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Frost&Sullivan Report: Business Analytics


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Telenet Fraud Management and Revenue Assurance Solutions utilizing Customer and Operational Analytics.

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Frost&Sullivan Report: Business Analytics

  1. 1. 25 January 2013Mobile Customer On-Boarding: Telenet (Belgium)Minimizes Risksize and position text box tothrough Report Title – and Increases Opportunity center Purpose-Built Analytics Report Title in the blue bar Stratecast Analysis by Karl Whitelock Stratecast Perspectives & Insight for Executives (SPIE) Volume 13, Number 03
  2. 2. Mobile Customer On-Boarding: Telenet (Belgium) Minimizes Riskand Increases Opportunity through Purpose-Built AnalyticsIntroduction1The communications service provider (CSP) landscape continues to incorporate new businesspartners, new business models, and different ways to keep customers satisfied. Truly, the workingparts of customer service offerings are gaining complexity. For example, growth of the ‘smartdevice’ market—smartphones, tablets, connected TVs, and machine-to-machine connections frommultiple industries—continues to expand at a double-digit compound annual growth rate(CAGR)—and, in some cases, triple-digit. On one hand, complex services accessed by these smartdevices create substantial financial risk for the CSP community with regard to the end-to-end servicemonetization and partner accountability functions; while, on the other hand, good customers usingthese services is a basis for additional revenue opportunity.Financial risk can come from operations issues such as traditional revenue leakage between internaldata process flows, or the lack of accountability from content delivery and usage for a growingnumber of CSP partners. Financial risk can also come from the lack of properly qualifying newcustomers during the acquisition process, or even from existing customers, as conditions change.Financial opportunity comes from new customers with the point of sale as a key beginning point.This allows CSPs to maximize customer value with a combination of information collected at thepoint of sale, and then augmenting it with external demographic and usage data throughout thecustomer’s lifecycle.Applying analytics to the revenue management and cost tracking sides of any CSP business hasgained significant attention recently, even though CSPs have used analytics to fight certain customer-related problems for more than 10 years. Most importantly, ‘purpose-built analytics’—automatedanalytical solutions designed to address specific business problems—have shown CSPs that embracesuch tools that not only can revenue flows be traced and accounted for, but operations costs can becontrolled and managed effectively. This is especially important as the number of external partnersources for content contribution increase, and as complex service usage offers expand.This report will explain the issues and differences associated with customer level and businessoperations risk analysis. It will show how purpose-built analytics, applied to the customer acquisitionprocesses, not only reduces the number of problem customers a CSP may inadvertently take on, butexplains how real-world customer acquisition savings can be realized. The report also explains howTelenet (Belgium), working extensively with the NetMind® platform from Agilis International,improved its customer validation process and, in so doing, increased customer value, beginning atthe point of sale (POS).1 In preparing this report, Stratecast conducted interviews with representatives of the following companies:  Telenet – Luc Verstraete, Director Billing, Payments and Credit Exposure  Agilis International – Richard Miller, EVP Business Development and Marketing  Agilis International – Judy Misbin, Director MarketingPlease note that the insights and opinions expressed in this assessment are those of Stratecast and have been developedthrough the Stratecast research and analysis process. These expressed insights and opinions do not necessarily reflect theviews of the company executives interviewed.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 2
  3. 3. What is CSP Financial Risk Analysis? Shown in Figure 1, CSP financial risk management can be broadly categorized as customer activities and interactions between internal and external business processes. Generally, the customer side is associated with revenue generation while the partner interaction and business operations side is associated with cost. Analytics can be applied to any portion of these business functions to deliver predictive insight and to better understand current and past behavior. While not a new concept, predictive insight today must now come at an increasinglyReal-time analysis of customer revenue faster pace and support larger data volumes. This meansfunctions such as on-boarding, usage real-time enough for CSP support personnel to have theanalysis, churn propensity, and bad information they need to make effective decisions, and fordebt analysis are now an essential new customers to know where they requirement. For many regions, where mobile saturation is high, CSPs now take extra steps to retain customers, which can bring on new problems if all parts involved are not properly managed. Real-time analysis of customer revenue functions such as on-boarding, usage analysis, measurement of a customer’s propensity for up-sell and cross-sell, churn, and bad debt, are now essential new business requirements. Figure 1 – Customer and Operational Risk Analysis Using Real-Time Analytics Source: Agilis International SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 3
  4. 4. Customer-related financial risk and opportunity analysis, as shown by the top half of Figure 1, is tiedto three functional areas associated with mitigating risk and maximizing opportunity including:  Pre-Acquisition Risk/Opportunity – Evaluation of potential customers applying for service.  Existing Customer Risk/Opportunity – Determination of a customer’s propensity to buy, propensity to pay, propensity to churn, and level of risk by way of subscriber or network fraud.  Bad Debt Risk – Customers that carry bad debt. What is their current propensity to pay? What is the overall risk analysis of the customer; e.g., do the financial positives outweigh the negatives, and therefore these customers are worth keeping even though they may carry some bad debt?Operational risk, exemplified by the lower half of Figure 1, includes many traditional functions suchas revenue leakage analysis from internal data streams, and theinconsistencies that potentially could come from external In its simplest form, CSP financialpartner or supplier relationships. While operational risk assurance (FA) is traditionalanalysis, along with customer risk analysis, is essential to any revenue assurance (RA), includingCSP, a detailed discussion of operational risk is beyond the revenue leakage analysis, andscope of this report. It was the subject of a recent in-depth financial fraud management.Stratecast market share analysis report titled: Global These functions are enhancedCommunications Service Provider (CSP) Financial Assurance (Revenue with today’s computing andAssurance, Fraud Management, and Cost/Margin Analysis) Market analytical tools, to yield near real-Forecast & Supplier Assessment; OSSCS 13-07 (October 2012).2 time analysis of business and operations data whenever needed.The nature of telecommunications fraud is transforming as Financial assurance also involvesCSPs now look at the entire customer lifecycle. By correlating cost and margin analysis todata from multiple internal and external data sources, improve revenue accountability asanalytical tools such as the Agilis International NetMind partner and supplier relationshipssolution can define a comprehensive risk index.3 This index expand, as business modelsallows CSPs to assess and evaluate both risk and opportunity evolve, and as customer revenueat any stage of the CSP and customer relationship. It has functions grow more complex.proven to be invaluable to Telenet as it initially launched itsnew mobile service offers, and as it continues to bring on newcustomers today.2 This Stratecast market share analysis and forecast report defines why the operations-based financial assurance functionsof revenue leakage analysis, cost assurance, margin optimization, and fraud management are critically important today. Italso profiles approximately 30 companies that provide some level of solution capability within this growing focus area,and projects a robust 12.8% CAGR for the global financial assurance market over the next five years. For moreinformation on how to obtain this Stratecast report or any other Stratecast or Frost & Sullivan report, contact youraccount executive or email to Agilis International is a privately held company headquartered near Washington D.C., with global offices in SouthAfrica, Malaysia and Belgium. It has more than 300 employees focused on developing and delivering telecom businessanalytics solutions specific to: cost and revenue assurance; customer risk and opportunity management; subscriberlifecycle management; traffic optimization, data warehousing and reporting; and dashboard solutions for thecommunications industry. It has a customer base of many CSPs headquartered throughout North America, Europe andAsia Pacific.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 4
  5. 5. The Business Challenge Telenet Faced at Point of SalePreventel, the Belgian organization that helped identify bad payment behavior, ceased operations asTelenet was initiating the release of new service offerings that were going to increase the company’sexposure to potential bad debt and fraud.4 At this point, Telenet needed a means to help mitigate therisk of bringing on non-paying customers while conforming to all customer privacy legislation andthe company’s general terms and conditions.5Linking into internal and external customer-centric databases, as shown in Figure 2, the riskmanagement solution Telenet initiated with Agilis International monitors, in real time, all new salesrequests. This approach provides an immediate assessment for customer acceptance or refusal ofservice. In addition, based on in-depth analysis of a customer’s propensity scores, it allows Telenetto make modified service offers tailored to customers. One of the key drivers for this solution isTelenet’s on-going offer of a highly-subsidized mobile device for each subscribing customer.Figure 2 – Telenet Pre-Acquisition Aliasing Process NetMind® A Existing 1.Identification l customer External data database source(s) Point of i Sales/E-Sales a 3.Scoring 2.Good customer? s i Bad Payer n g Fraud 4.Activation1. Identification with customer data (name, address, DOB, ID number,…) to check if an existing customer. Uses the Aliasing function to recognize disguised customers (bad debt, fraud)2. If applicant is recognized as an extising customer, the solution checks in other databases to see if they are a bad payer, fraudster,….3. If applicant is not recognized as an existing customer, they are scored through an external database4. Upon completion of identification and scoring processes, if credit worthy, applicant’s Telenet products are activated Source: Telenet Slide 2 Proprietary and Confidential4 Preventel ceased operations in April 2010. It managed an external database of customers that failed to pay CSP bills. Atclosing, some of its customers included Base, Telenet, Proximus, KPN Belgium and Clearwire.5 Founded in 1996, Telenet is a major provider of broadband cable systems in Belgium. Telenet provides cabletelevision, high speed internet and telecom services, primarily to residential customers, with coverage to approximately60% of the national population of Belgium. Under the brand name Telenet for Business, the company also providesservices for companies in both Belgium and Luxembourg. Telenet has been listed on the Euronext Brussels stockexchange since October 2005, under the symbol TNET. It is now a quadruple-play provider with the addition of TelenetMobile as a full mobile virtual network operator (MVNO). It serves approximately 2.2 million subs and 4.6 millionRGUs, with a monthly ARPU of approximately €41.5.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 5
  6. 6. A number of factors contribute to the acceptance of an applicant, including the ability to determine,based on previous history, if the customer is attempting to commit fraud via a number of means.Examples include:  Subscription Fraud – Fraud by bypassing offer conditions.  Handset Acquisition Fraud – Determining if the applicant is an organized fraudster attempting to acquire a subsidized high-end handset.  Dealer Fraud – Monitoring of sales numbers for accurate reporting is essential due to commissions paid to dealers for handset sales and data plan offers.  Identity Fraud – Using a secure order entry tool to catch any false identity tries for both business and residential applicants.  Customer Identification – Recognizing customers through various data inputs including name, address, and personal credit-important details.  Bad Debt Recognition – Identifying customers with existing bad debt, and making determinations based on a variety of financial factors. This category was most concerning to Telenet, as its service offers include an advanced mobile device for €1, with a long-term service commitment.  Multiple Activation Fraud – Recognizing individuals or companies that may attempt multiple service activations within a brief period.Shown in the center of Figure 2 above, the Aliasing engine is one of the pre-activation detectionengines of the Agilis International NetMindPOS point of sale solution. The NetMindPOS Aliasingengine utilizes business analytics to review new service orders, comparing them against a PositiveAliasing Database (PAD) to prevent fraudulent subscribers and previous bad debt customers fromsigning up for a new service undetected. The Aliasing engine performs an alias match of applicantinformation against the PAD by using algorithms such as fuzzy logic, Soundex and percent wordmatch to detect returning bad debt and fraudulent customers.6The PAD is created using data provided by Telenet and external data sources. It includesinformation on past fraudulent subscribers, bad debt customers, stolen devices, vouchers, andprevious good customers. Service orders are run through the PAD on a continual basis or as a batchoperation. When service applicants are identified as potential fraudulent subscribers or returning baddebt customers, the system can issue an alert and or activate an internal trigger, such as animmediate analyst review or point of sale order hold. Good customers trigger an equally immediateresponse with the CRM system, and agents are notified that a new or returning good customershould receive special treatment and be shown an offer that recognizes his/her value.Telenet further extended the use of the solution by using the analytics in the NetMind platform totarget offers to preferable customers in its outbound marketing campaigns.6 Soundex is a phonetic algorithm for indexing names by sound as pronounced in English.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 6
  7. 7. Results from Telenet’s Business Trial and BeyondTelenet worked with Agilis International to establish a proof of concept tied to the businessobjectives it had stated for identifying and mitigating financial risk from various forms of potentialcustomer on-boarding fraud. The solution was deployed in two months, and operated as a proof ofconcept (POC) for approximately three months thereafter. It remained operational for severaladditional months while process issues with the permanent solution were resolved.The permanent solution has been in operation for more than three years. Shown in Figure 3 are thekey business results after the first eight months of operation. They include:  Recognition that approximately three percent of all prospects posed a high financial risk, with 76 percent of them identified as bad payers, 21 percent of them identified as having existing bad debt, and less than one percent of them identified as previous fraud customers.  In certain situations, based on in-depth analysis of a customer’s payment profile, modified service offers were given.  The cost savings that came from identifying the high financial risk prospects resulted in approximately €600 per customer, based on the internal cost to provision a customer in and out of the network, the cost to chase bad debt, the cost due to lost handsets, and the cost for credit scoring fees.Figure 3 – Telenet Business Results through 8 Months of Operation Production system identified 3% Results of Implementation of Prospects who posed High Risk  Immediate Savings  Agilis business model flexibility The 3% represented 4 specific risk types  Agilis provided an extended POC  Utilized basic Aliasing capability  Extended the POC during deployment of full solution  Identified 1.5% of applicants as returning bad customers  Prevented ~ €600 loss for each  Lost Handsets  Credit scoring fees  Provisioning costs  Reduced Usage Fraud from same  Production system increased the yield to 3.0%  Total NetMind®POS savings in first 6 months was € 6.5 million Source: Telenet Slide 3 Proprietary and ConfidentialSPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 7
  8. 8. Telenet explained to Stratecast that the total savings during the first six months of operation was inexcess of €6.5 million. Continued savings have resulted since the solution was implemented, and thesolution continues to be a significant part of the Telenet customer on-boarding process.Agilis International NetMind SolutionAgilis International explained to Stratecast that its NetMind platform is a revenue assurance andfraud management system capable of managing the risk and opportunity points in the entirecustomer life cycle for landline, fixed, mobile, IPTV, DTH, GSM/CDMA/LTE, broadband, andnext generation networks. It can handle all types of technology, and adapts rapidly to evolving CSPbusiness models. Shown in Figure 4, the NetMind customer analytics coverage addresses all businessneeds relating to customer identification, propensity scoring, and usage.Figure 4 – Agilis International NetMind Customer Analytics Coverage With Advanced Analytics & Work Flow Management Case Management Operational Financial Dashboard Reporting During Each Stage of the Subscriber Lifecycle For All Services Offered on the Network SMS IPTV Voice E-Wallet Multimedia Data Downloads Services Across Multiple Network Types GSM/CDMA/LTE Broadband Wire-line Source: Agilis International Slide 4 Proprietary and ConfidentialAgilis International further explained that NetMind eliminates the risk and maximizes theopportunity inherent in each phase of the subscriber management process:  During the pre-acquisition process, before incurring the cost of installation.  Through the acquisition process, including strong validation of customer identification.  During the early subscription period, where the vulnerability to fraud is highest.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 8
  9. 9.  Continuing into the long-term relationship, with vigilant attention to changes that indicate opportunities for up-sell/cross-sell, churn, or potential abuse of network services.Agilis also noted that the industry cost savings from all customers that use its pre-authorizationAliasing engine exceed $1000 (€770) per customer. Agilis further stated that there are significantbusiness imperatives for engaging in a financial risk analysis process for the developed world, wheresubscriber growth is relatively stable. This means aggressively managing the new customer on-boarding process to retain good customers and to grow revenue.Within emerging markets, Agilis believes that billions of customers with little or no creditinformation require a new approach to the on-boarding process. What was typically done forpostpaid customers in the developed world, and what is now done (virtually nothing) for prepaidcustomers of traditional voice and data access services, won’t suffice. Growing market complexityfrom more transactions and more complex service offers, often accessed through smart devices,implies more opportunities, more risk, and a more complex infrastructure.SPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 9
  10. 10. Stratecast The Last WordSeveral months ago, Stratecast stated that reducing the level of revenue “leakage” from the flow ofdata between a CSP’s systems and through its business processes (traditional revenue assurance),along with stopping the intentional exploitation of these weaknesses by certain individuals(operations fraud), were operations functions that would grow in significance over the comingmonths. While still true, there is much more to keep in mind from a customer-level perspective.As smart devices proliferate with customers in both developed and growing markets, complexservice offers grow and partner relationships expand to meet the needs of these services. In thisenvironment it is now imperative that CSPs minimize their risk from new service applicants andfrom the potential financial risk caused by existing customers. In addition, it is critical for them torecognize opportunities to better meet customer expectations as a means for growing revenue. Enterthe world of real-time purpose-built analytics—automated analytical solutions designed to addressspecific business problems. Customer analytics solutions are geared to deliver predictive insight toCSP customer support teams in order to make effective decisions. This is especially important whenworking with new service applicants, gauging the financial risk that can come at any time fromexisting customers, and in providing service offers that are more closely aligned with customer needswhen they arise—the business opportunity side that is now emerging.While the role of financial risk management has many facets, keeping financial risk in check for anyCSP is critical for long-term business success. Customer-associated fraud is on the rise because theways in which to commit fraud are increasing, as the number of partners, authorized dealers andsuppliers a CSP must engage with increases. Real-time analysis of customer revenue functions,including on-boarding, usage analysis, churn propensity and bad debt analysis, is critical for long-term viability of service offers that involve partner participation. Opportunities to capture customerattention, through new revenue-bearing service offers, are increasing for the same reasons.Stratecast believes that real-time purpose-built analytics will make a difference with CSPs that mustnow keep track, from every business angle, of not just customer usage transactions but datainteraction with a rapidly growing list of partners, authorized dealers, and suppliers. Financial riskmanagement is an essential business function that will grow as complex service offers continue toexpand. Real-time analytical solutions, provided by companies such as Agilis International, will playan increasingly important role for CSPs in the months ahead, in dealing with financial risk analysisand capturing new business opportunity.Karl M. WhitelockDirector Global OSS BSS StrategyStratecast | Frost & Sullivankwhitelock@stratecast.comSPIE #03, January 2013 © Stratecast | Frost & Sullivan, 2013 Page 10
  11. 11. About StratecastStratecast collaborates with our clients to reach smart business decisions in the rapidly evolving and hyper-competitive Information and Communications Technology markets. Leveraging a mix of action-orientedsubscription research and customized consulting engagements, Stratecast delivers knowledge and perspectivethat is only attainable through years of real-world experience in an industry where customers arecollaborators; today’s partners are tomorrow’s competitors; and agility and innovation are essential elementsfor success. Contact your Stratecast Account Executive to engage our experience to assist you in attainingyour growth objectives.About Frost & SullivanFrost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. Thecompanys TEAM Research, Growth Consulting, and Growth Team Membership™ empower clients tocreate a growth-focused culture that generates, evaluates, and implements effective growth strategies. Frost &Sullivan employs over 50 years of experience in partnering with Global 1000 companies, emerging businesses,and the investment community from more than 40 offices on six continents. For more information aboutFrost & Sullivan’s Growth Partnership Services, visit SPIE #03, January 2013 CONTACT US © Stratecast | Frost & Sullivan, 2013 Page 11 For more information, visit, dial 877-463-7678, or e-mail