Asp function

The ASP Challenge - Company Business and Marketing

Three wireless CIOs argue the merits of outsourcing billing applications.

New wireless technologies and applications are flowing steadily into the market, and competition is pressing carriers to roll out new services and pricing plans quickly. This competitive environment motivates CIOs to weigh the benefits of using an ASP against those of keeping billing applications in-house.

Rural Cellular Corporation (RCC; www.rccwireless.com) uses an ASP model for enterprise resource planning (ERP) applications such as human resources and revenue management. But the company's CIO, Fritz Hibbler, is undecided about using an ASP for future billing applications.

"We've found there are huge benefits with an ASP, with respect to our ERP," Hibbler said. "We think those benefits could be applicable to our billing systems also."

Hibbler figured that using an ASP has saved RCC 25% of what it would cost to maintain an in-house ERP system. But selecting an ASP for billing functions would involve different considerations. RCC uses three cellular billing systems and one long-distance system. The carrier developed some of the systems and licensed others from vendors.

One of RCC's concerns about using an ASP for billing involves reliable network connections. To avoid system shutdowns, RCC would need an ASP with good network access to the carriers' remote facilities, Hibblersaid. The connectivity issue would be more important with billing applications than for the company's ERP functions because billing is more critical to RCC's corporate mission.

Another consideration is how much of the company's billing operations to entrust to an ASP.

"Strategically, a company has to ask itself: 'Are we comfortable giving very strategic aspects of our business to the ASP, or do we only want them to have operational aspects of it?" Hibbler said.

RCC hasn't thoroughly investigated using an ASP for its billing operations. However, conducting a costbenefit analysis would be the first step in the investigation. The analysis would involve more than scrutinizing the expenses involved in using the ASP and in-house billing models.

"We would also have to take into consideration those intangibles that could differentiate us from one of our competitors," Hibbler said.

For instance, if the company considered customer service a competitive differentiator, it wouldn't surrender the function to an ASP. Similarly, customer ownership and the security of shared data play a role in the type of ASP services RCC would consider for billing applications.

Carriers can use two main methods to transfer data to ASPs --dedicated or shared. In the shared model, several companies send data to an ASP using the same electronic platform. With the dedicated model, a company sends records as digital signals on a dedicated T1 line.

A third option also exists -- transferring records via an Internet virtual private network.

"The advantage is that you don't have a dedicated line, so the cost is lower," said Andrew Burroughs, Apogee Networks chief marketing officer and general manager. "The disadvantage is if there are security issues, but there are people who are transferring data through the Internet in encrypted form."

Although Apogee Networks primarily licenses software, it began offering hosted billing applications a couple of months ago (www.apogeenetworks.com).

Burroughs thinks the propagation of wireless data services will drive carriers to ASPs for billing applications.

"They don't have the existing billing systems to capture (IP-based) information and to bill it correctly," he said. "That will cause many wireless carriers to outsource some of their billing for an interim period."

For Hibbler, the biggest benefits of choosing an ASP would be access to IT personnel and the ability to roll out new products quickly. RCC would be wise to consider the option, he said.

ASP Inside & Out

During the past 18 months, four industry trends have pressured Alltel (www.alltel.com) to alter its billing methods, according to Lon Zanetta, Alltel CIO. The company has rolled out new services, including the Total Freedom national rate plan, released in mid-2000, and the Boomerang unlimited local service, released last month. Zanetta sees pressure building to expand billing applications to include services such as CDPD and in-commerce. In addition, rating methods must change as carriers eliminate roaming and long-distance charges, adopt new data-rating models such as usage-based billing and offer complex promotions such as free off-peak minutes and rollover minutes.

The third trend, convergence, may have affected Alltel more than other carriers because the company is a CLEC in some of its markets. Particularly in those markets, Alltel has experienced pressure to provide convergent billing and product bundling, Zanetta said. There's also pressure to deliver new billing and rating capabilities within days and weeks, compared with past expectations to deliver within weeks and months.

Although Alltel currently uses four billing systems, Zanetta says the company plans to whittle that number down to two, both of which operate on the ASP model. One of those systems, Virtuoso II, is supplied by the carrier's subsidiary, Alltel Information Services. The second, garnered from Alltel's 1998 merger with 360[degrees] Communications, is Convergys' (www.convergys.com) Cellware billing system. Both Convergys and Alltel Information Services host the billing applications and provide bill-processing services.

According to Zanetta, the biggest benefits of using the outsourcing services of Alltel Information Services and Convergys are gaining the companies' IT expertise, industry knowledge and bill-processing abilities, all of which free Alltel to focus on its core competency -- telecommunications.

Stepping into the shoes of carriers that may be considering ASPs for billing, Zanetta offers three points for consideration:

* Consider whether an ASP solution could enable you to enter a market or deliver a product more quickly than you could on your own.

* ASPs work in a multiclient environment, which means you gain the benefits of scale and, thus, lower your processing and development costs.

* If you choose the right vendor, an ASP will provide your company access to additional thought leadership. Good ASPs are active in the industry and learn from their relationships with several carriers, some of whom may have problems similar to your company's.

Unconvinced

U.S. Cellular (www.uscc.com) hasn't considered using an ASP for billing, mainly because it considers customer service to be one of its core competencies, and its billing and customer-service systems are integrated.

Jim West, U.S. Cellular vice president of information services and CIO, is concerned that working with an ASP would hamper the company's ability to alter the billing system quickly to complement new services. Although he knows that one ASP selling point is the ability to help companies speed new services to market, he's unconvinced.

"Most of the pitches I've seen are more focused on the original implementation," West said. "The concern is what it would do to our flexibility subsequent to the original implementation."

West said that although the company hasn't worked with ASPs, his concerns stem from its experiences with outsourcers in general.

U.S. Cellular currently licenses Amdocs' (www.amdocs.com) Ensemble billing software. To accommodate emerging billing needs, the carrier is considering modifying its existing system or buying a new one. Amdocs offers modules that include data-billing applications. One option would be to purchase those. The carrier also is considering other vendors that offer data-billing capabilities, such as Portal Software (www.portal.com).

Under what circumstances would U.S. Cellular consider using an ASP for billing?

"If we found that it was somehow prohibitively difficult for us to deliver data services in the manner that we deliver services today, then (an ASP) is something we would consider," West said. "We also might consider it for areas of the business that we don't consider to be key strategic areas, such as general ledger accounts and accounts ledger (applications)."

Burroughs said most wireless CIOs think like West. They don't like to outsource their billing if they can avoid it, perferring to maintain control. Typically, those that choose to outsource billing functions do it as an emergency measure.

"They may not have the billing expertise," Burroughs said. "They may have old legacy systems that may not be flexible, so they have to outsource something if they want a new product to be launched. You can't let your billing system hold the company hostage."