Swimming with Sharks: Stratecast Margin Assurance ‘Deep Dive’

Stratecast’s report on Global CSP Financial Assurance is not new. It came out last year, and I previously mentioned it here and here. However, my attention was drawn back to it by a new press release, promoting the benefits of reading the report. The press release reminded me of my earlier criticism of a different Stratecast report, which wrongly implied margin assurance is a new activity. Sadly, the people at Stratecast must be too busy doing ‘research’ to notice criticisms like mine. As a result, they have repeated the same nonsense in their new press release.

Margin Assurance is… the “fuzzy middle ground” that is rapidly defining new opportunities for both suppliers of Margin Assurance solutions and the CSPs that use these tools to improve their business processes.

The only problem is that margin assurance is definitely not new. Margin assurance is old. I used a fabulous ‘new’ research tool to verify this. You may have heard of this tool – it is called the internet. Here is a small sample of what I found by googling ‘margin assurance’…

  • In October 2012, Dan Baker interviewed Efrat Nissimov of cVidya for Black Swan. The article began with the following statement: “margin analysis is one of the hottest trends in business assurance and telecom analytics”. It goes on to say: “to be honest, while margin analysis is hot, it’s not exactly new.”
  • In September 2012, LATRO published a white paper explaining their margin assurance services.
  • In August 2011, Contact Telecom published their white paper on margin assurance.
  • In May 2011, Source Loop described a series of “revenue and margin assurance services” that they offered.
  • In July 2009, GRAPA (remember them?) was offering training on how to do margin assurance for “interconnect, content, rate plans, bundles”.
  • In October 2008, Birch Communications advertised for the vacant position of Director of Margin Assurance and Carrier Relations. The responsibilities included: “vendor cost analysis, revenue accuracy accountability, margin analysis and management, vendor negotiations, institutionalizing best practices and automation, improving revenue assurance objectives, and managing cross-functional teams”.
  • In September 2008, Subex published a brochure for their ROC software which explains that “ROC cost management can interface with information rich systems like interconnect billing and revenue assurance, thereby providing the operator with end to end cost and margin assurance”.
  • In May 2007, OSS News Review described Cape as “the leading innovator and provider of Revenue, Cost and Margin Assurance solutions“. (WeDo bought Cape soon after.)
  • A professional called Stuart Rowe acquired the rights to marginassurance.com in November 2006. He used the site to offer his services as an expert in “revenue operations, margin assurance, billing and payments”.

It took 6 years for margin assurance to go from the point where the URL was grabbed by a single professional, to the point where Dan Baker called it a ‘hot trend’. But if it was a hot trend years ago, it makes no sense to keep describing it as ‘new’.

This nonsense reminds me of the bad old days of revenue assurance, when those of us who were actually doing it had to suffer a decade of people telling us they had just started doing it – and that they could not believe that anyone had done it before them.

If you believe margin assurance is ‘new’ then you are ignorant. I am sorry to be blunt – but we cannot learn if we do not first admit to ignorance. (But then, people who are that ignorant probably do not read Commsrisk. Instead, they spend thousands of dollars on research reports that tell them what they want to hear.)

However, I do not believe that Stratecast is ignorant. I think they are just pretending to be ignorant. Take a look at what I found dating back to July 2010, when Stratecast published a report in cooperation with WeDo

As with other revenue assurance vendors, WeDo Technologies has expanded from basic switch-to-bill analysis into a broader set of offerings under the heading of “Business Assurance.” Here, a variety of different data sets are analyzed to identify revenue leakage and process improvement tied to cost management, margin assurance, and business process assurance. (My italics)

So much for Stratecast’s so-called ‘research’. I can believe they are too lazy to do a Google search, but do they not read their own reports?

In this instance, I think Stratecast are guilty of something much worse than laziness. It looks to me like they have deliberately chosen to misrepresent information in order to boost interest in margin assurance. I come to this conclusion by looking at the peculiar way they have defined financial assurance, which they describe as a combination of the (old) practice of fraud management, plus the (old) practice of revenue assurance, plus the (supposedly new) practice of margin assurance. To begin with, this is how they describe fraud management:

Communications fraud has been defined by the TM Forum as: “the intentional action(s) by an individual, group (e.g., syndicate), or enterprise (e.g., partner) to receive, through deception, products, services and/or revenues from the target service provider(s) without remitting expected value for those products or services.” Fraud Management is the identification and remediation of fraud-based activities.

There is nothing wrong with this definition. What struck me as odd is that Stratecast went to the TMF for a definition of fraud and fraud management, when there are several international organizations that have been addressing telecoms fraud for much longer than the TMF has. Why not ask for a definition from the GSMA, or from the CFCA, or from FIINA? Those entities had all spent decades dealing with fraud management before Gadi Solotorevsky started arguing, in the year 2010, that fraud management needed to be covered by the TMF… as a subset of the work done by his TMF revenue assurance team. (Fortunately, others disagreed with Gadi, or else the TMF would still not have a standalone team working on fraud management.) And that leads me to my next point…

Revenue Assurance is the identification and elimination of unbilled revenue associated with the use of customer services. This situation is generally a result of internal mismanagement, misaligned processes, or lack of a coordinated flow of data between the network, internal business systems, and partner channels.

So reads Stratecast’s definition of revenue assurance. Did you notice which international body they chose not to ask for a definition of revenue assurance? If the TMF is in a position to define fraud management, then why not use the TMF’s definition of revenue assurance? Whilst the TMF was a laggard in the field of fraud management, it was a pioneer in the realm of revenue assurance. The TMF’s RA team has existed a lot longer than its fraud management team. So why not use the TMF’s 2004 definition of revenue assurance, which has never needed to be changed since? I think I know the answer to this question. Stratecast does not want to hear the TMF’s definition of revenue assurance, which follows.

Revenue Assurance: “Data quality and process improvement methods that improve profits, revenues and cash flows without influencing demand”.

Hmmm… that kinda sounds like, way back in 2004, margin assurance was included in the TMF definition of revenue assurance. But as Stratecast have trolloped along a decade later, eager to rewrite history to sell some crappy reports, that definition would be inconvenient.

In case there is any doubt about the original intentions of the TMF team – I have no doubts, though I know of a team leader whose memory is failing him – I went back to the first published version of TR131 Revenue Assurance Overview, the document where the TMF defined revenue assurance. It contained an ***incredibly*** long section on the definition of revenue assurance (as if somebody did some proper research instead of just picking whichever definition they fancied). This is what the document states:

When a product increases in its importance and popularity, margin leakage also increases.

The word “revenue” is itself a misnomer for many of the objectives that have been defined for “revenue assurance”… For example, some authors explicitly, others implicitly, link the same techniques to the goals of cost reduction, margin enhancement or improved asset utilization. It may be that some authors now intend the word “revenue” to be only used in a figurative sense when included in the term “Revenue Assurance”…

[Our] definition deliberately avoids a strict specification of what are the boundaries to the scope of Revenue Assurance. Whilst all seem to agree that the main driver of Revenue Assurance is an enhancement of financial performance, there is considerable disagreement about which financial KPIs are relevant. For this reason, the definition has focused on the common methods employed in Revenue Assurance, leaving the choice of relevant financial metrics open so they can be tailored to different business models.

An exercise was undertaken to analyze current usage of the phrase “Revenue Assurance”…

  • The meaning of “Revenue Assurance” would be determined by analyzing actual industry usage by a wide selection of Revenue Assurance practitioners, and not through consideration of what a single or small number of authorities believe it should mean.
  • Reasonable efforts need to be made to collect objective data on how the phrase “Revenue Assurance” is used in practice.
  • Consideration would be given to how practitioners use the phrase in practice as well as the various definitions that have previously been proposed.
  • Data will be collected from several sources in order to reduce the risk of bias inherent to any one.

The detailed research included analysis of how often the word ‘margin’ would be found in conjunction with an internet search for the phrase ‘revenue assurance’. In 2007, when it came time to reperform this research, there was a telling increase in how often the word ‘margin’ was used alongside ‘revenue assurance’.

I take this all as definitive proof that long before Stratecast were whoring themselves to whichever vendor has lately told them to pretend margin assurance is new, there were plenty of telcos, vendors, consultants and experts who had already decided margin assurance is a part of revenue assurance. And they were doing something about margin assurance, not waiting for a 2015 Stratecast report to tell them to do something ‘new’.

Margin assurance is clearly not in a ‘fuzzy middle ground’ between revenue assurance and fraud management. The only people who are fuzzy on this point are Stratecast. If margin assurance sits in the middle of anything, it sits between revenue assurance and cost assurance. That is hardly surprising, given that revenues – costs = margins. Time after time, the research shows that telcos, vendors and consultants talked about how to assure margins by analyzing information about revenues and costs. In practice, margin assurance is mostly done by people with ‘revenue assurance’ in their job title; this ‘middle ground’ is being invented by Stratecast in order to create the false impression that the scope of margin assurance is separate to that of revenue assurance.

Stratecast can try to rewrite history as often they like, but some of us have a memory. We are not goldfish, willing to pay Stratecast to tell us to do the same things we have already been doing for years. And we are not waiting to be gobbled by a shark, trying to make money by fooling us into buying the same software we already own.

This real research is indisputable. Margin assurance has been around for almost as long as revenue assurance, and it has long been treated as a branch of revenue assurance. With their repeated efforts to misinform the market, Stratecast only succeed in deluding themselves. After all, they sell reports that literally contradict their previous reports. How can a ‘research’ business hope to retain any credibility when they behave like this?

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.