Revenue Assurance Teams Must Refocus on Costs

If you have not been hearing about big job cuts at telcos then I am impressed by the resilience of your business or dismayed by your ignorance of what is occurring globally. Revenues from traditional telecom services have been stagnant (or worse) for years. A few weeks ago I had a conversation with the CEO of a large carrier who had no interest in reducing fraud for voice and SMS because he believes both services are in permanent decline and that his company’s future lies elsewhere. When CEOs expect revenues for a service to fall irreversibly then it would be foolish to expect rapid advancement in a career dedicated to boosting the revenues generated by that service. Jobs are being cut because lowering costs is now considered a more important goal than growing revenues, but there are other ways to reduce a telco’s expenditure. Redundancy packages incur large additional one-off costs that offset savings from having fewer employees. There may be more intelligent ways to lower spending by increasing the efficiency of expenditure on operations or capital projects, but intellect is useless if divorced from reliable data. Now would be a good time for revenue assurance teams to show they have the imagination, talent and versatility to turn their attention to cost management.

I am not alone in thinking like this. Experienced managers at several revenue assurance vendors have recently spoken to me about their concerns for the RA market. They worry that revenue assurance has gone down a dead-end street by becoming too rigid. These firms previously rode a wave of sales as telcos bought revenue assurance systems for the first time, but the copycat nature of the RFPs for these systems became a trap. Vendors and consultants who encouraged every new telco client to repeat a list of all the same control objectives as used by their previous client seemed to offer an elegant shortcut that guaranteed maximum returns from standardized products. However, very long lists of control objectives copied from another business are prone to inefficiency because it is unlikely that two firms will have exactly the same priorities.

Too many revenue assurance controls delivered negligible value but were retained because they gave RA staff something to do. This was easily tolerated because of the considerable benefits generated by the subset of controls that really mattered, especially in the period immediately after a new RA system has been implemented. When continued over time, executing many controls which add little or no value discourages flexibility in the methods and aims adopted by a team. Why go to the trouble of investigating new ways of adding value when you already need to spend 8 hours a day executing a recurring list of controls as consistent with the specification of the expensive RA system your company bought? It is easy to see how staff can be lulled into a false sense of security by ‘needing’ to endlessly repeat a standard series of controls even if they never find anything wrong. This security then becomes the enemy of imagination, adaptation and change. And this lack of change then feeds into the concerns of RA vendors who are unable to make new sales because their customers do not want anything new.

During the early days of revenue assurance it was apparent that new RA teams needed to be wary of duplicating the efforts of staff elsewhere in the business. RA managers do not have an exclusive license to perform the tasks associated with RA. Just because a department is called ‘Revenue Assurance’ does not mean that nobody else in the business ever previously checked a bill, monitored for errors, corrected mistakes, or executed countless other controls that also serve the purpose of assuring revenues. By the same token, there will be staff spread around a telco who are already responsible for many tasks associated with cost management. There will likely be at least one team working for the CFO that actively negotiates better deals with suppliers. Somebody working on the networks side of a business will likely be scrutinizing the cost effectiveness of decisions related to the location of new infrastructure. But just because people are doing some things that reduce costs does not mean the business is doing every thing that might be done to reduce costs. Unlike those other teams, RA departments have experience of pursuing a somewhat holistic goal of improving revenues and profits in general, and they will also have some experience of managing the boundaries between their work and complementary work done by other teams. An RA team can seek to take increased responsibility for lowering costs without angering other parts of the business by replicating their efforts.

The much-trumpeted transition from revenue assurance to business assurance was meant to permit RA teams to expand their scope to areas like cost management that would previously have fallen outside of their objectives. The transition was encouraged by vendors who had already become desperate for new sales. The switch was flawed because the transition was too dramatic: a long and overly-prescriptive list of controls to achieve a narrowly-defined series of objectives was supplanted by loose thinking about vague ambitions. The ambitions covered by the umbrella of business assurance were far too extensive to all be accomplished with the finite resources available. The rigidity of expecting every telco to have the same priorities gave way to the dissipation of having no clear priorities at all. But RA teams can still revisit specific cost management goals that are amenable to data analytic and process improvement methods they already use. Many of these goals can be inferred from the various forms of assurance described in RAG’s leakage coverage studies.

Many years have passed since I began arguing that RA teams should scrutinize the profitability of network assets, though RAG’s studies have shown that only a few RA teams have risen to that challenge. Some will rue the missed opportunity to guide expenditure on 5G, but other ways to cut capital costs will remain attractive. Telcos will still need to roll out new cell sites or lay cables. Somebody needs to decide when and where to provide temporary enhancement of network coverage for major events. Towercos should aim to be especially efficient with capital expenditure, so RA professionals can improve their job prospects by developing experience of relevance to towercos as well as network operators. But there have always been more obvious routes to expanding the remit of RA by linking revenues to operating costs. Interconnect revenues for one telco are interconnect costs for another. Understanding both revenues and operating costs leads to an understanding of the profitability of each service and each customer.

It does not require much imagination, nor awareness of current affairs, to identify other areas where telcos will increasingly be sensitive about costs. Protests about climate change and the spike in energy prices caused by the war in Ukraine should have already heightened awareness of the need to be efficient with energy, but how many RA teams have grabbed the chance to analyze energy usage across networks and data centers? A business that understands transmission in communications networks should have a head start at understanding the factors that drive costs when transmitting energy across other kinds of networks. Working with imaginative business partners to reduce electricity use and costs by a few percentage points will become increasingly worthwhile as electricity prices rise.

If you work in revenue assurance and have not sought increased responsibility for cost management then it is not too late to diversify your role and add new value to your telco. And if you have already taken responsibility for cost optimization then be conscious of how reducing costs will be central to the messages that CEOs present to shareholders. Successfully analyzing data in order to reduce costs may even save somebody’s job. And that person’s job may be your own.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.