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Connectiva-Systems-Optimizing-the-Telecom-Business
Vimali Swamy
Monday, February 1, 2010
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There is a bittersweet smile among most telecom operators around the world. At more than $1.5 trillion annual revenue, telecom is one of the largest and fastest growing industries in the world today. Emerging markets, in particular are witnessing an exponential growth in subscribers and are enjoying substantive top-line growth. Yet, the concerns over revenue leakage and fraud too, are increasing. Statistics show that operators lose approximately an average of five percent of their annual revenue, amounting to a whopping $75 billon in yearly revenue losses. The Yankee Group, a leading analyst firm that tracks telecom and related markets, estimates the market for revenue assurance solutions – that can help reduce this leakage – to be more than $900 million in annual spending per year.

Avi Basu, President and Chief Executive Officer of Connectiva Systems has a reason to be pleased as the looming concerns of revenue leakage in the telecom industry have opened up many opportunities for his New York based company. Founded in 2001, the company develops revenue management software that enables telecom operators reduce revenue leakage, minimize fraud, improve operational effectiveness, and increase over-all profitability. With its award winning multi-application analytics platform, Connectiva has helped save more than half a billion dollars in revenue for some of the leading telecom operators in the world. These include large telcos like Zain, Bharti, T-Mobile, Videotron, and Idea.

The Bee in the Bonnet

The typical revenue cycle of a telecommunications operator involves a complex and intricate set of systems that work with each other. A minimum of 15 different systems collaborate and process all the data related to the user from the moment a customer walks into a retail outlet for new activation to post-activation usage activities such as making calls, downloading content, using wireless applications to reviewing and paying the monthly bill.

Due to various types of disconnects between systems and inadequate process and data integration, ‘leakage’ may occur. Uncharged traffic, inconsistent rating, fraudulent activities, and erroneous billing are some of the several possible causes of leakage. Furthermore, errors in order management and provisioning systems allow subscribers use the services without being charged or generate inconsistent customer records that can create long-term customer satisfaction issues. An efficient revenue assurance program is therefore required to keep track of the entire revenue stream and ensure the integrity of the process.

Also, observes Ari Banerjee, Vice President, Next Generation Software Systems, Yankee Group, “Operators lose billions in revenue leakage every year. The last five years in particular have seen a proliferation of new billing relationships, including royalty management and partner settlement, developing between the carriers and virtual operators, commercial distributors, content providers, and advertisers. This is a daunting scenario as traditional carriers have not typically been strong in areas that require managing a diverse third party ecosystem, bleeding edge IT innovations, and business process transformation to support business models.”

For instance, when a telco or cable operator offers a plan that includes five movies for free but actually gives away seven movies, the company is leaking revenue without even knowing it. The extent of revenue leakage ranges between three and five percent in North America and Europe and to more than 25 percent in Africa. In a research study conducted by Connectiva in 2008, it was estimated that Indian telcos alone lose more than $900 million every year and this continues to be a major headache at the board level.

To address this challenge, Connectiva has developed a unique technology with a holistic and elegant solution approach. Built in a modular way, the solution provides a way for providers to collect and manage data across a wide variety of telecom data sources and also leverages advanced analytics to instantly identify discrepancies and outliers. In addition to reactively auditing usage data, Connectiva can also simulate how a call record is generated, captured, rated, and billed before the telecom carrier officially launches a service plan. This would help proactively identify revenue value chain disconnects and save millions of dollars in future revenue.

This is the value proposition with which Basu started the company in the early part of this decade and found immediate takers in Wataniya, a telecom carrier based in Kuwait and Zain, one of the largest operators in the Middle East.

Key Turning Points

Initially, Connectiva developed its solution as a joint development project with its early customers including Wataniya and Zain. But, Basu always knew in the back of his mind that he did not want to create a consulting company. His vision was to create a generic world-class product, which could meet the revenue management needs of global providers. He believed that the packaged software business was a high margin one, while consulting was not, so he set up a product development center in Kolkata and brought in the best talents from the IITs and the ISI (Indian Statistical Institute).

Connectiva’s deals with Zain and Wataniya proved to be very successful, and in 2005, the company won a major deal with Bharti. In a highly competitive market with major players such as Subex in India and Wedo in Portugal, IBM and Bharti chose Connectiva after a detailed and exhaustive study of the offerings from various vendors. It was the turning point for Basu; and for Connectiva this was a landmark deal.

After Bharti, a deal with T-Mobile in Germany catapulted Connectiva to the next level. In a very competitive sales cycle that lasted more than 18 months, T-Mobile put Connectiva and other vendors to the test and presented them incredibly tough real world problems to solve. “We did a very successful POC (proof of concept) for T-Mobile and over the course of this pilot, the client had the opportunity to look under the hood, kick the tires, and validate the product capabilities in the context of their most complex leakage scenarios. The POC helped them appreciate the flexibility of our application and visualize how it can be deployed in their landscape,” says Anandan Jayaraman (AJ), Chief Product and Marketing Officer, Connectiva.

The grind Basu and his team experienced, however, ultimately proved fruitful. T-Mobile selected Connectiva to manage its revenue assurance processes in a pan European deal.

Increasing Customer Traction

Connectiva also won its first U.S. customer last year and believes that it is very well positioned to expand its presence in North America.

“While North America was the earliest adopter of revenue assurance and fraud management solutions compared to the rest of the world, most telcos invested in solutions that were either custom built or based on legacy technology. The replacement cycle for these deployments has started, however, and we are currently being evaluated by some of the largest carriers in the U.S. and Canada to replace their current systems with our next generation analytics-based solution stack,” says AJ.

In addition, North America still remains a post-paid market, paying bills at the end of the month compared to emerging markets that are dominated by prepaid systems where charging and rating happen in realtime. “We see huge potential in fast growing emerging markets such as Latin America, Africa, Eastern Europe, China, and South East Asia. The mobile revolution is transforming these economies, but at the same time they have high levels of revenue losses and continue to be hampered by internal and external fraud,” explains AJ.

Basu also has an eagle’s eye over India. After success with Bharti, several operators have noticed Connectiva. Today, Connectiva dominates the Indian market and names top-level customers such as Bharti and Idea as well as a number of Greenfield providers, mobile value chain enablers, and financial settlement operators among its customers. In addition, Connectiva is also the leading vendor in the Middle East and African markets. The firm has won several new deals in South East Asia and is in the process of finalizing one in China.

In the past four years, Connectiva has taken giant strides. Starting as a small company with single digit revenue, Connectiva has become a dynamic global company with over 40 customers worldwide. A counter in the Kolkata office keeps a meticulous record of how much value the company has generated for its customers to date. Connectiva is aiming to recover at least a billion dollars by the end of 2011.

Changing Business Focus

Earlier in the decade, revenue assurance was all about stopping money from ‘leaking’ or ensuring that customers were not under or overbilled. In today’s complex web of communications systems, telecom operators require more. They need to increase average revenue per user (ARPU) through targeted upselling and cross selling and decrease churn by providing a better customer experience. In this context, telcos have been clamoring for revenue assurance to evolve from their current state to help achieve a broader set of revenue optimization goals.

“Our customers now ask questions such as ‘how do I optimize the customer life time value, how can we reduce time between recharges and how to effectively increase adoption of new value added services. They want us to do more than just identifying leakage. They are asking us to analyze their data to solve several adjunct problems,” says AJ.

As a result, Connectiva now focuses on three dimensions of their customers’ revenue management challenges including realization (identifying leakage and fraud), retention (providing a better customer experience), and maximization (increasing ARPU).

The company continues to invest heavily in R&D and is planning to launch several new products shortly. “We are no longer just a revenue assurance or fraud management player; we are a key player in the broader telecom analytics market. Our goal is to help our customers derive insight from data and rapidly turn this insight into action,” says AJ.

The Challenge

While Connectiva plans to double the cost savings it achieves for its customers, the company must also adapt its offerings to the changing business model of its customers and to specific geographic market demands.

Operators are seeking to grow new revenue streams in data, content, and other value added services to compensate for the commoditization of voice. As a result, revenue assurance and fraud management platforms must evolve to meet the challenges of new types of revenue value chains, interface with next generation systems for content delivery, and deal with diverse industries such as financial services, retail, consumer products, and travel that are participating in the mobile digital economy.

While in the developed markets operators are primarily concerned about ensuring a positive user experience, emerging markets in a high growth acquisition mode are looking to increase level of usage, reduce dormant behavior, and boost adoption of newer services.

Basu is excited and views these challenges as opportunities. “We want to learn and stay ahead of the curve by quickly adapting to customer needs and providing the innovation and support they need,” he says.

Key Differentiators

Though Connectiva is in the process of emerging as the top vendor in its category, it has several fierce competitors that are betting hard to slowdown its quick climb up the ladder. What are the key differentiators that will help the company continue to win deals and stand out from the crowd?

Connectiva’s strength lies in the core technology –it offers an end-to-end analytics stack that serves as a foundation for all its products such as revenue assurance, fraud detection, and more; whereas its competitors have built separate solutions for every kind of problem and they do not talk to each other. “We have taken the approach of building a generic framework that can address an entire class of problems and can be easily extended vs. hard-coding applications that are limited to a specific domain,” says AJ.

Another key aspect that differentiates Connectiva is the unyielding focus on delivering business outcomes for its customers. The DNA of Connectiva lies in helping customers realize value that is measurable. According to Basu, a customer should always be able to calculate his ROI, and for him delivering value is not just a sales pitch, but also an obsession.

Basu comes from the old school of business ethics, which emphasize on companies cultivating deep partnerships with their customers. He believes in walking with the customer but also in exploring new ways to work together. Several customers of Connectiva have outsourced their revenue management and analysis functions to them to improve costs and productivity. “We have transformed ourselves from being a technology vendor to a business partner who seamlessly blends business consulting, technology, implementation services, and operational outsourcing to deliver the business outcomes our clients are looking for,” says AJ.

Connectiva also understands that it needs to constantly change and embrace future opportunities. Until last year, Basu and his original team were the sole force behind Connectiva’s global growth. Today, the team has expanded and it includes the best in the business including several executives from SAP, Convergys, and IBM. Connectiva’s service delivery team is also growing rapidly and includes top talent from consulting firms such as Accenture, IBM, and Deloitte.

What is Next?

With 40 plus customers, global presence, and significant market traction, Connectiva is on the cusp of a growth wave. With its flexible analytics framework, it is also seeking to pursue opportunities in new verticals outside telecom. “What we are best at doing is finding a needle in a haystack, and there are specific problems in several industries where such technology and expertise can create a huge amount of value. We are actively engaged with a number of new markets,” says AJ. Though the company has set up a team that focuses on new verticals, its main area of focus will continue to be telecom where it has established significant credibility.

Last year had been great for the company, for it won a successful funding of $17 million, expanded senior management, and doubled its strength to 400 plus employees worldwide. “I am confident that Connectiva is well placed to take the revenue management market by storm. Their clear focus on revenue assurance, fraud detection, and customer experience are exactly what the communications service providers are looking for from their vendors,” says Banerjee.

As for Basu what is more important is to see a billion dollar smile in the face of every customer.
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Reader's comments(3)
1:nice \'article\'
Posted by: Manju S Reddy - 04th Mar 2010
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2:replay1
Manju S Reddy replied to: Manju S Reddy post - 04th Mar 2010
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Posted by: Abhijit Paul - 04th Feb 2010
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