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View to a Bill

View to a Bill

If the CIO doesn't get involved and mandate a unified system across the organisation, pockets of billing systems attuned to specific business units grow up simply because they are cheaper and quicker to implement.

Traditionally billing systems have been considered bean-counter territory, but that was then and this is now.

When One.Tel collapsed so spectacularly last year, apart from the fact that it wrote new records for fleecing two of Australia's richest men (to the tune of almost a billion dollars), the aspect of the demise that so confounded onlookers was the amount of debt, in unbilled, let alone unpaid accounts, the company had amassed.

In the aftermath the picture that emerged was one of a company whose systems had broken down to such an extent that it could not tell legitimate customer numbers from invalid ones. The company had no handle on which customers had been billed, and of those, which had paid and how much, let alone any idea of the ARPU - the average revenue per user, a metric critical to the health of a mobile phone service provider. And according to Gartner research director Dr Marcus Blosch, whatever else the company's problems, this alone would have been enough to sound the death knell. "A company cannot afford to ignore its billing systems. At the most fundamental level cash flow will kill you if you don't get it right."

Isn't cash flow a CFO's turf? Not necessarily or, more accurately, not exclusively, says Blosch. "The CFO's domain is not so much the system itself but making sure that [customers] pay up." But, he adds, billing information is about much more than who owes you money. It's an avenue to the modern mantra of succeeding, even staying in business, by knowing your market segments.

Billing systems deliver a whole lot of information, about who buys what, and when. If a company can extrapolate this information to do more for the customer than simply prepare a statement of what they owe, and track the date on which they paid it, says Blosch, so much the better. Such data provides the core for customer relationship management techniques, or CRM, and, he says, to isolate it on its own data island makes no sense. "The golden rule is we don't want islands of technology, repositories for islands of information. We want one single source, enabling people throughout the organisation to take information and reuse it," says Blosch. "In these days of the always-on user, every company needs to know a lot more about each customer."

Which is why it makes good sense for a company's billing information stream to be feeding into the same ocean.

Deregulation is a good example of when smart billing systems are about much more than who owes how much to whom, and whether or not they paid on time because, for one thing, it leads to an explosion in the middle of the food chain.

"In the old days, the guys that produced the product, say electricity or gas, also transmitted it, and also billed for it. Deregulation, whether it's in the energy market or telecommunications or wherever, means that the guy who produces the [product] now just trades it, and the only thing the guy who bills it owns is the relationship with the customer," Blosch says.

For example, he says, a Sydney energy company could be supplying to customers much further afield, in just the same way a reseller might be buying nuclear energy from a company in France and retailing to customers in Scotland. And since the relationship is the only thing that the retailer owns, the smartest way to maximise the value of that relationship, and hence the value of the business, is to use the information garnered by looking at usage patterns to sell each customer additional services.

"Sure we can mailshot you, and ask the question: Â'Do you want to buy gas from us as well?' But what we want is to avoid all our mailshots ending up in the bin. Far preferable is that we use the information available to really Â'understand' you, to wrap product around you or even, conversely, do a profitability analysis on you and figure out that you make us no money, so not bother," Blosch says.

No matter what a company's line of business, he maintains, the bottom line is that the intellectual capital it builds is its greatest asset. "The nuts and bolts hardware is practically irrelevant. You may think of billing software as unsexy - and fair enough. But if you think of it in terms of a means to a more flexible business model, then that changes the complexion of it."

Pockets of the airline industry have managed the mindshift, Blosch says, citing smart use of the Sabre airlines reservations system by Ryan Air. By tying the reservations system to the billing system, Ryan Air has achieved dynamic pricing of seats - as the plane fills up, the price of the remaining seats goes up. It's this kind of instant use of information, garnered from flexible systems, says Blosch, that makes marrying billing and other systems so strategic to a business's opportunity, and a market advantage.

And, just to inject a little paradox, the new demands on billing systems from deregulation can be as much about not knowing, as knowing; about building up Chinese walls as it is about setting information free.

When the telecommunications market was deregulated in Australia in the mid 1990s, Telstra found itself in the schizophrenic position of being both service provider and network provider to other telecommunications companies wanting to provide similar competing services. One of the paramount concerns of a service provider in the position of buying network capacity from Telstra would be that its billing and customer information wouldn't filter through to the part of Telstra with which it competes for those customers.

The solution for Telstra, says Ed Pearson, the company's Wholesale Customer Operations Manager, was a series of double blinds: first, it broke the business up into Telstra Wholesale and Telstra Retail. Further, Telstra Wholesale has no bird's-eye view over what happens to the network capacity it sells to its corporate (wholesale) customers, retailers or aggregators. The customer might equally be one large wholesale customer, such as BHP, or an aggregator which on-sells network to many smaller companies or individuals, Pearson says.

Telstra provides a statement of account or billing tape, which the customer or aggregator can then break up and bill to its own customers at different intervals, and allowing for different rates, discounts and margins, all of which are invisible to Telstra. Once the charges are incurred, the aggregator is responsible for the debt; Telstra does not get involved in bill disputes further down the food chain. Where smart billing does enter the equation is in new Telstra services such as e-bill, an electronic billing service for third parties which delivers daily call feeds, allowing the third parties to more dynamically plan their business, tweak business models, introduce new plans and deals, and target new market segments, but also to improve their ability to pick up on call pattern incongruities and nip problems in the bud.

"It allows the third parties to send bills weekly if that's deemed to be a service their clients want, or look at their network usage and develop new products based on dynamically updated data which offers a clear picture of demand," says Pearson. "It also allows them to do credit management checks on customers who suddenly start showing massive increases in calling patterns. A company can run up a lot of charges in a month. Having the call feeds daily means the service provider can identify the change and analyse the risk, bearing in mind that it will be responsible to Telstra for that debt."

Zarko Sumic, a US-based analyst with Meta Group, who concerns himself with executive and vertical services, likes to use the metaphor of portfolio investments to explain the place of billing systems in an organisation's structure. There are those core stocks or bonds in your portfolio, likewise those applications on which you rely to simply stay in business, he says. "Billing systems are one of these. A billing system gives you the ability to send out bills, tells you how much money you're owed, and so on, which is core to any business staying in business.

"In a regulated environment, in fact, the billing system is the only form of interaction with the customer, so it is more accurately called a customer information system." In essence, he says, what is for all intents and purposes accounts receivable/accounts payable information is really much more: it's core information about the business and its opportunities.

The traditional view of billings as reported from a financial point of view is changing as people realise the wealth of information contained in the summaries and patterns of usage on which billing is based. What's more, Sumic warns that not adopting the new view of billings will result in missed business opportunities if companies are not able to respond to the market because they did not have the information to introduce different and appropriately targeted or customised products and services in a timely fashion.

A classic case of the information haves and have nots is that of US telecommunications company NCI which analysed its billings information and used the information to introduce a long-distance calls service called "Family and Friends". The service ultimately proved hugely popular and successful. AT&T, the competitor for that market segment, simply could not match the service, says Sumic, because its billings system could not keep track of customers to that extent. "It didn't have the same established hierarchical relationships," he says. "There was, in a sense, no such entity as the customer, and certainly no tracking of the relationship of customer to customer which allowed it to evaluate the demand and likely take-up for such a product - just the person who had financial responsibility for the account."

In a deregulated environment, Sumic says, it is increasingly important to inject some personality into billing systems. "The system needs to identify and cater for the lifestyle of the customer - for example, to understand that one customer may take services in different locations, or a range of products. This information can drive a company to develop specific kinds of services for that customer, such as aggregated bills, and so on. To take an example from a different industry, airline companies have tiers of service. You may be a Premier Flyer [and that] means you don't have to wait in line, you get a different kind, a different level of service."

This is in a sense the nexus of billing and CRM, Sumic says. "But I also see this area shifting ground. CRM now occupies three distinct spaces. There's operational CRM, the back-office stuff. Then there's analytical CRM, where a company does its data warehousing and other market segmentation processes. And then there's the collaborative part of CRM, the different interactions with your customers, which includes call centres, electronic bill presentment, and so on."

In a deregulated environment, Sumic says, the ability of a billing system to be more than just the mechanism for collecting the money, but also to actively support operational CRM in creating new products and in populating the analytical environment with data to assess new marketing opportunities, is a path to a specific and definitive market differentiator. Conversely, companies which fail to get with the program will not survive deregulation, he says, citing the case of Peachtree, an energy supplier in Atlanta, Georgia that went out of business because it simply could not efficiently track, bill and collect from its customers for the range of products and services that the deregulated environment saw Peachtree trying to deliver to them.

Companies that are able to grow, and track as they do grow, have a diverse range of opportunities open to them. Sumic cites another example: the UK-based Centrica, a holding company which comprises British Gas, among others. It expanded from its retail energy supply business to offering its customers a range as diverse as financial services and roadside automobile assistance. The company grew, says Sumic, because it was supported by its billing system, which was flexible enough and configurable enough to deal with the diversity of business services. "They were able to know that one bill was going out to one customer, a cumulative, consolidated statement of account."

It is this flexibility of billing which is key in a deregulated environment, says Andrew Chamberlain, who leads EDS' utility industry practice in Asia Pacific. Going to deregulation means going from an agreement to service that which is just a standard tariff, to an offer of contract, and to all the inherent additional flexibility that requires. "The billing system in the back office has to cope with the attributes of a deregulated offering, such as the customer choosing to transfer their mobile phone number for example," he says.

Billing is the core service of the provider, Chamberlain argues. It revolves around the capacity of the company to bill for products they sell - and make payment options convenient, payment records accurate, aggregate the amount one customer owes and offer loyalty discounts for multiple service customers as appropriate.

"If billing doesn't match the offering, then a company ends up in a One.Tel situation, in a crisis of cash flow, which especially in a market characterised by particularly tight margins, is fatal," says Chamberlain. "When a company is in the business of selling multiple products - electricity, gas, broadband and so on - then the ability to bill, making internal modifications as you go, becomes even more important; the billing system must expand with the business."

Likewise, a company must take into account the impact on the customer relationship of its failure to bill. If for reasons of inadequate billing systems a customer does not receive a bill for service for several months, and then receives a huge, accumulated bill, it is reasonable for the customer to decline to pay it as is, even though they have been receiving the service. It's as double whammy, says Chamberlain: bad for cash flow, but even worse for the relationship with the customer. Billing is the responsibility of the service provider, it is not incumbent on a customer to notice the absence of a bill. "Do you sit at home and wait for your electricity bill to arrive? I don't," he says.

Legacy systems are the nemesis of an evolutionary business model, Chamberlain says. They are often being judged too expensive or too slow to modify to keep up - a problem which sees business fragmenting its user base and attendant billing systems across different businesses just to cope. If the CIO doesn't get involved and mandate a unified system across the organisation, pockets of billing systems attuned to specific business units grow up simply because they are cheaper and quicker to implement, he says. It's a mistake based on companies, or more likely, individual business unit managers looking at today's tree, not the health of the forest in the long term, "when companies haven't thought strategically about what their company is going to look like in five years time".

No company is ever going to be able to predict that completely, however, Chamberlain acknowledges, just as no billing system is ever going to be completely flexible. But choosing something open, configurable and able to expand to include new products with a minimum of fuss is a good start.

There are plenty of good reasons for the CIO to stray into traditional bean-counter territory, and they are all pure business fundamentals. Reasons range from the opportunity that integrating billing information presents to track opportunities and respond to changing market conditions dynamically rather than reactively, to balancing and enhancing customer relationships, as well as the nuts and bolts of making sure that the company's overall systems expenditure is as collectively and cumulatively relevant, valuable and cost effective as possible, not state-of-the-art beachheads for isolated data domains. Not to mention keeping cash flow going and building the business.

Lest you think you are way behind the eight ball in harnessing your company's billing system to the greater company good, Chamberlain has words of comfort.

"Who's doing a good job with what they have? Absolutely nobody, so far," he says. "I ran an experiment when energy market deregulation first came into force. I rang the big three utilities and asked for a proposal to supply electricity and gas. That was [at time of writing] six weeks ago and I have had no response. Yet in the meantime I have had two direct mail campaigns from one of them, with no recognition of the fact that I had contacted them.

"Most companies' so-called CRM is a point of view of nothing - unrelated databases full of data duplication."

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