Archive for October, 2010

The long awaited moment arrived. The study (phase 1 I have to add) was completed and submitted to the University of Johannesburg for examination. A series of academic articles will share the provisional taxonomy.  Additional work will be done in the DPhil to continue building and validating the working definition of RA. I can’t share too much prior to formal publication but I can discuss the study approach and some of the outcomes and implications for industry.

There is a saying about going back to the beginning if all else fails. Grounded theory enabled me to do just that. The qualitative method for those unfamiliar with it works on the principle of inductive reasoning. It assigns codes or words to concepts as it appears in the raw data. The creation of the code is done within the context of what is said without considering who said it, through which medium and for what reason. Obviously one can use the method to analyse “who said it” and “how it is communicated” but for this study I focused on what is said. Some 200 “what of RA” codes were generated and analysed to create hierarchies of conceptual categories. Developing the hierarchies of meaning this way allows your theory (or the concepts only in this case) to be grounded in the data. It thus becomes free of emotion, own values or ideas.

Over 20 core concepts emerged from the data, many of which are of no surprise. When you read industry material, what is foremost in most of these RA articles? Motivation to do RA, structure of the RA function, functional area in which to do RA, the process and the methodology of RA, etc. Known concepts but with vague or fluid meanings attached.

The core concepts saturated. In other words I did not find industry material talking about a concept I did not already have. However, there are concepts, which did not develop density, as there was no material that provided detailed enough descriptions to develop properties. Using an example. The RA methodology developed properties of its purpose, e.g. what it should do for the CSP but did not develop enough on what it should look like or consist of to be regarded as a methodology. Needless to say, there is overlap in the material pertaining to concepts. What one source describes as the methodology, the other would position as a process. Some differences can be eliminated through analysis, while others become issues for industry debate and field assessments.

The provisional taxonomy positions these 20+ concepts into 8 domains within one of two underlying themes (business management practices and the philosophy of RA). The study was a bit wide to publish as one article. The basic taxonomy and the method used to arrive at it will be published in 1 article. Conflict across concepts or obvious disparity within concepts will be dealt with individually though discussion documents. These will be published in academic journal where you will have the opportunity to respond.  I will also attempt to resolve these conflicts through fieldwork, which may….will be quicker than formal journal discussions.

Happy to answer questions if I can do so within the constraints of publication requirements.

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TEOCO, the cost and revenue management vendors headquartered in Virginia, have issued a startling report about traffic pumping in the US market. Traffic pumping, also known as access stimulation, is a kind of arbitrage where local carriers (LECs) in rural areas are complicit in arranging for the termination of inflated volumes of traffic on their networks. They form partnerships with providers of ‘free’ services to end users, who receive a cut of the LEC’s termination charges. Typically these services will be conference calling facilities or sex chatlines. Carriers are legally obliged to carry the calls, and rural LECs profit because the regulator sets them high termination rates in order to protect services in rural areas. The regulator’s noble intentions are little comfort to the carriers forced to pay the high termination price for a lot of inflated traffic. TEOCO has analysed the data, and per their calculations, traffic pumping has cost US carriers a total of USD 2.3 billion over the last 5 years. To find out more, read TEOCO’s press release and download their report (registration is required).

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This post started out as another in the occasional series on what other industries do when they talk about ‘revenue assurance’… and then a flash of inspiration made me see the relevance to what we do in telcos. As part of my regular web trawl about revenue assurance news, I found myself reading about ‘solar revenue assurance’ . It turns out the concept is a form of insurance for the income generated (pun intended) from investing in a new solar power program. You can read more here. This use of the phrase is at the far end of the spectrum from what most people think of as being revenue assurance for telcos. There has been many a person who has misheard a syllable and assumed that people work in a department called ‘Revenue Insurance’. The linguistic connection between ‘assurance’ and ‘insurance’ is strong. When farmers talk about ‘revenue assurance’ they invariably refer to a financial guarantee that ensures they remain solvent even though crop production will vary. That same variability also threatens solar power projects: returns are lower if the sun does not shine! Step back and look at the big picture and there is justification in using insurance to share the risk, and hence motivate more investment and more total production than if the risk was not shared.

The connection leads me to an interesting question about revenue assurance in telcos. If you listen to some people, it is guaranteed that RA will not just pay for itself, but deliver huge returns. On the other hand, there is pessimism about financing RA projects. Execs are unwilling to take risks when they are not confident about the returns. Some vendors bridge the gap by offering risk-sharing deals. In short, the vendors do not ask for money up-front and instead take a slice of the incremental income they produce for the telco. Outsourcing of revenue assurance and fraud management is also becoming more popular, making vendors genuinely long-term partners in the battle to maximize business value. So what would it take to offer insurance for the returns generated from revenue assurance or from fraud management? If leakages are caused by mistakes, and fraud by theft, then revenue assurance and fraud management are a kind of operational risk management that lowers the telco’s costs in a similar way to how safety training reduces the number of accidents and security guards reduce the number of thefts. We can also insure against accidents and thefts, so why not insure against leaks and frauds? On the other hand, the vendor that offers its services on a risk-reward basis could seek insurance for its returns, which is nothing other than a ratio of the losses that the telco would otherwise have suffered.

Back in the here and now, nobody does insure revenues and/or leakages like this. The truth is that, despite the sales hype, leakages are less predictable than the weather. Insurance companies take on a degree of risk, but they do not gamble on unknowns. This should open our eyes to the possibility of a kind of maturity that currently resides well over the horizon. There is a level of quality control and process integrity where we could predict the overall value of leakages and frauds as reliably as the weather is predicted. That level exists, even if we never climb that high in practice. We are currently far below that level of sophistication, and all our measures only tell us about the past, without being a reliable indicator of what lies in the future. When revenue assurance and fraud management reach a stage where the variances they address are as predictable as sunshine or rain, then it will become possible to create financial products that further share the risks. For now, the practice of telco revenue assurance is a long way short of revenue insurance. Validation of its ongoing economic value will only come when revenue assurance returns are predictable enough to be bought and sold.

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Israeli RA vendor cVidya has announced that it will be launching a Software-as-a-Service (SaaS) version of its current fraud management and revenue assurance offerings. Their new proposition is to be branded cVidyaCloud. You can read the press release here.

The press release only offers skimpy details about what will be offered – expect to see more announcements as the services are actually rolled out. cVidya’s aspiration is to supply on-demand versions of all their analytics tools, but it is unknown which particular services will be launched first, or what the rollout timetable might be. Their press release only states that: “one of cVidyaCloud’s applications will be introduced in the company’s User Conference in Barcelona in two weeks.” However, their marketing pitch is clear: cVidyaCloud will offer low-cost services that will be more affordable for customers with smaller budgets, and will make this possible by keeping set-up as simple and standardized as possible. The cVidyaCloud proposition appears to be offered as a straight competitor to ROCcloud, the SaaS offering which was launched by Subex in April. One difference is that cVidya’s marketing is more ambivalent about who are the potential customers for online services. Whilst Subex appeared keen to avoid cannibalizing sales by focusing ROCcloud at the smaller end of the market, cVidya have been more open in their language. The new product page for cVidyaCloud describes it as “revenue intelligence on demand for service providers of all sizes“. In practice though, cVidya are likely to use SaaS as a way to attract new customers and will later aim to upsell to licensed software installed at the customer’s premises.

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Near the end of this rather routine revenue assurance article-cum-sales pitch for Connectiva, we find a remarkable assertion:

In addition, our solutions are capable of handling very large volumes of data. For example, they process more than 8 billion records per day in the largest revenue assurance deployment in the world.

How does Connectiva know this is the largest RA deployment? Is someone maintaining a league table? If so, will someone share it with the rest of us? ;o)

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