Matrixx Enterprise Spend Controls

8/6/2019 Matrixx Enterprise Spend Controls

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Enterprise Spend ControlsProtecting this valuable customer segment

from bill shock and churn


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MATRIXX Enterprise Spend Controls

CONTENTS

EXECUTIVE SUMMARY ......................................................... 3

MARKET DYNAMICS AND BACKGROUND ........................... 4

The lack of real-time for enterprise customers .............. 4

QUANTIFYING THE ISSUE ..................................................... 4

Bad debt write-offs .......................................................... 5

Bill reconciliation and dispute resolution ...................... 6

Customer churn ................................................................ 6

Conventional wisdom ...................................................... 7

THE DRIVERS FOR ENTERPRISE SPENDING CONTROLSAND PREDICTABLE BILLS ....................................................... 7

Improved KPIs ................................................................... 7

WHAT ENTERPRISE SPENDING CONTROLS LOOK LIKE ..... 7

Greater control, exibility and clarity ............................. 8

Use cases ......................................................................... . 9

Developing a business case ........................................... 11

THE MATRIXX SOLUTION ..................................................... 12


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EXECUTIVE SUMMARYIn todays global economy, corporations requirecommunications solutions which include a myriad ofdevices, global roaming plans, ubiquitous connectivity andalso a method of rapidly and accurately paying for theirservice usage.

Enterprise subscribers are more likely to have smartdevices, use business or productivity applications, use 3Gcards and are also more likely to roam due to businesstravel. This puts them at higher risk of bill shock wherethe monthly bill is higher than expected - primarily becausemany are unaware of roaming charges, of overages appliedonce they consume their allotted amount of data and lackof understanding about how corporate email is charged for,both in-network and while roaming. Demand for spendingcontrols that help subscribers manage their mobile accountis consequently rising because many enterprise customersand even many consumers are experiencing bill shock.This lack of visibility and control of service usage leaves theenterprise without insight into spending until it receives amonthly statement of charges. This results in unpredictablemonthly costs and no ability to do long-term budgetplanning. Communication Service Providers (CSPs) areresponding by trying to educate their enterprise customersto the true cost of service overages, but are hampered bylengthy and costly bill reconciliation and dispute resolutionprocesses. At stake are millions of dollars per month inuncollectable revenue due to write-offs when enterprisecustomers refuse to pay the bill.

Results from a recent study commissioned by MATRIXXSoftware, indicates that the average monthly write-off fora CSP is 10% - 15% of total enterprise revenue, with 60% ofthe CSPs surveyed writing off as much as US$20m a monthor more.

Even if a dispute is resolved or the bill is written-off,the study found that over 90% of CSPs have experienced

customer churn as a result of enterprise bill shock rangingfrom individuals up to entire organizations, which poses ahigh risk to the CSPs business. As a result, 75% of enterpriseshave asked their CSP for real-time spending controls, and allof the interviewed CSPs in this study recognized that as smartdevice, laptop and tablet usage continues to explode, a cost-effective long-term solution is needed.

Real-time enterprise spending controls promise mutualbene ts for enterprises and CSPs. With such controls inplace, CSPs can:

Minimize bad debt write-offs caused by enterprisebill shock.

Decrease enterprise customer churn.

Improve critical KPIs such as data revenue collected,roaming revenue, and customer satisfaction.

Streamline revenue assurance processes,reduce time-to-cash and improve pro tability.

Avoid resource-draining bill reconciliation and disputeresolution processes, and the customer bad-will that canresult from them.

Enter into a real-time nancial relationship with theirenterprise customers that stimulates:

Proactive, mutually bene cial businessobjective setting.

A transparent, shared understanding of enterprisespending on communications services that allowsCSPs to accurately design offers and packages forspeci c enterprise business requirements.

With real-time spending controls in place, enterprises can:

Manage employee usage and make bills more predictable.

Avoid overage charges through exible and con gurablecredit limits and noti cations across all levels andhierarchies of the organization.

Avoid service use restrictions imposed by CSPs whenbills are disputed.

Take advantage of preferential account top up rates ordiscounted bundles based on historical usage patterns.

Uncover usage patterns and trends that allow CFOs tobetter-manage budgets and make long-term planningeasier through negotiation of communications servicespackages which better t the enterprise requirements.

Ensure that the enterprise only pays forbusiness-based usage.

Today, bad debt write-offs present a major nancial riskfor CSPs that will only grow worse as service usage, thenumber of services used, and the number of smart devicesand 3G cards increases. Enterprises are already requestingbetter spending controls and it is now incumbent uponCSPs to develop features that will meet the demand of thisimportant and high value customer segment.

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MARKET DYNAMICS AND BACKGROUNDGrowth in mobile broadband data traf c is presentinga number of challenges to CSPs and their enterprisecustomers. Driven by an increase in smart device usageand roaming, enterprise employees are incurring largemobile service overage charges as they unknowinglyexceed their allotted voice and data package limits.The main culprit is that enterprises generally have novisibility into the charges they incur until the end of eachbilling cycletypically at the end of each calendar month.Increasingly, the bill is larger than anticipated, which makesthese high-value, high-volume customers continuousvictims of bill shock. If they refuse to pay the charges, thena dispute resolution process is instigated. This usuallyresults in a lengthy and costly investigation for the CSP,often leading to bad debt write-offs, and sometimescustomer churn even if the dispute is resolved. It alsoleaves the enterprise with no ability to predict monthlycosts, thereby leaving the root cause unresolved and oftenleading to a recurrence of the issue.

From a billing perspective, enterprise accounts are uniquein that each enterprise typically negotiates discrete rates,plans and volume discounts for its employees. Often,departments share bundles of minutes and data usageallowances between staff. Billing relationships can becomplex and hierarchical. Historically, traditional batch-based billing systems were the only tool CSPs had thatcould model these relationships, support customer speci cpricing, volume discounts, and the sharing of pooled dataor voice minutes across different departments. Until now,batch systems were the only way that CSPs can process thesheer volume of transactions generated by large enterprisecustomers, as data usage continues to rise.

Dependence on batch rating and billing infrastructurealone has created an environment fraught with bill shockand billing disputes. For enterprise customers, CSPs areoften days behind in processing usage or sometimes

even wait until the end of the month to process usageso that volume discounts or payment relationships canbe applied. Because of this, the enterprise customer hasno visibility over spending, overage charges, or the costattached to employee usage until the bill comes at the endof the month. Additionally, the operator has no ability totrack against data quotas, credit limits, or alert enterprisecustomers when they are reaching a roaming limit or a dataallotment. So far, there has been no way to address thisissue, and bill shock is rife.

As a result, CSPs are placed in the dif cult position ofeither choosing to write off service overage charges as baddebt, or sacri ce relationships with valuable enterpriseorganizations which could churn to other CSPs. Thislimits pro tability and introduces a high degree of riskand unpredictability into the CSPs business. It leavesenterprises feeling dissatis ed, with unpredictable businessand operational expenses, and at worst, employees whoare unable to communicate because their services havebeen throttled or cut off.

The lack of real-time for enterprise customersBill shock is predominantly caused by heavy usage ofdata services and international roaming services, whereenterprise employees dont understand the frequency,applicability or size of charges debited to their account.This is particularly true for email usage, where employeesoften believe that email does not count against their dataallowance.

On page 5 is an example of a monthly billing processow for enterprise customers showing where CSPs and

enterprises have pain points due to the lack of real-timevisibility throughout the process.

Because usage is not rated in real-time, and the CSP does

not provide real-time information or communicationsabout spending levels, the enterprise is in the dark untilthe end of the month. When the statement is received atthe end of the bill cycle, there are unforeseen charges andno predictability from month to month of total costs. Ifthe bill amount is disputed, the CSP incurs reconciliation,resolution and write-off costs. Even if the dispute isresolved and the enterprise bill is written off, in some casesthe enterprise churns and their revenue stream is lost.

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QUANTIFYING THE ISSUEStudy results show there are three primary areas whereCSPs are negatively impacted because they lack the abilityto provide real-time visibility of enterprise spending.These are quanti ed below as bad debt write-offs, billreconciliation and dispute resolution, and customer churn.

Bad debt write-offsWhere payment of a bill is refused by the enterprise, baddebt write-offs seriously impact the bottom line of CSPs particularly at a time when properly monetizing networkusage in the face of mobile data growth is already achallenge. This can also lead to revenue leakage above andbeyond the write off amount as settlement charges must bepaid to roaming partners whether or not the CSP collectsthe disputed charges from its customers.

While each dispute resolution is unique between a CSPand an enterprise customer, write-offs can range widelyfrom speci c charges to 100% of a disputed amount,making the nancial outcome of dispute resolution totallyunpredictable.

5

Price Con guration

Enterprise has few options how it is charged CSP must go through timely process

to implement pricing

Price Negotiation Enterprise negotiates communication package

CSP has only limited options to offer

Usage Processed

Enterprise generates a large numberof billable events

CSP processes usage in batch

Bill Generation

Enterprise has to wait until the end of the monthfor the bill, and has no spend visibiliy

CSP aggregates all costs together into a bill

Write-offs

Enterprise service is disrupted duringdispute resolution

CSP has to write-off some portion of bill

Potential Churn Enterprise churns to another CSP

CSP loses revenue from write-off andpotentially loses revenue stream permanently

Dispute Resolution

Enterprise refuses to pay the bill CSP enters into lengthy and costly

dispute resolution process

Bill Reconciliation

Enterprise disputes the bill amount CSP allocates resources to reconciling the bill

Bill Shock Enterprise calls CSP call center to complain

about high bill CSP call center is overloaded

Write-offs as a percentageof total enterprise revenue per month

35

30

25

20

15

10

5

0

< $5m $5TO

$10m

$10TO

$15m

$15TO

$20m

$20TO

$25m

> $25m

Source: Stratecast, a division of Frost & Sullivan, December 2010

Enterprise billing process ow


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Write-offs range from less than US$5m a month toover $25m, with 10% to 15% of total enterprise revenuerepresenting the average. These gures are signi cantalone, but they make an even greater impact whenunderstood in the context of the percentage of overallmonthly revenue that enterprises deliver to a CSPs top-line revenue. Based on subscriber volumes, enterprisecustomers account for 10% - 15% of all subscribers butdeliver up to 40% of total revenue. They are also heavydata users contributing up to 40% of data revenues.

Bill reconciliation and dispute resolutionReconciling a disputed bill is universally acknowledged byCSPs as problematic and complex. It can affect customer

goodwill, and places a heavy burden on the RevenueAssurance (RA) group. This group must ascertain the true costincurred by an enterprise, department or individual user, andthe amount of effort the CSP has used to recover a payment.

The dispute resolution process can be open-ended in termsof the time and resources required to reach a conclusion.Service revenue from that customer is effectively put onhold while the dispute is resolved, particularly whereservices have been restricted or denied as a consequenceof unpaid, outstanding charges.

A lack of exibility in overdue bill payment arrangementsmeans that an enterprises communications services can becompletely cut off until payments are received. Meanwhile,the enterprise can experience disruption to vital businessfunctions such as voice or email access as services arethrottled or denied. Additionally, disputes also increase

the cost of handling customer care inquiries. Finally, if theCSP does not throttle or cut off services during the disputeperiod, revenue leakage increases as employees continueto use services beyond the agreed limits, making the write-off larger every day the dispute continues.

Customer churnAll CSPs expect a certain level of customer churn as a factof doing business. Gone are the days when enterprises hadonly one or two options when choosing a communicationsprovider. Enterprises now have a wide array of providersto choose from. So even if disputes with enterprisesare resolved, there is no guarantee that individuals,departments or an entire organization will not leave and

sign up with an alternative CSP. This compounds theimpact of dispute resolution costs and write-offs as itresults in the complete loss of revenue from an enterpriseas it churns to another provider.

In the present survey, over 90% of CSPs had experiencedenterprise customer churn resulting from spendingdisputes. As one CSP stated, Whenever we get complaintswe try to resolve the issue at our end, but even then, somestill switch to another [provider].

Conventional wisdom

6

% large enterprises contributeto overall revenue

50

40

30

20

10

0

10-20% 20-40% 50% > 50%

Customer churn fromspending disputes

100

90

80

70

60

50

4030

20

10

0

Yes No




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CSPs are responding to these numerous challenges byexploring the potential of enterprise spending controls.The survey found that nearly 75% of enterprise customersrequested better spending controls from their CSP in orderto help them manage their accounts and gain visibility overemployee and overall corporate spending. The objectivefor CSPs is de nitely clear; to provide predictable billswhich enterprises do not dispute, and ultimately tooffer better nancial planning tools that provide theirenterprise customers forward budgeting and greaterspending control.

THE DRIVERS FOR ENTERPRISE SPENDING

CONTROLS AND PREDICTABLE BILLSThere are a number of drivers behind these requestsfor enterprise spending controls and predictable billsincluding:

Some enterprises believe that CSP pricing plans nolonger t their usage needs.

Enterprises realize that crucial communications serviceswill be affected by non-payment of bills.

Enterprises now have a choice when it comes to whosupplies these services.

Large enterprises believe that some CSPs are unableto see the big picture from the enterprise businessperspective and therefore are in exible in their approachto dispute resolution.

More predictable bills would allow these high-valuecustomers to better plan their budget cycles, and predictroaming usage spikes in advance. They could alsounderstand if there were problems with speci c useroverages, which could be addressed if enterprises hadsuf cient and timely information about how theiremployees used communications services.Customer education was also viewed as a key factor byCSPs in making bills more predictable. And all CSPs takingpart in the research agreed that real-time spending analysiswould help them signi cantly.

Improved KPIsReal-time enterprise spending controls hold the keyto increased CSP business performance. Every CSP inthis study agreed that such controls would bring betterawareness of real-time enterprise spending, and improvecustomer satisfaction. CSPs who deploy such spendingcontrols could expect to see tangible improvements in thefollowing KPIs:

Data Revenue Collected. Revenue leakage and debtwrite-offs would be minimized, since enterprises wouldbe aware of their spending and be able to negotiate extravoice minutes or data transaction volumes to avoid anybill shock.

International Roaming Used. Roaming premiums wouldbe easier to apply. The enterprise would have insight tothe additional charges related to roaming usage, and alsobe able to see employee roaming usage patterns.

Day Sales Outstanding (DSO). DSO would be tightenedthrough a real-time nancial relationship with theenterprise customer.

Customer Satisfaction. Enterprise customers would bemore satis ed with their experience and would be lesslikely to churn.

7

Enterprise customers asking for betterspend controls and predictable bills

80

70

60

50

40

30

20

10

0

Yes No



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WHAT ENTERPRISE SPENDING

CONTROLS LOOK LIKEEnterprise spending controls allow the CSP to managesubscriber balances, spending limits and usage in real-time. They administer subscriber policy, backed by apricing catalog, thereby allowing real-time credit control.Noti cations can be offered to the enterprise that spendinglimits or usage thresholds are about to be reached. Thisprovides a real-time decision point for the enterprisethat allows it to top up employee credit, select and buyadditional service bundles at preferential rates, or decidehow certain services are throttled given a number ofdifferent usage scenarios.

Enterprise spending controls provide CSPs and enterprisecustomers with a shared view of service usage andspending, providing the real-time balance managementfeatures that offer the visibility and control that bothrequire; the CSP provides a clearer view of how servicesare consumed, and the enterprise gains the ability to bettercontrol its spending based on a wide variety of parameters.

Greater control, exibility and clarityIn marked contrast to batch processingcycle billing andthen paying for overages at the end of the monthreal-

time enterprise spending controls offer greater control,exibility and clarity for the enterprise on a day-by-daybasis as its staff consume services.

At the beginning of the month, service usage and spendinglimits can be allocated from a central package directlyto departments or individuals based on their individualneeds. For example, eld services staff may need moremobile voice minutes to check in with HQ, whereasexecutives based at satellite of ces may need greater QoSfor video calls or a bigger data allowance for reviewing andauthorizing documents or les. Everyone needs an emailallocation. Spending controls allow department heads to

understand email usage and be noti ed in real-time if thedata allowance threshold, which underpins email usage, isapproached.

Noti cations of any spending or usage metric can becon gured by the enterprise to be sent to both individualsand department heads to alert them of high spendinglevels. This helps the enterprise manage its budget andusage dynamically. If a spending threshold is about tobe passed, an employee or administrator is noti ed andgiven options on how to resolve the situation. Crucially, itallows the enterprise to adjust usage quotas or allocationsbetween hierarchies, departments or individuals thatshare pools of minutes or data capacity, and, for example,reallocate spare credit from areas of low use to thoseof high use. Enterprises can adjust to dynamic marketconditions in this way, responding to speci c demandsplaced on their communications services during any givenmoment. It also allows them to dynamically provisionextra credit to areas where its needed, rather than face anoverage charge or service usage limitation from the CSPfurther down the line.

Real-time spending controls provide an unprecedentedlevel of granularity in how the enterprise budget isapplied and shared across hierarchies, departments andindividuals. At any given point, there is clear visibilityinto whats in use, how much its costing, whos using it,where they are and which device they are using. Usagetrends such as these can be extrapolated by an enterprisesaccounting team, who is in a better position to realign how

the budget is spent, reinforce enterprise usage policies or torationalize spending based on understanding where its likelyneeded most today, tomorrow or months into the future.

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Use casesThe following use cases illustrate how enterprises becomemore empowered to control their own spending, and howCSPs bene t through dispute avoidance and increasedopportunity to sell-in top-ups and new offers.

Facilities managementA corporation negotiates a mobile package for allemployees which includes 200,000 voice minutes and500GB data allocation per month, where roaming andoverage charges apply. There is a total overage cap of$10,000 across all employees during any month.

The facilities manager allocates 150,000 minutes and 350GBto the Sales department, and 50,000 minutes and 150GBto Engineering. But, during the month, the package can bemanaged in real time by the facilities manager as below.In this use case example, the facilities manager has livespending visibility from noti cations, and when balancesrun low, has the control to proactively purchase more dataallowances as required. Note that if the facilities managerdecides not to buy an additional quota and incur overagecharges, then he is not in a position to later dispute overagecharges as he has been made fully aware of these chargesin advance.

9

Overage chargesare avoided

Overage charges

are avoided by reallocatingcredit to engineering

Facilities manager buys anextra GB bundle to ensure

departments last untilthe months end

Facilities manager isnoti ed in real-time

Facilities manager reallocatesGB from sales to engineering

Facilities manager isnoti ed in real-time

Engineering

Facilitiesmanager

Sales

Sales uses its GB allowance

later in the month

Engineering usesGB allowance before

month end


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Employee application controlEnterprise spending controls are also exible to allowdepartment managers to ensure that employees pay forprivate usage on their device:

Not only can the department manager enforce corporatedevice usage policies, but more GB can be allocatedto heavy data users, or more voice minutes for off-siteemployees. Most importantly, the enterprise bene ts fromtighter budget control and can elect what type of employeeusage it will pay for including voice, data, Web browsing,

le sharing or chat.

10

Users of non-businessservices are noti ed of

their excess spend

Employees are allowedup to $10 per month for

personal use

Inappropriate charges to the enterprise are avoided

Individuals who exceed the threshold know they

must pay the balance

Enterprise is charged for itsusage, employees are

charged for personal usagethat exceeds limits

Enterprise saves money bynot paying for employees

excess personal usage

Comms director reminds staffof enterprise $10 policy

regarding personal usage

Some individuals exceed thislimit and the communicationsdirector is noti ed in real-time

HQ

CommsDirector

Individual

Field Sales

Individual Individual


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Developing a business case

The business case for CSPs to implement enterprisespending controls can be made through these fourfundamental drivers:

Reduced debt write-offs. Bad debt can be limited, andthe cost of bill reconciliation and dispute resolutiondramatically lowered.

Improved customer retention. Retention is key, becausechurn is costly. According to Stratecast, customer churncosts CSPs in North America approximately $75M to$100M per quarter in total on average. According to NexusTelecom, CSPs can have a churn rate up to 7% of the

subscriber base, with a cost per churn event of betweenUS$200 and $600, and customer acquisition up to ten timesthis cost.

Revenue increase. Enterprise spending controls providegreater opportunity, and more in ection points during theworking day for enterprises to understand what theyrepaying for and to make better-informed decisions aboutspending more. The provision of spending controls is alsoa service in itself that CSPs can offer as an extra to somecustomers and offer it as a loyalty factor to others.

Reduced dispute handling costs, which vary depending on:

The total time spent with the customer resolvingthe dispute.

The number and type of offers made to the customer.

The number of times the problem has occurred historically.

The level of write-off provided to the customer.

Enterprise spending controls also provide bene ts to chiefnancial and marketing of cers at CSPs:

CFOs can:Recover bad debt.

Gain a real-time revenue view.

Enjoy a dramatic reduction of credit risk and bad debt.

Prevent roaming revenue leakage for data services.

Reduce the number of disputes and the associated costs.

Remove back of ce processing costs.

Reduce DSO (Days Sales Outstanding).

CMOs can:Attract more enterprise customers by offering spendingcontrols and real-time noti cations.

Gain the ability to track customer usage and market tothem in real-time.

Take advantage of spending controls that remove fear ofuse for new service offerings.

Easily deliver customer-negotiated pricing, packaging andbilling relationships.

Gain a real-time view of enterprise customerconsumption and behavior.

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MATRIXX Software

779 E. Evelyn Ave| Suite E | Mountain View, CA 94041| +1 408 215 9344| matrixxsw.com

THE MATRIXX SOLUTIONAt MATRIXX, our vision is that both enterprises andCSPs should bene t from real-time spending controls.Enterprises should gain the visibility and control thathelps them better manage their budgets, while CSPs canavoid bill shock, bad debt, disruptive and costly disputeresolution scenarios and better monetize the network all while improving customer loyalty. Additionally,MATRIXX Enterprise Spend Controls are speci callydesigned to allow for maximum business exibility inmanaging corporate billing relationships and negotiatedpricing including unlimited balance sharing, unlimitedpricing con gurability and actionable, real-time enterprisespending visibility.

Unlimited exibility to control spendingWith MATRIXX Enterprise Spend Control, CSPs can:

Instantly make real-time balance information available tothe subscriber.

Set usage and spending controls across any number oflevels in the organization.

Give volume and cross product or cross departmentaldiscounts.

Price according to any metric including Kbs/MBs, content

downloads, bandwidth or service QoS.Offer a set amount of resources for a speci c time period daily, monthly or weekly.

Vary prices and policies based on an employees level inthe hierarchy and executive status.

Charge the enterprise for enterprise service consumption,and separately to the employee for personal usage.

Easily set sharing rules across hierarchies, departmentsor individuals.

Enterprise customers can enjoy full exibility to:

Help con gure their own spending controls and gainbetter visibility over their spending.

Act on real-time noti cations by reallocating usage orspending from a central pool, or simply topping upwith more.

Construct balance sharing plans between hierarchies,departments or individuals, with controls that mean asingle balance can be shared by 10 or 10,000subscribers, across any number of different devices.

Track how resources are being used at any level and usethat information to plan for the future.

For more information about enterprise spending controls,please contact MATRIXX Software.

Appendix: notes on research methodologyAll data points referred to in this paper are from unique rst-line researchconducted by Stratecast in Nov-Dec 2010. MATRIXX Software commissionedStratecast (a division of Frost & Sullivan) to conduct interviews with a globalsample of CSPs, to understand the demand from their enterprise customersfor greater visibility and control over enterprise spending on communicationsservices, primarily mobile services. Multiple personnel from 12 CSPs wereinterviewed covering North America, Europe and India. Interviewees heldpositions in billing and revenue assurance organizations.

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