Posted: 10/1999
Best of Both Worlds
Billing Outsourcers Offer Hybrid Solution for Carriers
By Susan Helen Moran
Billing vendors are changing their traditional outsourcing offerings and adding electronic billing to the mix to meet carriers' growing strategic billing requirements, as a new hybrid of outsourced and in-house billing evolves. Driving this evolution are a growing number of carriers that are demanding more complex offerings and increasingly are willing to outsource their billing, a key information technology (IT) process, according to industry analysts.
"Five years ago, the typical service bureau was one-size-fits-all," says Rich Aroian, vice president, marketing, Saville Systems, a billing and customer care vendor based in Burlington, Mass. "People used service bureaus primarily for cost savings. [Now we are] finding customers putting service bureaus in use in world-class markets and putting sophisticated front-end applications on them."
Carriers choose to outsource for a number of reasons. "There is value [for carriers] in having immediate access to a broad spectrum of systems integration, consulting and business-process management services," says Charles Ansley, communications industry group leader for Electronic Data Systems (EDS) Corp., Plano, Texas. "These services enable them to improve time to market, to reduce costs, to gain scarce resources and to maximize the return on investment in existing technology while integrating new Internet-based applications."
For many competitive service providers, building an in-house billing solution is not viable because it would take too long to get their products and services to market. "Using a service bureau, you can be ready to bill a new service in two months," Aroian says. Compare that timeframe with five months to a year or more that it often takes to install similar capabilities in house. David Hurwitz, president and CEO, US WATS, Bensalem, Pa., which offers local exchange service, decided to outsource its billing to ATS Inc., Washington, for that reason: "It will allow us to go to market quickly with innovative offerings."
Many carriers, especially startups, choose to spend their capital on network infrastructure--their core competency--rather than on back-end systems, which tend to be complex and high-maintenance. "To have [even] the printing of bills done in-house, the investment in software and color printers is too much for many carriers," says Susan Kraus, manager, Imaging Services Group, Standard Register, Dayton Ohio, a bill printing and processing vendor.
"To be realistic, we cannot do everything ourselves," says Sim Thiam Soon, chief information officer, Primus Telecommunications Inc., McLean, Va., a fast-growing competitive local exchange (CLEC). Primus uses EDS as its outsourcing partner in the United States and runs its bills on EDS's IX Plus platforms, which run on IBM IS400s, processes call detail records (CDRs), captures data, rates calls, generates and sends bills. In the EDS-Primus Fort Lauderdale outsourcing facility, EDS provides 100 customer service representatives (CSRs). "Out-sourcing has removed the need for core competencies in AS400. It is pointless for us to buy EDS' IX Plus software and commission a team of our own people to learn it," Sim says.
For a growing CLEC such as Primus, Sim emphasizes the importance of the scalability of the outsourcing solution and the ability of the outsourcer to grow with the carrier. Primus has built a new CDR mediation platform and other front-end systems to scale with the EDS system.
"For proper [billing outsourcing] to take place, we need partnerships," Sim says. Primus sends its own personnel, including a billing director and a small team of people, to the EDS Fort Lauderdale outsourcing facility to check for data integrity.
Hybrid Solutions
Despite its many pluses, there are some situations in which outsourcing is not the optimum solution for a carrier. "In strategic areas such as billing and customer care, where the process is perceived as a competitive differentiator, most companies view control of the process as critical in retaining a competitive edge and optimizing business flexibility," says Shlomo Baleli, president of Research and Development, Amdocs Inc., St. Louis.
Similarly, the need for control over data is another reason service providers inevitably switch from outsourcing to in-house systems, says Bill Pearce, vice president of sales and marketing for Teleflex Systems Inc., Boca Raton, Fla. For that reason, Pearce says his company believes there is a middle step between outsourcing and purchasing platforms. Whereas many service bureaus only rate CDRs and print invoices, Teleflex allows its outsourcing customers dial-in access to their data, often in real time. The data also can be used to empower CSRs to service customers with real-time or near real-time data.
Where they cannot get the kind of flexibility offered by Teleflex, carriers are turning to a hybrid of in-house and outsourcing billing processes to meet market demands.
"We are encountering certain situations where telcos are asking us to provide solutions encompassing anything from full system integration and implementation, through to facility management, software enhancement, ongoing support and up to full outsourcing of the customer's data centers and ISO operations," Baleli says. "Customer care and billing (CC&B) system vendors ... are required to put together a range of resources, capabilities, relationships and methodologies that will allow the telco to choose the level and form of outsourcing most appropriate to its business and technical needs."
Primus, for example, uses a mix and match of outsourced and in-house systems. There are portions of Primus' in-house billing system that can be extracted to surround the EDS platform. In Canada, Primus migrated subscribers from some of its recent acquisitions to its in-house systems. Primus Billing System (PBS), Order Entry Management System (POEMS) and Client System International (PCSi) all were developed in house.
Bringing It In House
Several billing vendors, including Saville, Amdocs, TeleFlex and ATS, are offering an in-house version of their service bureau offerings to give carriers the ability to transition easily from outsourcing to in house. US WATS plans to bring the ATS solution, which is now in a service bureau form, in house before long.
Teleflex's Pearce says his company views outsourcing as a step carriers take that inevitably leads to purchasing a platform. Other vendors agree.
"It is important for clients who start with the service bureau to have the option in time to bring the system in house," Aroian says. "[At Saville,] the application used in the service bureau is the same that is offered for in-house use. All pricing is based on the number of subscribers a client has. The same pricing model is used for both the service bureau and the in-house system."
The difference is that a large amount of capital is required up-front for the in-house application. Saville's in-house system ranges in initial price from $1 million to $6 million depending on the number of subscribers and the complexity of the installation requirements, Avoian says. Add to this initial capital investment upgrade fees, ongoing maintenance fees and a percentage of a license fee to support the application. Compare this with a pay-as-you-go monthly fee of $100,000 and often less for the service bureau option, Aroian explains.
In the future, outsourcing billing naturally will lead to outsourcing many other operations support systems (OSSs) such as order management, provisioning and customer services, says Saville's Aroian. There will occur increasing sophistication and integration around outsourcing billing, customer care, outbound and inbound call management and all other OSSs.
Susan Helen Moran is a freelance writer based is Oakton, Va. She can be reached via e-mail at shmoran@bellatlantic.net.
Outsourcing Electronic Billing
Outsourcing has received a big boost from carriers demanding electronic billing capabilities from their outsourcing partners. Systems integrators and billing vendors are responding to these demands by expanding their service bureau offerings to include e-solutions. Electronic Data Systems (EDS) Corp., Plano, Texas, for instance, recently launched its E.Solutions unit, a 20,000-person venture estimated to produce $2 billion in revenue for 1999, according to a company spokesperson. "CEOs and chief information officers ... sense that we are at the threshold of a new business era, where particular companies ... can grab the competitive advantage on a global basis," says Charles Ansley, communications industry group leader for EDS. "But they can't do it alone; they'll need a jump-start from companies that understand e-commerce."
"We are beginning to see the integration of electronic billing applications with outsourcing [in the marketplace]," says Rich Aroian, vice president, marketing, Saville Systems, Burlington, Mass.
About one year ago, Standard Register started offering electronic billing in conjunction with paper statements for its carrier customers. "The Internet takes billing and outsourcing one step further than what we've been able to do with high-speed data and color printers," says Susan Kraus, manager, Imaging Services Group, Standard Register, a Dayton, Ohio-based bill printing and processing vendor. "Electronic billing gives you so much more flexibility--[you] can put graphs on the bill, make it interactive, set up a direct channel [between the bill and] the customer service department."
Carriers can send Standard their usual bill data stream with flags on those accounts where the end-user wants to receive their bill electronically. In addition, carriers can send the bill data stream through a database that will separate accounts into electronic and paper.
In late August, DCA Services, Oklahoma City, introduced an electronic bill presentment and payment (EBPP) product for resellers that also use its back-office services for billing, provisioning, customer service and collections. The new service allows resellers to present bills electronically to subscribers who request them over the Internet. Resellers using the new service are provide with a billing link from their website to DCA's service. For security, end users are required to login with a name and password. The service also includes e-mail notification of bills and several credit card payment options--automatic debit, debit upon e-mail approval or manual credit card entry.
"EBPP means money is transferred in real time," says Rick Nagel, vice president of sales and marketing for DCA. "This transaction means no check floating and no subscriber oversight--a definite plus for our customers' cash flow."
Resellers also can place promotional products and marketing messages on the EBPP page, allowing for cross selling and upselling, he says.
Some vendors are specializing in providing primarily e-billing. Derivion, Atlanta, for instance, is banking on the belief that the market for outsourcing e-billing is growing among small and mid-sized carriers that want to gain speed to market and reduce their billing costs. Presently, the vendor is implementing its e-billing direct model solution to three competitive local exchange carriers (CLECs), according to Barbie Pressly, a company spokesperson. The initial fee charged is between $25,000 and $50,000 depending on the complexity of the bill and set-up, says Read Ziegler, chief marketing officer, Derivion. Then, 25 cents to 30 cents per bill is added. The cost of an e-bill is about 70 percent to 80 percent less than the average cost of generating and sending a traditional paper bill, according to Zeigler. Derivion has six customers fully implemented and more than 30 on the fast track, he says. Derivion's implementation fast-track program comprises three steps. The vendor:
* Takes a copy of the carrier's bill and places it in extensible markup language (XML) format, which Zeigler believes allows more flexibility and faster changes than would hypertext markup language (HTML), and presents the bills on the carrier's website;
* Enables the payment piece giving the carrier the option of using an automated clearing house arrangement and/or payment by credit card; and
* Implements the customer (end-user) enrollment component on the carrier's website.
