We Need Fewer, Bigger, Better Vendors

There has been a lot of revealing news recently. But when I say ‘revealing’, I mean that in the sense of a man who sees dark clouds on the horizon, pulls out his binoculars, studies the skies carefully, tries to predict what will happen, and only reaches a conclusion when the rain is pouring on his head. The latest news ‘reveals’ that the market for revenue assurance and fraud management is contracting. Does this need saying? Hardly. It is obvious, and has been for years. And yet talkRA does need to say it, because if you receive your business assurance news from elsewhere, there is zero possibility of you reading about the decline of the market.

Let me summarize recent news. To begin with, an absence of anyone issuing press releases about sales is also a kind of news. They say ‘no news is good news’, but not in this instance. Companies that have to report results have been issuing disappointing numbers. Companies that do not report results have been saying as little as possible. The re-born Connectiva has shifted its focus away from RA and FM. Minor player Basset barely mentions assurance any more. Even Morisso Taieb, serial launcher of LinkedIn groups (such as the ‘RA Pros’ group) is sending out invitations to join a new group for ‘online lending professionals’ – which means there is not enough activity on his old groups, or he wants to get a job with a payday lender.

Everything points in the same direction: revenue assurance and fraud management have reached the point where the buzz is over, sales are rare, and former big-shots want to change job. So if any of you were hoping to be appointed the Chief Revenue Assurance Officer of a major telco, you might want to stop daydreaming, and to think more constructively about your career direction. The party is over, but the hangover will not last forever. We still need to get on with the rest of our lives. After the boom and bust comes a steady state of affairs, where the ongoing demand for assurance is satisfied, without excessive optimism about what might come in future.

Those of you who intend to manage revenue assurance and fraud management teams over next few years, need to be thinking very seriously about your current choice of supplier. Suppliers that were good choices during a phase of growth may be lousy choices during the steady state. Will your vendor still be in business, a few years from now? Will it be under new management? Will it have merged with another vendor, meaning you will have to switch to another supplier’s product whether you like it or not? Will the vendor persist, but milk you for fees, whilst having no intention of upgrading their product further, because they can find no market for it? Consider Connectiva. A start-up that raises a lot of capital may never reach the point where it turns a profit, and unprofitable firms cannot persist indefinitely. Consider Basset. Even if the supplier is viable, or is bought out, you may find the supplier has only a few customers for the product you use, and so has no reason to invest heavily in upgrading that product. Choosing the right suppliers ranks amongst the most important decisions that managers can make. Even if your supplier is currently satisfying requirements, there is still a need to plan for the future, and that future may involve a change of supplier.

My advice is straightforward. There is little future for business assurance if it relies upon too many undercapitalized, underperforming, small and loss-making vendors. Too much will be spent on marketing, too few resources will be directed into significant research and development. That means customers will have a lot of nominal choice, but only of similarly unimpressive, underdeveloped products. It is better that we all drive an identical Model T, and for every car to be black, than bickering about which horse we ride to work. Fewer vendors would be in everyone’s interests – except for those working for the vendors that miss the cut, and the telco staff who are too close to those particular vendors. We need vendors to be profitable, so they can be stable, and reinvest profits into development. That means bigger vendors, and fewer vendors, each taking a larger slice of a smaller cake. That is in the long-term interests of customers too, because investment in tools will only occur if a profit can be made from selling them.

Consolidation is good for the strong, who will survive, and bad for the weak, who will perish. Assurance has been the subject of a lot of hype, but hype tends to distract us from real weakness. I want to see a stronger, healthier assurance sector. To get that, we need to weed out the weaklings.

Eric Priezkalns
Eric Priezkalns
Eric is a recognized expert on communications risk and assurance. He was Director of Risk Management for Qatar Telecom and has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and others.

Eric was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He was a founding member of Qatar's National Committee for Internet Safety and the first leader of the TM Forum's Enterprise Risk Management team. Eric currently sits on the committee of the Risk & Assurance Group, and is an editorial advisor to Black Swan. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.

Commsrisk is edited by Eric. Look here for more about Eric's history as editor.
  • Eric,

    I disagree. The more vendors, the merrier. For one, it keeps the market leader on its toes. Is the market better served by quasi-monopoly players like Amdocs in billing and Oracle in databases?

    If certain suppliers are weak, let them deal with that challenge. Buyers are intelligent enough to select value.

    Another reason to keep weaker players is a larger player can acquire them and take them to the next level — which makes them more financially viable, as you suggest.

    We are moving to an era where size matters much less. Big data makes it possible for a relatively small group of process experts to break away and get something started. The software skill is less important than the domain expertise. And the cloud has made is far easier to ramp up a software business and penetrate accounts that would be impossible to reach in the software license era.

    Imagine if you and a few other talkRA experts ganged together to create your own consultancy. I think you would come out of the starting gate winning some business — even challenging the market leader in some areas.

    I’m a one-man industry analyst firm. There’s nothing more fragile that that :- ) But in certain limited subject areas I can beat Gartner because they really don’t focus on those corners of the market.

    • @ Dan,

      There’s no doubt that you’re a one-man phenomenon, and I applaud the way you routinely beat goliaths like Gartner. Yet whilst I naturally side with the underdog, I wouldn’t compare Subex and WeDo with Amdocs and Oracle. Subex and WeDo are a long long way from becoming a quasi-monopoly. If they were making monopolistic profits, I would agree with you. However, RA has not reached the stage where it generates reliable revenues like those which puff up the profits of Amdocs and Oracle. Rightly or wrongly, customers perceive Amdocs and Oracle offerings to be ‘essential’ in ways that customers of RA systems do not. When Amdocs and Oracle make sales, they can add a healthy margin to the price. Some of that margin goes to shareholders, and some to marketing. However, some also goes towards product development. This is the basis of my argument – that if the developers are undernourished, we will reap a poor harvest in terms of poorer tools, which leads to poorer delivery inside the telco, which slows the development of RA.

      I wish I could agree with your sentiment that buyers are intelligent enough to select value. I see two problems with this statement. Firstly, value for who? There’s a few people in RA who persuaded their telco to buy a system from a certain vendor – and then became an employee of that same vendor. They may have made the decision which delivered best value for them personally, but I wonder if they had the telco’s best interests at heart. Secondly, telcos suffer the same faults of plenty of business: they may choose the lowest cost over the best investment. When every vendor is promising millions, billions, 2-20% etc returns on absolutely anything labelled “revenue assurance”, and when there is very poor (and very inconsistent) valuation of the returns generated by RA, then it’s easy to see why an inferior low-cost product may be selected over a more effective, but more expensive alternative.

      You’re very kind to suggest that if I and the other talkRA experts founded a consultancy, then we could challenge market leaders. But I am not persuaded by your flattery. Most telco execs employ consultants because of two reasons: (1) weakness, or (2) politics. It is rare that telcos employ consultants like me because I simply know more than they do… and even if I did know more about a specific topic, that doesn’t mean they would follow my instruction. Weak execs employ consultants in order to bolster the decision they wanted to make anyway; they are not really interested in hearing any contradiction to their existing opinions, as that would highlight their weakness as decision-makers. They are only looking for justification for the decision they have already made. Politics often involves the fudging and manipulating of decisions to appease the contrasting demands of execs in conflict with each other. Consultants might be able to find ways to overcome an impasse in much the same way that diplomats might overcome the differences of warring factions. So consultants can make good money by telling execs what they want to hear, or by being good negotiators and intermediaries. They rarely make good money just by being knowledgeable about their subject and giving good advice about it. In fact, the latter is almost irrelevant when it comes to consulting about assurance and risk management. I routinely hear bad advice peddled so regularly that it makes me want to pull my hair out. In fact, like urban legends, bad advice can be repeated so often that most people believe it must be true, though nobody can name an example that shows it to be true.

      Many times I’ve had to deal with consultants from a firm with swanky marketing and an impressive brand who literally knew nothing about the topic they were ‘teaching’ to me. Sometimes they appeared to be telling me things which had been read from something cribbed from something copied from something I originally wrote! These people don’t get the job because of what they know, or how good they are at the nominal task. They get the job because they look right, say the right things, and know how to play the game (with a nod, a nudge, and a wink). The tedium and triviality of such meaningless game-playing is why I’m so happy to be retired…

  • fraud guy

    Very well said Eric…