Itâ€™s been a while since we have seen good, quantitative survey results on the state of revenue assurance within telecommunications service providers worldwide, but KPMG has just released findings in their latest publication – â€˜Revenue Assurance in Telecommunications – Progressing or Preservingâ€™, that are really quite disturbing.
When asked about estimated revenue leakage in their operations, 54 percent of RA Heads indicated that revenue leakage was greater than 1 percent of total revenue (excluding fraud), and 15 percent indicated revenue leakage of greater than 3 percent. Some respondents in Africa acknowledged revenue leakage greater than 10 percent.Â These survey findings are skewed because 18 percent of respondents had no information on revenue leakages and 37 percent had no information on fraud leakages. Availability of information was a greater challenge for operators in the Asia-Pacific region than other regions.
I donâ€™t wish to sound alarmist but this extrapolates to over US$40 billion worldwide in lost revenue. Goodness me, after all the efforts by RA software vendors, countless consulting firms and our own series of RA publications and guides, you would think the message had sunk in by now. RA is a critical component of any operation and any recovery goes straight to the bottom line as all costs have already been accounted for.
The key insights listed in the executive summary say it all:
Top three sources of leakages
â€¢Â Â Â Configuration changes in any of the network elements
â€¢Â Â Â New product development and tariff configuration
â€¢Â Â Â Poor system integration from MSC-IN-Mediation-Billing Systems (CDR processing cycle)
Top three challenges faced by RA
â€¢Â Â Â Lack of accurate and timely information from business/operations
â€¢Â Â Â Absence of automated tools to support RA processes
â€¢Â Â Â Lack of proper authorization and influencing power of RA function
â€¢Â Â Â Prepaid (often considered as safe from leakage) is the largestâ€”and most vulnerable revenue stream for a majority of operators
â€¢Â Â Â Operators are willing to explore RA outsourcingâ€”mainly to access required skills
â€¢Â Â Â Vendor-related activities are yet to come under the purview of RA reviews
The report findings go on to point out that about one-fifth of operators worldwide do not have a formalized RA organization structure. In developing markets, RA was given more strategic importance than in developed markets (i.e. visibility to Board of Directors and Audit Committees indicating larger business mandates) and intention to move to cost reduction and revenue enhancement does exist across a majority of operators. Those that fall into these categories are presumably not members of the TM Forum because they are areas we have been hammering for years.
And the vendor community does not get away scot free either.Â The report states that even though an RA tool is considered a critical requirement for future RA transformation and that varied RA tools are extensively used by operators across the regions, a majority of respondents are dissatisfied with existing tools.
The majority of operators said they owned some requisite skills, with â€˜Network and Technicalâ€™ skills most lacking and that cross functional representation within RA teams is not yet formalized for most of them.
At this point itâ€™s probably fair to quote that famous line from Apollo 13, â€œHouston, we have a problem!â€ This report is concerning, nay disturbing, when you consider the effort,Â publicity, events and concerns centered purely around RA in the last five years, in particular.
Senior management teams in any CSP that doesnâ€™t get it yet is steering the businessÂ into industry equivalent of the â€œBermuda Triangleâ€.Â Any board member or shareholder reading this report will surely be asking management about RA in the organization and taking remedial action, post haste.
what’s in your opinion the reason that these figures come from RA Heads, and not from the CFO? I would say that the CFO is the most entitled to say how much of the total revenue is lost, even if it’s only an estimation. In the end, that’s where in most cases RA Heads report to anyways, so why do you think CFOs are almost never quoted in these reports?
To go a step further, what credibility do the respondents have, if 18% don’t even have the information? Maybe those are really the honest ones and the others, who claim those figures, have no data to back those up. If 18% of a target group lack the critical piece of information, I would argue that the question is asked to the wrong people.
These are very good questions which should probably be directed to KPMG, the survey authors. However, I would hazard a guess that CFOs, if approached, would not even respond to an RA survey or be willing to disclose any leakage in their revenue systems. And it’s not necessarily the case that RA always reports to the CFO. In many operators the RA function has extended well beyond the ‘leakage assessment and correction’ stage to one of assuring that any new products and services are billable before their release, even requiring RA sign-off and RA is a stand-alone department reporting to the CIO or CEO.
RA people also rely on industry or internal KPIs to not only keep track and quantify their efforts to senior management but also to gauge how their operation is faring against other similar organizations. That is why the TM Forum’s RA Benchmarking Surveys are so popular and why RA people are not frightened to respond to surveys from respected firms such as KPMG, especially if KPMG is their audit firm. As long as their anonymity remains intact and they are able to show their management where they fit in the scheme of things when the survey is released they will probably respond. As for the 18% that did not have the information at hand it may have been a god excuse not to take part in the survey or, as you say, they were the honest ones.