and deliver some kind of return for investors. But that is just my opinion; there is too little fact on offer to properly analyse cVidya’s performance. I can only observe that cVidya’s report of its own performance has never been reliable. As always, the maxim should be caveat emptor – let the buyer beware.

What is the job of a risk manager? Well, it is basically to kick people in the bottom for being careless, before the carelessness causes real slip-ups. Or to be more precise, the job of a risk manager is to implement a process by which people get kicked in the bottom for being careless. Or, to be more precise, it is to implement a framework where: processes identify what bottoms exist; other processes analyse how far the bottoms stick out; other processes prioritize which bottoms to correct first; and other processes decide whether to kick the bottom on the right cheek, to smack the bottom on the left cheek, to leave the bottom as is, to give somebody else the bottom, to eat more and grow a bigger bottom, or to completely stop eating and avoid the need for a bottom. Then we step back, look at the new aggregate levels of bottomage, and decide if bottom curvature is in line with stakeholder expectations.

You could solve most people’s risk misconceptions by observing that every risk is just like a bottom. Bottoms are useful and they serve a purpose. Without bottoms, life would come to an end. The right bottom can be very attractive. Some want more bottom, and some want less bottom. If a bottom does not fit into a pair of jeans, then you eventually have to face reality and either go on a diet or purchase a new pair of jeans. Flattering clothes and averted eyes can reduce the attention paid to oversized bottoms, but we would be fools to deny the existence of the bottom. However discretely, every bottom needs to be handled from time to time; wait too long and you will find yourself sitting in a stinking mess. There are a lot of bottoms that people are averse to, but there will be some bottoms that people actively seek. And some people feel uncomfortable talking about bottoms. However, not talking about bottoms does not make them any less real.

Since Nassim Taleb popularized black swans, people are now accepting that we have not paid enough attention to bottoms. In fact, we chronically underestimated the gross weight of bottoms in circulation, because we were only ever counting bottoms on the occasions when somebody had their trousers pulled down in public. But, in recent years, bottoms have got a lot more exposure, mostly because of economic belt-tightening and increased transparency. The result is that businesses and even governments are increasingly conscious of the need for proactive bottom strategies. So risk managers must take the lead with changing attitudes to bottoms. And what is the alternative? None. Kick risk’s bottom, or risk being branded an arse.

I never blog rumours, but lots of bloggers do. Each to their own. So whilst I hear lots of rumours about Connectiva, the Indian revenue assurance vendor, I have been waiting patiently for official news. But telecommunications does more than leak revenues. It also leaks information. Or speculation. Or rumour. Or the grievances of disgruntled workers. You can decide for yourself, by visiting this blog apparently set up by Connectiva employees.

UK mobile operator O2 found themselves in trouble last week, when it was discovered they automatically sent the user’s telephone number to any website they visited. Any. The problem is fixed now, but the error that caused the privacy violation was created on January 10th and remained uncorrected until January 25th, according to O2′s blog. Whilst O2 were quick to resolve the issue once they had become aware of it, the most important lesson learned (we can only hope it is learned this time) is that customers have become adept at spotting the mistakes not caught by the operator’s formal testing. Lewis Peckover, a system administrator at a mobile gaming company, not only found the problem, but helpfully shared it with the world, writing a script so anyone could check if their O2 phone was broadcasting their number. You can see his script page here.

A knee-jerk reaction might be to demand more controls, more testing, more whatever. Without knowing how O2 works, I would not like to comment. Mistakes happen and will keep on happening; a demand for more and more controls can only lead us in ever decreasing circles. My reaction to this incident is quite different. First, O2 reacted quickly. That is important. Agility demonstrates concern and limits risk. Second, they were transparent. They did not keep quiet and hope the problem would disappear. Instead, they were proactive in talking to customers, press and regulators. This also limits the eventual damage done. Third, all telcos could benefit from making it easy for customers to give them information, and being responsive when acting upon it. It was easy for Lewis Peckover to tell the whole world about O2′s bug. O2 got the message, but they got it via a public route. If the same information had been passed to them privately, and if they responded as rapidly, no more harm would have been done to customers, but less harm would have been done to O2′s reputation. Customers can and will keep finding flaws, and the internet makes it easy for them to share them publicly. As with Facebook’s bug bounty, telcos can get error-spotting customers to work for the telco, not against the telco. Trying to avoid mistakes is obviously important and deserves the investment of time and effort. However, a tiny investment in helping customers to help the business means the issues can be resolved quickly and quietly – thus generating a positive return for the firm.