Digital Services: The Risks of Crossing the Chasm

In an 18th century Japanese painting by a famous Zen master, two blind men are depicted crossing a deep chasm, slowly inching their way across a precarious log bridge to the riches that await on the other side. This image is a good analogy for how some service providers feel about navigating the shifts they are experiencing in the telecommunications market today.

Like these ancient travelers who are unsure of the journey but hopeful of what lies ahead, today’s Communications Service Providers (CSPs) are facing an increasing number of challenges from the new Digital Economy and need to prepare for new risks. Unlike anything we’ve ever seen before, this new way of doing business is all being driven primarily by the growth of partner ecosystems and platforms, which will become tomorrow’s model for delivering new digital services.

These digital economy ecosystems include unlikely bedfellows, such as service providers, content and OTT providers, enterprise businesses and others, and they are creating a whole new set of challenges for CSPs. First of all, there is an increasing need for investment across new technologies just to enable these ecosystems, such as cloud computing, ICT (information and communications technologies) and digital apps. Then there are the associated challenges of actually managing the new complexity that comes with the growing number of partners that make up this new ecosystem.

Think this is all getting a bit confusing? We’re only just getting started. Let’s review a list of some of the new partnership models* that an operator might want to support in this new digital economy:

  • A2M2B: business to intermediary to business
  • AB2C: Co-market
  • B2M2X: Intermediary
  • B2D2C: Distributor
  • A2E2B: Ecosystem Enabler
  • B2E2B: Clearing house
  • B2F2C: Franchise
  • B2G2C: Integrator
  • BG2C: Sell with
  • B2K2C: Broker
  • B2P: Purchaser
  • BV2C: Advertiser
  • P2B: Provider

*Extracted from TM Forum’s R217 Partnership Revenue Models V0.5.2 Standard

While there is a lot of talk about all the new business and revenue opportunities this digital transformation will create, at the same time it is also creating a lot of uncertainty and complexity. The ‘risk universe’ for communications operators is changing – and growing – rapidly. Everything from partner onboarding and oversight, to supporting and enforcing complex partnering agreements, SLAs and pricing and settlement models. For instance, on the billing side, there are one time charges, recurring charges, usage-based charges, termination charges, and of course discounts and bundles to manage. And then we have prepaid and postpaid billing, self-assessment, billing-on-behalf of, and insurance for the various payment models.

This all requires new tools and processes to keep everything working together seamlessly, to ensure there is no revenue leakage or new avenues for fraud. CSPs also have the complexity of hybrid networks to manage, often supporting 2G, 3G, 4G, and 5G technologies at the same time, with newer IP networks working in parallel with circuit switched networks that are melting their hardware, or iron, into software through virtualization.

Along with the internal risks associated from added complexity, there are also the external risks of security and fraud. We experienced one example of this with the recent denial-of-service (DDoS) attacks that caused Twitter and hundreds of other sites to stop working. Hackers accessed over 150,000 vulnerable IoT devices, including security cameras and DVRs, which were overtaken and used without their owners’ knowledge or consent as botnets to overwhelm various internet sites. As the IoT grows in scope with little in the way of protocols and oversight, this security gap will undoubtedly continue to grow.

With all of these fast-paced and far-reaching changes within the telecommunications landscape, the risk of revenue leakage and fraud is becoming a much bigger threat.

In the telecommunications industry, change is here to stay – and so is risk, which means we need to learn to manage it more effectively. Operators have to ensure that their understanding and ability to manage this risk keeps pace with both their business, and the world around them. The ability to manage multiple risk environments while complying with existing regulations and adapting to new business models will allow CSPs to succeed in this new digital era.

To put all this in perspective, in order for telcos to cross the chasm and successfully transform their operating models, the function of managing risk will have to take center stage. How can they begin? While CSPs cannot prepare for every eventuality, initiatives can be implemented that will bring short-term business gains while helping build the essential long-term components of high-performing risk management capabilities that will be required over the next decade.

At WeDo Technologies, our goal is helping our clients assure their business, both for the present and the future, with an understanding that new risks arising from emerging technologies and new partner ecosystems will need to be managed side by side with the more traditional risks stemming from legacy systems and traditional business models. Today, about 50 percent of a typical CSP’s risk management team is dedicated to risk-related operational processes, such as credit administration, while only 15 percent are focused on analytics. According to McKinsey research, by 2025, these numbers will be closer to 25 and 40 percent, respectively.

Technological innovations continuously emerge, enabling new risk management techniques that help organizations make better risk decisions at a lower cost. WeDo Technologies software leverages big data processing techniques, machine learning, APIs and even crowdsourcing to expand traditional fraud and revenue management capabilities, allowing us to optimize and analyze data in better ways and automate complex processes, such as data preparation and risk pattern identification. Whether it’s linking machine learning to digital risk profile analysis, or developing new working tools that allow citizen data scientists – those from outside of the traditional revenue assurance departments – to help identify areas of risk, we are committed to helping our clients cross the chasm of this great digital shift. This will transform their businesses for the better, regardless of what the future holds.

This article was originally published on the WeDo Technologies Revenue and Business Assurance Blog. It has been reproduced with their permission.

Carlos Marques
Carlos Marques
Carlos joined WeDo Technologies in 2009, after previously working in marketing and sales for IT companies. Carlos is WeDo Technologies' Head of Product Marketing and Alliances. He is the leader of the company product board - the "meeting point" for product and services strategy at WeDo. Carlos is also the person responsible for publicly communicating the product roadmap during WeDo's annual user conference.