By Dan Baker
February 29, 2016
The market heat around acquiring analytics and big data platforms has been intense in recent years. But perhaps now that the flames have died down and the smoke has cleared a bit, we can draw a lesson or two.
Large service providers will naturally want the latest and greatest analytics tools because it’s their business to push the envelope with a complex portfolio of offers. Plus, they have the scale and money to support a staff of big data scientists and marketing gurus.
But smaller Tier 2 and 3 telcos, cable companies and new entrant utilities are in a different position. Their smaller staff and scale forces them to focus on a narrower set of services and execute on those extremely well.
Now there are many solution vendors out there offering analytics tools geared to the needs of the non-Tier 1 players. However, an equally viable option is to build data analytics processes around existing systems in billing and CRM.
And that latter option is the specialty of our guest expert, Kirill Rechter, the CEO of LogNet Billing. His company has recently incorporated data analytic tools into its billing solution that help its service provider customers improve their service offerings.
Kirill, the world of billing has changed dramatically in the 20 years you’ve been at the helm of your MaxBill product line. And I understand your message now is that service providers really need to integrate the billing operations into the overall business strategy.
Thank you, Dan. Yes, we have been in this business a long time and this is something I am very proud of. Like most technology companies, we have had our ups and downs. In recent years, we have positioned LogNet Billing in front of the right target markets with the correct messaging and thankfully our business is expanding.
Over time, new customers generally approach us with a specific and urgent need, which often revolves around adding specific features or functionalities that they are missing. When we start an engagement, even at the presales process, we encourage new customers to take a step back and look at their overall strategy and think about how their billing operations can help their businesses grow. This approach opens the eyes of a lot service providers and is attracting a lot of attention.
Replacing one billing system with certain set of functionality with another billing system with different features will not always add value to the service provider and may even make its business more complex.
Billing operations can and should have a strategic importance to a service provider and certainly contribute to a service provider’s bottom line.
Traditionally you’ve served communications service providers — telcos, ISPs, cable TV operators, IPTV providers — but in recent years you moved into the utility market as well? Why is that?
This certainly is true. We have customers in a range of vertical markets — not just communications, but also gaming and transportation — and in recent years we have focused a lot of attention on the utilities sector.
The market for utilities services in many countries is deregulating and many new players are entering the market to supply energy services to both retail and commercial customers. Previously, most utilities were government owned monopolies and there was simply no need to improve billing processes.
Take for example the UK — roughly 300,000 retail gas and electricity customers are churning on a monthly basis. This is a great market opportunity for a new entrant to capture a significant market share of customers who are dissatisfied with their existing supplier. An efficient and accurate billing operation can help a new entrant build a loyal customer base and profitable business, even if it selling a low margin commodity.
You can’t really draw a sharp line between a utility and a telco anymore. Quite a bit of cross over is happening these days.
Yes, this is true too. The market for both telecommunications and utilities services are fiercely competitive. Most traditional telco services today are mere commodities and the differences among service providers are marginal. This is more obviously the case in the utilities market. To overcome this, many service providers are diversifying their service offerings to differentiate themselves from the competition. This is why today you see both telcos and utilities company offering a range of value added smart home apps and services.
We have a very good customer in the UK that is an example of this. This company was formerly a fixed line and Internet provider. When the utility market in the UK deregulated, its management team saw an opportunity to offer retail energy services based on good customer service, transparent billing and automated business processes.
They have achieved great success with their strategy and execution. The company started out around six years ago with around 30,000 and today they have grown their customer base to over 1 million subscribers.
Ok, let’s talk about analytics. And I know you have an issue with offline analytics systems. Why do you consider them less beneficial or effective?
Well, the issue is that offline analytical systems are not a good fit for our customers and our target market.
When analytics is being done offline there is a disconnection from your operational flow. Alternatively, an integrated system enables you to better take action in real-time.
Most offline, standalone analytics solutions are really a black box. You can’t grasp how it works because it’s a pure statistical thing. I think that they work perfectly well for an eBay, Amazon and other e-commerce firms whose order volumes are hundreds of thousands to millions per day. These large e-commerce firms have to go that route because they don’t really know their customers very well or have much of an ongoing relationship with them.
Here’s another key difference — e-commerce firms mainly sell products and our customers sell services. Selling products on a one-off or occasional basis is much more straightforward to analyze when compared to selling services over time.
So, then what is your approach to analytics? Does it require hiring a systems integrator or consulting firm?
There are many approaches to data analytics available to service providers to better understand their customers and find new ways to improve their service offerings and pricing. However, most of these existing analytic practices offered by vendors and used by service providers overlook the billing system data.
Our approach to analytics leverages the data generated in the billing processes and the information stored in a billing system. This data is highly dynamic and contains a wealth of information about the service usage habits of customers.
We provide a set of the tools for a service provider to do an in-depth analysis of this data in real-time. In addition to accurately setting pricing, a service provider can adjust important elements of service delivery, such as accessibility of services and timing of usage. This is essential in highly competitive markets.
Our customers generally know their businesses very well and the market conditions they work in much better than us as their vendor partner. As an extension of this, most of our customers are independently using the data analytic tools in our MaxBill system without the assistance of a system integrator or external consultant.
And how do you actually analyze the data?
We have made our data analytic tools available in a guided process. This process is generally utilized by marketing managers responsible for the definition and management of product offerings. The finance department also uses these data analytic tools to do predictive forecasting.
This guided process revolves around analyzing the parameters of a planned or existing service or services package. The process starts with helping the user define a targeted customer segment and then a baseline of financial statistics, such ARPU and P&L, is produced for this target customer segment.
Next, the process lets the user adjust any of the parameters of the service or package and then provides a simulation of how customers will respond to these changes. This simulation that we provide analyzes past usage patterns and purchase history. It also takes into consideration what can be referred to as the records of dissatisfaction, meaning trouble tickets, complaints to the call center or SLA violations.
The outcome is a prediction of how the changes will impact the baseline financial statistics. This means that marketing or financial managers can get a prediction of how the changes will impact ARPU and P&L and overall sales.
Say, for instance, a loyalty package targeted at a specific customer segment is about to expire. Marketing managers can get a range of prediction on how adjustments to the time commitment, pricing or service included will impact renewal rates.
We know the telecom world is moving to virtual and cloud functions on the network side. Do you get involved on the network side or provision the end customers?
No, this is not our niche. We reuse existing interfaces to the network and use APIs where necessary.
In today’s world, owning the network is not strategic for the tier 2 and 3 telcos and utilities we serve. A lot of these operators don’t own networks anymore — everything is virtual.
Rather, the strategic focus the service providers in our target market needs to be on the customer, service delivery, billing, revenue and products/services.
With time, billing for utilities and telcos will begin to look like billing for e-commerce. It should enable service automation and the selling of any service, especially business-to-business services.
Kirill, thank you. I think there are quite a few gems of business wisdom here that telcos and utilities can take to the bank.