Opinion piece about Rostelecom’s refusal to deploy the single billing system. The article is published in the issue under the feature story “More than one”.
Standard, August 2012 (Monthly business journal about telecommunications and broadcast in the world and Russia is issued by COMNEWS, the major Russian publisher of business ICT media.)
Russia’s federal telecommunications provider Rostelecom rejected a 10-year-old project for the implementation of a single billing system in all of its regional assets. The company’s top management now calls this approach to business organization inefficient and cost-ineffective. The telecom operator made a decision to develop a multi-vendor business model for billing system design.
The project for implementing a convergent billing system in all inter-regional companies of OJSC Svyazinvest and OJSC Rostelecom started almost 10 years ago, in December 2003, two years after the foundation of the inter-regional companies based on 88 regional telecommunications operators. Yet, the project was never completed.
The tender held in September 2004 by Svyazinvest holding company was won by Amdocs Ltd. whose convergent billing system was selected for implementation. Licenses were purchased directly by the companies that are part of Svyazinvest, i.e., by Rostelecom and the inter-regional companies. After the companies were merged on April 1, 2011, all the licenses were transferred to the balance sheet of Rostelecom.
Svyazinvest planned the implementation of the convergent billing system to take no longer than 2.5 years. During the work progress, the company came to the conclusion that it would not be that easy to install the new billing system from Amdocs: the problem was caused by 150 heterogeneous billing software programs already running at the inter-regional companies and Rostelecom. To make them uniform, Svyazinvest engaged in the project CJSC Peter-Service and Infosfera, LLC (from 2010, Start2Kom, LLC), in the spring of 2006. Their products were to be used as add-on to the legacy billing software and it’s with them the Amdocs system was to interact.
Svyazinvest assured that the implementation of the Amdocs billing system would help arrange a single billing system in all the inter-regional companies and would lower the total cost of billing operation. The holding company failed to implement these plans. In 2008, having spent more than $50M for “leveling” and implementing convergent billing, Svyazinvest froze the project. The company then said it would fully reject billing from Amdocs and wrote off a large part of the expenses due to revalidation of the inter-regional companies’ intangible assets.
According to the financial statement of Rostelecom (that afterwards got in charge of the billing issue), by the results of 2010, the Amdocs system impairment loss amounted to 4.4 billon rubles, or 145 million dollars at the average exchange rate of the Central Bank of Russia for 2010. A high-ranking source in Amdocs then told the Standard magazine that the vendor was ready to renew the expired licenses. However, Rostelecom preferred to fully convert them into Amdocs’ licenses for its CRM system, which was reflected in the company’s financial statement for 2011.
“The loss recognized in previous periods with regard to the licenses for the amount of 3,419 (million rubles – Standard’s note), was reversed in the total income statement for 2011,” the document says. However, Rostelecom still thought of purchasing an integrated convergent billing system from other companies at that time.
In an interview to a Standard’s reporter, CBOSS President Andrey Morozov reminded that as far back as 2004 he assumed that Svyazinvest might face problems with the implementation of the Amdocs product not only due to the project’s large scale, but also due to the fact that the company planned to have the billing system installed not by the vendor itself but by third-party integrators. At first, it was IBM Global Services and then OJSC Svyazintek. “Sophisticated technology is best of all implemented by the vendor itself,” Mr. Morozov assured.
Another source of the Standard magazine, who wished to remain anonymous, added that the Amdocs system is “to a large extent a construction kit and not a turn-key solution, and its implementation requires a great effort and additional investments.” Viktor Strelkov, Rostelecom’s CEO and CIO, believes that such an assessment can be applied not only to Amdocs but to absolutely any vendor of billing systems. “There are no packaged billing solutions and any billing solution requires more than 80% updates. At least because of the fact that different tariff models and products, launched along with the implementation, can be pre-integrated in no product. It is important that the system’s basic functionality be sufficient for a variety of complex schemes depending on the customer needs,” he explained.
Viktor Strelkov added that, by the time when Rostelecom rejected the idea of implementing the Amdocs billing system, its life cycle, which for such software is on average from five to seven years, came to an end. “We decided it would be more effective for us to exchange the expired licenses not for convergent billing, whose necessity we now question, but for a modern CRM platform,” he emphasized.
Bouquet of Systems
In the interview to the Standard reporter, Viktor Strelkov said the telecom operator was reviewing the appropriateness of implementing an umbrella convergent billing system. According to the Rostelecom’s top manager, at this phase of development, the company’s executives see no obvious positive technology or economic effects of its use. He explained that a billing system is a complex set of subsystems responsible not only for issuing bills to subscribers but also for charging, payment handling, settlements inside and outside the company, and so on.
Viktor Strelkov thinks that no vendor of turnkey solutions was able to provide a product that could have met the basic needs of the federal telecommunications provider. He reminded that last fall Rostelecom started large-scale rebranding aimed not only to renew the corporate style but also to transfer all the company’s regional assets to unified tariff and product offers. He added that this, in its turn, required taking technical measures in response as to implement a common approach to providing such services and servicing the company’s customers in the market.
As of August 2012, Rostelecom’s macro-regional branches were using different billing systems from five vendors, three of them being dominant. These are Start2Kom, Peter-Service, and CBOSS. The Start billing system from Start2Kom provides settlements with PSTN users, as well as broadband Internet and IPTV service users in such macro-regional branches as “Center,” “Siberia,” “Volga,” and “Far East.” “Our billing solutions in Rostelecom cover more than 60% of PSTN users and more than 50% of broadband and IPTV service users,” Start2Kom Vice President Andrey Dunsky said.
Alexey Kireev, Business Development Director at Peter-Service, said that the company implemented billing solutions in the macro-regional branches of “Ural,” “North West,” “Center,” and “Moscow,” which replaced a large number of various billing systems deployed at that time. “The “Ural” macro-regional branch runs a convergent billing system that centralizes charging for mobile and fixed-line services, as well as for data transfer and IPTV,” he specified.
According to the Standard magazine, the “Ural” macro-regional branch uses the Bill Master billing system from Inline Telecom Solutions, Ltd., for broadband services. The “South” macro-regional branch uses two billing systems: KURS from Peter-Service and ONYMA from CJSC Stack Soft. In addition, an integrated solution from CBOSS, including the billing system, is installed at CJSC NCC (Nizhegorodskaya Cellular Communications). Apart from the Nizhny Novgorod Region, the coverage area of NCC includes Tatarstan, Mordovia, Chuvashia, as well as the Saratov and Penza Regions.
Andrey Dunsky believes that the objective for billing “leveling” has been achieved. At least, in those macro-regional branches which use the Start billing system. “We have tested the convergent billing solution, ensured centralized web-based real-time charging for key telecom services, as well as implemented interaction with all telecom platforms used in Rostelecom’s macro-regional branches, such as Cisco, Juniper, and Huawei. The macro-regional branches using the Start billing system are thus ready for the implementation of convergent billing. In this case, the Start system will be the core to build an umbrella infrastructure around,” he said. “We’ve overcome the difficulties but, perhaps, we can single out a great diversity in the billing solutions applied and each of them had to be approached individually,” Alexey Kireev added.
According to Viktor Strelkov, thanks to the “leveling” project, they managed to reduce the number of heterogeneous legacy billing systems in the entire consolidated Rostelecom from 150 (in 2006) to several dozens. An anonymous source claims that there are no more than 30 of them. “And it is a great breakthrough, especially if we consider all the mergers and takeovers the company had gone through in the past years,” a top manager in Rostelecom noted. “But this wasn’t the end of the process of billing system consolidation. It is going on and we plan it to take from two to six years.”
Viktor Strelkov added that this is partly the reason why the telco still has not made a decision to transfer all the billing systems to a single vendor. “That what we have is already working and bringing results. And, before purchasing a single umbrella billing system from a new vendor, it is required to prove that it can inherit all the functionality that had been developed in the last six years,” he emphasized.
The More the Better
Rostelecom’s IT Director is of the belief that the most appropriate approach to building a billing system design business model is unification of automated systems not by vendor but by task. Andrey Morozov from CBOSS shares this opinion. He is sure that convergent solutions from multiple vendors can be used in a multi-vendor model, which will enhance the reliability of the unified system and, at the same time, reduce its TCO for the telco, making it less dependent on a particular vendor.
“From a technical point of view, unified billing may consist of a number of poles. In other words, several different technologies may support a single business process. And we would like to be one of such billing solution vendors for Rostelecom,” Andrey Morozov said. The idea of a multi-vendor convergent model for billing system design is supported by Daniil Granin, head of Amdocs Russia.
Andrey Morozov pointed out that, when using a multi-vendor model, it is important to distribute the areas of responsibility among its participants, to promote their competition. Viktor Strelkov agreed with this statement. In his opinion, five convergent billing systems from different vendors, three of which are dominating, is an optimal balance for Rostelecom as a federal telecommunications provider. Yet, he added that the company is open for partnership and cooperation with any other billing system vendors if their solutions will more fully meet its requirements as the unification of the business processes will continue.
OJSC Svyazinvest purchased the convergent billing system from Amdocs Ltd. to be installed at all the inter-regional companies and OJSC Rostelecom in 2004. Svyazinvest appointed IBM Global Services, one of the Amdocs’ global strategic partners, as the project’s main contractor. The contract with Amdocs cost $200M and the company even claimed Svyazinvest got a 50 percent discount. IBM’s consulting services were estimated by the holding company at another $25M. After the initial assessment of possible costs, Svyazinvest said that total costs for the implementation of the Amdocs system would amount to $12 per number ($5 per license, the same amount for the solution implementation, plus taxes). As the holding company’s subsidiaries were servicing about 40M numbers, the total cost of the purchase and implementation of the convergent billing system increased up to $480M and the subsidiaries had to spend another $25M per annum to have the system maintained. IBM Corporation was the general contractor for less than a year. In late 2005, Svyazinvest established a subsidiary, OJSC Svyazintek, especially for the management of the billing project.