Cato Rasmussen Cato Rasmussen CEO - BolgiaTen

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Revenue is Vanity..Margin Is Sanity

  • ....Cash Is King


    ARPU is a term still used in our industry. What if that ARPU is generated on a visited network, how good is the margin? Hence, how good a measure is ARPU in todays market?.....


    …..As we all know margin from traffic revenue is eroding. In the fast moving consumer goods domain, low margin products can be very attractive if the volume sold is high enough. This does not work for traffic in the same way.


    In the beginning of the Mobile Internet era we invested heavily in horizontal mobile portals and PIM (Personal Information Management) applications (calendar, phone book). Rather than adopting a license approach to PIM and price the products available for purchase on the Mobile Portal, we went an implemented traffic oriented billing and rating systems preventing us from offering the products in a way customer expected to purchase these kind of products. While revenue share and premiums boosted revenue and was highly profitable, the revenue model was relatively short lived.


    What I am driving towards is that new Billing (read revenue) systems need to enable new and complement existing business capabilities. As the heart of the “money go around” system, next generation billing need to cater for a variety of revenue models to ensure needed business capabilities regardless of what products, services or solutions that are or may be on offer in the future.


    Traffic, whether based on packets and sessions or traditional circuit based phone calls are priced based on tariffs and rating. But to use the same pricing mechanism for a movie or a music track does not make sense. For these types of products pricing should be based on uplift on “in-price” from supplier. Further, entering in to eHealth, surveillance and other solutions based on technologies such as M2M (Machine to Machine) we are inclined to do value based pricing.


    We have in the communications industry tended to talk about profitable customers. In other industries, particularly those that have become our new competitors are measuring profitable products.


    When a product is no longer selling and becomes unprofitable, it does no longer fulfill the purpose for why the product was produced in the first place.

    If a customer is no longer profitable, what then? ”Stupid customer”!


    We have to re-think the Billing/Revenue systems of the future, in order to enable various revenue models:


    -       Customer management (not think about as a post or prepaid account)

    -       Account Management (transactional – not receivables or pre-paid balance management)

    -       Product catalogue management (not only tariffed product codes)

    -       Pricing management (not limited to rated items)

    -       Cash Management (not limited to postpaid collections and dunning or pre-paid revenue accruals or balance terminations)


    In an organization where groups of people have to share a common belief to move in the same direction, the above is easier said than done. A major hurdle lies within the delta of how we have gone about defining the Business Processes enabling business capabilities in the past and how we need to change going about defining Business Processes to enable the additional business capabilities needed for the future.


    However, as processes are lifted in to software they become governed by data, hence defining business processes are not alone good enough. We have to join processes with information models.

    Cato Rasmussen
    About Cato Rasmussen Cato Rasmussen works as CEO at BolgiaTen
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