The Ultimate Guide to the Quote-to-Cash Process for Telecom
One of the most important set of business processes for a service provider (SP) is found in the quote-to-cash lifecycle, referred to in this whitepaper as “Q2C”.
What is the Quote-to-Cash Process?
The Q2C lifecycle is the set of processes that delivers revenue and cash, the lifeblood of any company. All service providers have at one or more points in time had issues with the processes in this lifecycle. Many companies never resolve these issues which puts a cap on how fast they can grow their businesses or even worse ends up leading to their demise. This whitepaper explores many of the issues that impact the Q2C lifecycle and offers ideas on how these issues can be overcome.
Key Components of the Telecom Quote-to-Cash Process
Before we delve into the issues impacting the Q2C lifecycle, the various components of the Q2C lifecycle must be defined. The Q2C lifecycle consists of the following components (also see diagram below):
- Sales Process
- Network Services Quote Process
- Complexity in Pricing Models and Billing
- Network Service Provisioning / Activation Process
- Accuracy and Payment Delays
- Network Inventory Management Process
- Revenue Reconciliation Process
Common Challenges in the Telecom Quote-to-Cash Process
This section will provide some analysis on the common issues that cause problems in the Q2C process.
Network Services Quote Process
The Network Service Quote process is one of the most important components of the Q2C lifecycle as the cost quote that is obtained through this process locks in the margin that will be generated from the service sold. This margin is also locked in for the term of the customer and related network services contracts. The following are common issues we see that negatively impact this process:
- Lack of automation
- Use of inexperienced personnel
- Lack of business intelligence on telco/access costs
- Lack of a comprehensive quote process
Complexity in Pricing Models and Billing
Like the Network Services Quote process, the Customer Pricing / Quote process also is the primary determinant of making money or not. The following are common issues that hamper this process:
- Lack of understanding of cost to provide service
- Lack of visibility into actual (observable) margin
- Lack of a disciplined pricing process erodes margins
Accuracy and Payment Delays
The Billing Order Entry process is the process that establishes the service in the biller. This rather mechanical process is important for obvious reasons.
We commonly see lack of automation, which can lead to:
- Data errors and/or omissions
- Revenue leakage and delayed billing
Network Service Order Process
The story in the Network Service Order process is typically related to using manual processes including entering orders through a vendor portal or via email. The issues with managing the process this way are as follows:
- Lack of automation
- Lack of data
Network Inventory Management Process
The Network Inventory Management process is the bedrock of maintaining a cost management capability and a must have to operate a profitable service provider business. This process establishes the basis to evaluate future cost billing for new services and must be set up at time of service installation. We see the following common issues in this area:
- Failure to build a solid network inventory
- Failure to maintain network inventory
Revenue Reconciliation Process
The Revenue Reconciliation process is the last step in the Q2C lifecycle and closes the loop on the process. Common issues we see in this area include:
- Lack of an effective revenue assurance capability
Solutions to Common Issues in the Q2C Lifecycle
This section of the paper will identify and discuss solutions to the issues described above across the Q2C lifecycle.
Need for Service Orchestration / Process Management Solution
Over the past 10 years or so there have been many SaaS applications appearing in the marketplace that focus on one or more of the components of the Q2C lifecycle. While this trend has been good for service providers as many of the Q2C functional components are now automated, this trend has also created the following issues due to these SaaS platforms not being integrated to one another:
- Inefficient processes
- Data errors / omissions
- Lack of visibility
Fortunately, many of these SaaS platforms have integration capabilities (via REST APIs) so the above issues can be mitigated through the integration between a “hub” application and the individual applications used elsewhere in the Q2C process. In addition to integrating the applications an orchestration capability is needed that will control the flow of the process, assess logic conditions and make decisions, etc. Together, integration and orchestration can provide the following benefits:
- Automate “inter-application” flow, eliminating human data entry and data errors, reducing interval times
- Enhance visibility to process flows within each application
- Provide process analytics to identify overall process health and specific issues with various Q2C functional components
Network Services Quote Process
Most of the issues in the Network Service Quote process are caused by running the process manually using email, spreadsheets, etc. There are far too many tasks that require very specific data as well targeted use cases to both automate pieces of the process and generate analytics that guide the required outcome which is obtaining market-edge pricing for services. The following are some recommendations on ways to level up your network services quote process:
- Find a software solution that supports the following:
- A range of quote options (email, contract, API)
- Provides location intelligence (i.e. detailed information as to which carriers serve buildings that are being evaluated)
- Allows users to augment location intelligence with their own data
- Provides workflow to guide the process and allows access to the underlying quote data to create custom analytics
- Supports integration and orchestration capabilities
- Upgrade human resources to close any skills gap where necessary or upskill existing quoting personnel so there is a solid understanding of the fundamentals of telecom quoting / cost principles
- Develop cost benchmarking analytics to guide quote generation and selection
- Past quote data should be indexed by service area (City, MSA, etc.), service media (fiber, coax, copper, etc.), Vendor or Vendor Tier (Tier 1 incumbent, Cable, Resellers, etc.), bandwidth levels, quote term and number of quotes received per vendor per request so past data can be compared to new quote data. Also cost trends should be created so a general understanding of the directionality of rates is known
- Optimize network service quote process to ensure that providers are leveraged for the best pricing given the characteristics of each quote opportunity
Customer Pricing / Quote Process
The Customer Pricing / Quote process must incorporate the following in order to create and sustain margins:
- Customer pricing must be competitive vis a vis other market offerings and at the same time maximize potential margins. As such, market pricing and internal service delivery and operation cost structures must be understood. This information needs to be leveraged into creating pricing models (i.e. standard cost model to add to wholesale pricing) that can be easily and quickly applied during the quoting process.
- The customer pricing process must also be disciplined to avoid scenarios where large price decreases are made during the process to “make the sale” without factoring in impact on margins. The pricing model referred to above should have built in standard price adjustments that can be made quickly and should also have an escalation process designed in so that any deeper price decreases get thoughtful considerations as to impact on margins
- Look for quote software automation that supports this piece of the process including the protection of margin
Billing Order Entry Process
The Billing Order Entry process will benefit from the following:
- If data entry errors / omissions are causing revenue leakage then additional scrutiny of entered order data should be performed
- This can be the job of the sales rep to confirm what was sold was entered correctly so the commission is paid correctly
- The orchestration approach referenced above can also reduce / eliminate data entry errors through the automation of entering order information into the billing platform through the use of quote / proposal information and billing system APIs
Network Service Order Process
Similar to the Network Service Quote process the Network Service Order process must be supported by software automation in order to scale effectively. The following are the key items to cover when automating the order process:
- The order process should be an extension of the quote process (as much of the information developed in the quote process is required for the order process) so quotes can be quickly and seamlessly converted to orders
- The software automation must include a bi-directional data flow automatically updating order status as orders progress through milestones
- The software process should have data integration capabilities so that order events / data can be relayed and acted upon from other systems
- Data is critical to track order SLA performance, internal order processing performance and is also an important data source for invoice validation
- The order process should actively maintain the data (i.e. MACD) in the inventory platform as orders are fulfilled
Network Inventory Management Process
The Network Inventory Management process is the foundation of the cost management process so is one of the more important processes that drives profitability. The following are some of the ways that the Network Inventory Management function can be enhanced so it supports the cost management function:
- Existing inventory data needs to be reviewed, validated and updated to ensure completeness, accuracy and timeliness of data
- Many data sources will need to be leveraged to create a proper inventory:
- Invoices
- Contracts / Service Orders / Tariffs
- Vendor network configuration documents (CSRs, etc.)
- Internal network documents / information
- Many data sources will need to be leveraged to create a proper inventory:
- Order processes (I.e. MACD) need to be leveraged to maintain inventory data as orders are processed to keep inventories accurate and up to date
- The inventory is the central component of many key financial and operational processes so inventory data should be leveraged to support the following activities in an automated manner:
- Key financial activities include:
- generating cost accruals
- validating invoice charges
- optimizing pricing models
- revenue to cost reconciliation
- Key financial activities include:
- Operational activities supported include capacity management, SLA/trouble management, network optimization, etc.
Revenue Reconciliation Process
Since this step in the process is by definition the last step in the Q2C process it is mostly not processed at all or effectively given the set of issues that have been identified in the overall Q2C process. The following describes how this function can be set up / practiced and also identifies the requirements of doing so.
- This process requires items in the network (cost) inventory to be related to services that are in the billing (revenue) service inventory. This linkage can and should be established within the Q2C process where the output of the quote / order process can be used to create a corresponding billing item that is linked to the cost service items (that are ordered). Once the link is established then the issues related to dislinkage (i.e. revenue leakage from flaw billing process or excessive cost due to faulty disconnect processes) will be avoided
Companies that have not performed this reconciliation process in the past typically have a good opportunity to uncover revenue leakage and excessive cost issues that when fixed drive increased margins. Once fixed, implementation of the above described capabilities will work to prevent these types of issues to persist in the future, thereby preserving value.
Conclusion
This paper has discussed many issues inherent in the typical Q2C process and ways in which a lot of these issues can be avoided or fixed. Levering technology to drive automation and development of key functionality combined with well qualified human resources can result in the following benefits:
- Reduced cycle time / cost achieved by reducing human tasks via automation and implementing event-driven processes (vs. polling methods)
- Increased revenue through lower customer order abandonment, lower revenue leakage, etc.
- Improved sales / margins by sourcing at better cost as well as creating more profitable pricing
- Improved data accuracy, availability through automation of tasks previously performed via human resources
While the benefits described above are significant it will take an intentional “digital transformation” for most companies to achieve these benefits. It is not enough for companies to simply adopt SaaS platforms to automate / support components of the Q2C process. Modern software technology must also be leveraged to orchestrate the flow of data and intent across the multiple systems and sub-processes to create a seamless Q2C process. When done correctly the results can truly be transformational.
