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News
& Events - Press Releases
July 10, 2002
From “Informática Hoje” magazine - June 2002
CPqD Revenue Assurance, the Medicine to Stop Revenue Leakage
Credit Card companies and Telecommunications Service providers adopt
policies and software tools in synch with business processes to recover up
to 75% of the revenues lost due to recording errors, delinquency and fraud.
(Brazil; June, 2002) - Delinquency and fraud are the main cause for
revenue leakage, but not the only ones affecting companies dealing with huge
volumes of customers and very complex billing processes, such as Credit
Cards companies and Telecommunications Services providers. Within the Telcos,
for instance, international numbers indicate a 3% revenue lost, but there
are some estimates that Telcos in South America might be losing up to 20% of
their revenue. Cellular phone cloning, billing records lost between the
central office and the billing system, database inconsistencies, switching
systems not configured properly, and the excessive number of systems
involved in the billing process lead to millions of dollars of uncollected
revenue. This issue is being addressed now with a methodology called Revenue
Assurance, with fast adoption rate among South American countries, which
promises to stop the revenue leakage and assure effective collection and
accounting of all revenues. According to CPqD, in 2000 the telecom
sector in Brazil had total revenues around US$ 20 Billion, and the lost
revenues accounted for about 5%, or US$ 1 Billion.
CPqD estimates that, by applying traditional methods to deal with
this loss, around 25% could be recovered. On the other hand, the adoption of
Revenue Assurance methodology and software tools in synch with the business
processes, revenue recovery would surpass 75%. Considering only delinquency,
Brazilian companies annual reports indicate losses between 4% and 9%, which
is the case of Wordcom’s EMBRATEL.
Before privatization of the telecom sector in Brazil, EMBRATEL did not
provide services directly to end-users, and it has been struggling in the
past two years with customer data provided by the Local Services providers.
But even its direct competitor, INTELIG, which has chosen to sign billing
agreements with the Local Services providers, was not satisfied with the
billing services provided by these companies and decided to develop a
Revenue Assurance project, focusing on co-billing.
TELESP CELLULAR has implemented the most complex Revenue Assurance project
in Brazil. According to Marcos Mohr, Director of Revenue Assurance for
TELESP CELLULAR, his group reports directly to the VP of Finance, but
oversees processes crossing organizational borders. “We left the traditional
formula of looking only to the telephone network, to encompassing all
processes involved with revenue handling, an innovative strategy that has
given us excellent results”, says Mohr.
TELESP CELLULAR, as well as other telecom companies, prefers not to disclose
project details, avoiding to mention revenue that was lost and what has been
done to recover it. But, according to Mohr, the project conducted from July
to November 2001, provided an initial gain of US$ 1.5 Million. “We have
addressed some points that were not seen as vulnerable by the market.
Instead of concentrating only in those points that we had identified losses,
we took preventive measures to avoid new problems,” explains Mohr.
The company uses several tools to monitor the network and its processes, and
is acquiring from CPqD a toolset specifically developed to manage its
Revenue Assurance actions. Carlos Henrique Rocha, telecom manager with
Deloitte, the consulting group involved in projects with TELESP CELLULAR,
Global Telecom, INTELIG and TELEMIG CELLULAR, says that delinquency is the
main cause of revenue leakage, and at least 40% can be dealt with. “About
60% of the delinquency is tied up on people who cannot pay their invoices,
and it will be difficult for the companies to recover it or it will not be
cost-effective to recover. Another 20% is related to customers who can pay
their invoice but have not, either because they forgot about it or are
disputing the invoice, and the remaining 20% is associated to internal
problems with the service provider, like an incorrect customer database”,
says Rocha. He notes that the other revenue leakage problems are due to the
inherent complexity of telecom billing. It starts when the call is recorded
in the switching equipment, which generates information about minutes of
traffic in a Call Detail Record (CDR). This record is transferred to a
mediation platform, where it is translated into information understood by
the billing systems.
To make things worse, only about 25% of the traffic is collected via
electronic CDRs, since there is still analog switching equipment out there
that requires manual transportation of data tapes to the datacenter. "This
logistic for concentrating in the billing system the information gathered in
the switching equipments is very complex, as is the invoice delivery to the
users. About 38% of the revenue is rejected in the first billing cycle”,
highlights Rocha. “Unfortunately, most of the Brazilian operating companies
were looking at only part of the problem, which was limiting their actions.
The closest you get to the sales and marketing areas in a revenue assurance
analysis, the more effective results will be,” assures Rocha.
Rocha says that the first step in the project is the diagnosis, which takes
between four to eight weeks, in order to evaluate the complete revenue chain
and identify where the revenue losses are. The second phase is dedicated to
recommendations on how to overcome the losses, usually between 30 to 50
steps, which might be prioritized by the company, addressing first the ones
with best results. "100% of the revenue assurance projects give ROIs between
5 and 100 times the amount invested in the project, because the Brazilian
companies are loosing a lot of money. They have invested heavily in
increasing the market share, but control mechanisms did not keep up with
this growth. Now they are focusing on actions to improve return on
investment, and revenue assurance is a venue”, concludes Rocha.
About CPqD
With over 25 years of telecommunications and IT solutions, CPqD is a major
provider of Operation and Business Support systems, training and consulting
services committed to delivering innovative solutions to the
telecommunications industry. CPqD employs over 1200 highly skilled
professionals, in research facilities in Campinas, Brazil and through
offices in North America, South America and Europe. CPqD provides services
to leading telecommunications companies worldwide and has hundreds of
registered trademark software applications that benefit over 40 million wire
and wireless customers. For more information, go to
www.cpqdusa.com.
For more information contact:
Luiz Del Fiorentino, Vice President-Global Business Development
CPqD
fiorenti@cpqd.com.br
Francisco Lopes, Technical Director
954-332-3695
business@cpqdusa.com
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