smart margin analytics: why bolting on a margin assurance capability to an existing revenue...
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Smart Margin Analytics: Why Bolting on a Margin Assurance Capability to an Existing Revenue Assurance System can Deliver Big Savings – a presentation by Efrat Nissimov, cVidya’s Director of Product Management at the “Big Data and Analytics for Telecom & Mobile Carriers” event in Atlanta.TRANSCRIPT
OPERATIONAL RISK MANAGEMENT & COMPLIANCE
© 2012 – PROPRIETARY AND CONFIDENTIAL INFORMATION OF CVIDYA
Beyond Prevention: Revenue Assurance Margin Analysis
2
Agenda
Market Trends
Why Margin Analysis
Margin Analysis on top of Revenue Assurance
3
Market Trends
4
Trends in the Market – New Challenges?
New technologies
New pricing models
New services
Additional players in the revenue chain
Data traffic explosion
Market Trends - New Challenges
5
Global Mobile Data Traffic Drivers
More Mobile Connections Faster Mobile Speeds
More Mobile Users More Mobile Video
6
Data Traffic Explosion
7
The Hunger Games
7
New technologies (LTE)
New business models
Policy-based charging
Data sharing family plans
Results of the ever-hungry bandwidth consumer:
8
Variety of Pricing Models
UNLIMITED DATA DATA THROTTLING
• 3GB of usage per month for
3G unlimited customers • 5GB for 4G LTE customers
and then throttling • 2GB of data per month and
then throttling only on congested cells
DEVICE PACKAGES
9
Why Margin Analysis?
10
The Need …
Money… Operators are under increasing market and competitive pressure
While OPEX and CAPEX costs must be lowered, shareholder demands for increased values must
be met
Understand the Revenues
Identify the Costs
Optimize the Margins
11
Why is Margin Analysis So Important Now?
Multiple operators have been licensed to compete, so tweaking services to achieve maximum profitability has never been more important
Over-the-top players are not only eating scarce bandwidth, they are offering profit-killing alternatives to voice and SMS
Revenue per subscriber is decreasing, and operators needs to remain profitable, protect their business and exploit opportunities
Service-bundling has exploded, and triple\quad-play operators need to gain a consolidated view of margins
Interconnect and content partners have expanded, underscoring the need to monitor these partners from a service profitability aspect
12
Traditional Approaches for Margin Analysis
For years people have been performing margin analysis using Excel spreadsheets
In the early 90s, margin analysis was also a key benefit of owning a data warehouse
Why are these approaches less than optimal?
Time consuming
Results are not granular enough
Excel is suited to producing periodic reports (monthly\quarterly). Once product categories are mixed and segmentation is required, the Excel model becomes clumsy
13
A long term goal of many RA organizations is to understand profitability for different segmentations
Determine revenue generated and cost , effectively analyzing the margin per segmentation
The Goal
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Margin Assurance
Conceptually: Margin = Revenue - Costs
Verify that each segmentation, or group of segmentations, has a positive margin
Costs include:
– Direct costs, for example, payment to a partner per minute for calls
– Indirect costs, for example, network costs, customer acquisition costs (indirect costs are more difficult to define)
By using direct costs only, it is still possible to set upper limits on the margins
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Margin Challenges Revenue challenges
Multiple rate plans and bundle complexity
Consumption- or service-based charging
Quality of service-based ratings
Cost challenges
Partnership arrangements and commissions
Interconnect partnerships, where wholesale rates are higher than retail rates
Content supplier relationship where content received and paid for is not delivered or billed
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Margin Analysis on-top of a Revenue Assurance Solution
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Easy to Implement — Based on RA Data
Margin analysis and Revenue Assurance are
complimentary activities that share similar techniques
and information
RA paves the way for margin analysis since most of the
source data has already been collected, normalized, and
augmented with additional data (e.g., customers’
demographic, regional, and network information)
Since platform is based on xDR-level (not just aggregate
numbers), operators can view various dimensions in
highly granular segmentations
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What Should Be Analyzed?
Content providers
International carriers
Inter-carrier traffic
MVNOs
Content Provider
A
Soccer Video
Basketball Results
Golf Updates
Sports Package
Settlement
Settlement
Content Provider
B
Content Provider
C
National Geographic
The Wild Life
Discovery
Nature Package
The Runner
Poker
Packman
Games
CSP
Austria 0.25$
Belgium 0.20$
Hungary 0.30$
Zone A (0.25$)
Settlement
Settlement
CSP Germany 0.55$
Italy 0.45$
France 0.50$
Zone B (0.50$)
UK 0.75$
Spain 0.70$
Romania 0.80$
Zone C (0.75$)
International A
International B
National Carrier
A
Transit Traffic
Terminating Traffic
Orginating Traffic
Carrier A
Settlement
Settlement
National Carrier
B
National Carrier
C
CSP Transit Traffic
Terminating Traffic
Orginating Traffic
Carrier B
Transit Traffic
Terminating Traffic
Orginating Traffic
Carrier C
CSP
MVNO A
MVNO B
MVNO C
Transit Traffic Orginating Traffic SMS
Data Terminating
A
Settlement
Settlement
Transit Traffic Orginating Traffic SMS
Data Terminating
B
Transit Traffic Orginating Traffic SMS
Data Terminating
C
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Most Important Uses for Margin Analysis
Service hierarchies
Margins on hierarchies of services and sub- services
Pricing plan analysis
Analyze whether a pricing plan has a high or a low margin
Customer usage patterns for a particular plan
Market segmentation
Customer profitability in great detail - margins for subscribers per region, business customers in a particular industry, etc.
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Most Important Uses for Margin Analysis
LTE service monitoring – QoS-based pricing, bandwidth consumption, services enhanced during an actual session, etc.
Analyzing service margins and profitability presents a challenge
Complex plans (e.g. Friends and Family mobile data plans)
Requires constant vigilance to ensure profitability, since there are many variables that could make costs spike
Experimentation, testing and “what if” scenarios
Uptake of a particular service is getting tougher to forecast - being able to assess the margins of a service in advance or soon after launch is critical for making adjustments to the product
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Financial Dashboards
Centralized financial dashboard, configurable to organizational business topology
Financial impact reporting, tracking and decision support for C-level, CFO, Risk Management, RA experts, Management, and others
Drill down for impact on relevant business entities (revenue streams, services, platforms, customer types)
Hierarchical finance trend analysis and deviation detection
Forecasting and “what if” scenarios for selected entities based on common forecasting models
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Margin Analysis Dashboard Example
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Margin Analysis – The Full Picture
Margins
Customer Segment
Service
Subscriber Invoices
Partner Settlements
Exact revenue & costs
Revenue Assurance
Adjusting parameters – Impact margins?
Destination Rates
Plan Bundle
Best approach to maximize margin
Automatic
Recommendations
Service Type
Customer Segment
You Need to Know
Service Type
Region Margin Analysis
Where are you underperforming?
Service in Bundle
Pricing Plan
“What if” Analysis
Why you are underperforming?
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