Revenue sharing model description of telecom operator sales. Revenue sharing as a natural evolution of outsourcing. Sales funnel vs. Community creation

Today, it has finally become possible to talk about the bold project of MTS and Beeline, which until recently had to be talked about with the reservations “possibly”, “allegedly” and “rumoured”.

During a joint press conference between MTS and VimpelCom, in which a representative of the Russian Ministry of Telecom and Mass Communications also took part, operators spoke about activities in the field of RAN sharing (joint construction and use of a radio subsystem cellular communication) and answered questions from journalists from leading publications.

For you - a summary of the meeting and individual comments, as well as reference materials.

The declared theme of the conference: "Development of communication infrastructure in Russia and legal regulation industry." Participants: Deputy Minister of Communications and Mass Communications of the Russian Federation Dmitry Mikhailovich Alkhazov; CEO OJSC VimpelCom Mikhail Yurievich Slobodin; President of MTS OJSC Andrey Anatolyevich Dubovskov.

Dmitry Alkhazov, Ministry of Telecom and Mass Communications

Increasing the level of accessibility of communication services for the population in our country with continuous improvement of the quality of these services is our priority. We solve these problems in the sphere of regulation of the telecommunications market. At the same time, we try to adhere to the principle, which implies that the increase in the availability of communications for the citizens of our country is achieved through such regulatory methods that help industry entities solve these problems, including by optimizing resources. In this case, I mean primarily investment resources. Some concrete steps have already been taken, a whole series of them.

First of all, I would like to remind you of our decision regarding the introduction of the principle of technical neutrality. In fact, we can now say that we have a growing pool of radio frequencies in circulation that can be used to build mobile broadband networks. Obviously, this measure is directly aimed at reducing operator costs associated with the construction of networks. Experience shows that the resolution of technical neutrality turned out to be extremely timely. This can be judged at least because operators in 77 regions of Russia already use this principle. (Note AB: in Russia, LTE networks operate in 79 regions, including the Moscow region and the Leningrad region).

From January 2015, literally in a matter of weeks, the method of paying for the radio frequency spectrum will begin to work, in which we have moved away from paying for each base station. Now the operator pays for the frequency band that is allocated to it. In essence, this measure encourages the operator to use the spectrum more efficiently. At the same time, the operator who solves the problem we need is not “punished with a ruble” - builds all new base stations. Thus, the operator’s operating costs associated with the use of the base resource are fixed at a constant level. An increase in the density of base stations and an increase in the quality of services are not associated with additional costs.

We can also mention our innovations related to the universal service system. The range of universal services has been qualitatively expanded. Everyone remembers that over the past few years, the universal service consisted of 1.5 thousand payphones and several tens of thousands of “public access points”. Now, in addition to these two options, for the same budgetary funds, the universal service operator will be required to build Internet access points. This measure launched the construction of the largest fiber-optic communication system, qualitatively changing the level of development of fixed-line communications infrastructure in the country.

Another significant innovation in the field of market regulation, which today’s meeting is dedicated to, is, technically speaking, RAN sharing. We have adopted a number of acts. Now operators can share one base station. This is aimed at reducing operator capital costs for the development of mobile broadband network infrastructure. We expect cost optimization capabilities to be one of the industry's key enablers to accelerate network development in remote regions. It is gratifying that today we can state that the industry has transformed our achievements in the field of regulation into specific joint projects, into specific agreements and specific projects.

Mikhail Slobodin, VimpelCom

The title of our conference is boring. I would title it differently - a revolution has taken place in Russian telecoms in terms of the efficiency of capital investments and operator cooperation. A new page has opened for the integration of several players in the fight for cost savings. This is happening against the backdrop of the macroeconomic crisis that we are seeing, in particular, the rise in foreign exchange rates. This is our contribution, as telecom operators, to improving the country's balance of payments. The volume of investments in foreign currency that we pay to our vendors will be optimized. Of course, a huge amount of work was done here by a team of our colleagues from MTS and the VimpelCom team, including the technical, legal, and commercial blocks. This, of course, is the regulator’s command, without which the necessary changes in the regulatory environment would not have occurred.

From the moment of the first serious meeting with Andrey (Dubovskov) to the moment the networks were actually turned on, 10 months passed. I think that for such a complex infrastructure project this is a very good result. This is just the beginning. Of course, this is a very long-term cooperation. Now the teams are getting used to it and seeing how it works in interaction. Before this, there was cooperation between operators in the field of passive infrastructure - a much simpler option for interaction. Now done big step forward - technological, structural, organizational. We had to overcome the resistance of the commercial teams of each of the companies, which, as a rule, kill such infrastructure projects. However, if you think about the prospects, this is the prospect of Russian telecom - cost savings based on joint activities.

The scope of interaction between MTS and Beeline is 36 regions of the Russian Federation.

Note AB: The companies have “announced the entire list”; one can only guess which regions they are talking about. My guesses are listed below. Assumptions in which I am almost sure are marked with an asterisk; without an asterisk - a hypothesis

Altai Republic, MTS based on Beeline *
Astrakhan region, MTS based on Beeline *
Vologda region, Beeline based on MTS *
Dagestan Republic, Beeline based on MTS *
Ivanovo region, Beeline based on MTS
Irkutsk region, Beeline based on MTS *
Republic of Ingushetia, MTS based on Beeline *
Kabardino-Balkaria, MTS based on Beeline
Kaliningrad region, MTS based on Beeline *
Kalmykia Republic, MTS based on Beeline *
Kaluga region, Beeline based on MTS
Karachay-Cherkess Republic, MTS based on Beeline
Kemerovo region, MTS based on Beeline
Kirov region, Beeline based on MTS
Krasnoyarsk region, Beeline based on MTS *
Mari El, Beeline based on MTS
Mordovia, MTS based on Beeline
Murmansk region, Beeline based on MTS *
Nizhny Novgorod region, Beeline based on MTS
Novgorod region, MTS based on Beeline
Omsk region, Beeline based on MTS
Orenburg region, MTS based on Beeline
Oryol region, MTS based on Beeline
Penza region, MTS based on Beeline
Perm region, Beeline based on MTS
Pskov region, Beeline based on MTS *
Sakhalin region, MTS based on Beeline
North Ossetia-Alania, Beeline based on MTS
Tver region, Beeline based on MTS
Tula region, MTS based on Beeline
Udmurt Republic, Beeline based on MTS
Khabarovsk Territory, Beeline based on MTS
Chelyabinsk region, Beeline based on MTS
Chechen Republic, MTS based on Beeline
Chuvash Republic, MTS based on Beeline
Yaroslavl region, Beeline based on MTS *

Less likely scenarios: sign (-) is a doubtful version, sign (--) is an even more unlikely version.

Amur region, Beeline based on MTS (-)
Arkhangelsk region Beeline based on MTS (-)
Belgorod region, Beeline based on MTS (--)
Bryansk region, Beeline based on MTS (-)
Buryatia Republic, Beeline based on MTS (-)
Vladimir region, Beeline based on MTS (-)
Voronezh region, Beeline based on MTS (--)
Jewish Autonomous Region, MTS based on Beeline (-)
Trans-Baikal Territory, Beeline based on MTS (--)
Kamchatka region, MTS based on Beeline (--)
Karelia Republic, Beeline based on MTS (-)
Krasnodar region, Beeline based on MTS (-)
Komi Republic, Beeline based on MTS (--)
Kostroma region, Beeline based on MTS (-)
Kurgan region, Beeline based on MTS (--)
Kursk region, Beeline based on MTS (-)
Lipetsk region, Beeline based on MTS (-)
Magadan region, MTS based on Beeline (--)
Ryazan region, Beeline based on MTS (-)
Saratov region, Beeline based on MTS (--)
Sakha (Yakutia), Beeline based on MTS (--)
Smolensk region, Beeline based on MTS (--)
Tomsk region, Beeline based on MTS (--)
Tyva Republic, Beeline based on MTS (--)
Ulyanovsk region, MTS without Beeline (--)

UPD: official list

Mikhail Slobodin thanked his colleagues from MTS, his colleagues involved in the project, noting that it was very difficult to find legal forms interactions. As a result, an agreement several centimeters thick was drawn up based on the best international practices, taking into account Russian specifics. Mr. Slobodin considers his conclusion a real “breakthrough.”

This concluded Mr. Slobodin’s speech. The leader of the meeting asked him the question “how end-user will feel the results of the companies’ activities within the framework of the agreement?”

Answering this question, Mikhail Slobodin noted that as a result of cooperation between Beeline and MTS, the growth rate of penetration of LTE services will increase. In addition, “the less money you spend, the more you can afford to develop your network and improve quality.”

M.S.: Today we are faced with a situation, and this is a big challenge for the industry, due to the fact that the capital costs of cellular and mobile broadband operators are largely tied to the dollar. Now we are seeing a significant increase in the company's costs. At the same time, the company receives income in rubles. Revenue growth rates are declining. If we take into account inflation, incomes are even reduced.

Russia, as a country, should be proud that we have one of the most, if not the most, effective prices for cellular communications and mobile broadband services. Effective in terms of the ratio of operator costs and service prices. Today communications in Russia are very cheap. I am afraid that the price level will be very difficult to maintain against the backdrop of growing operator costs. We will partially compensate for the negative trend with this project, but it will not be possible to completely eliminate the problems with this project alone. Concluding his answer to the question, Mr. Slobodin promised that thanks to the project, consumers will receive services of higher quality and perhaps not at such high price, what it would be like if not for the project. The only people who will suffer from the project are the suppliers of foreign equipment - they will get less operator money.

Andrey Dubovskov

We are also glad that all this is happening, we are happy, we will save CAPEX, OPEX. We will be able to direct the released resources elsewhere. By the way, I want to immediately note that this project is not directed “against anyone”; I have already seen some stupid headlines. What nonsense. We didn’t unite against anyone (note AB - looks questioningly at Slobodin, Slobodin spreads his hands - they say, who could even think such a thing, smiles. And adds slyly, “someone is probably suffering, really,” laughs). We could collaborate with some other company, like with Beeline. And VimpelCom probably doesn’t mind. No one is uniting against anyone, everything is fine.

AB: Yeah, that's what we understood. I remember how at one time MTS and Beeline unsuccessfully negotiated with Scartel, which feigned interest in cooperation with any operator that wanted to work on the basis of its LTE network.

HELL. Dmitry briefly described legislative innovations in such an important area as telecommunications. What is being done now by the team of the Ministry of Telecom and Mass Communications, the regulator, should have been done earlier, back in the 90s. The idea, for example, of administering a frequency resource not according to nominal values, but through the spectrum, was on the surface back in the 90s. I am very disappointed that this was not done sooner. A large number of respected government officials have changed. For some reason, only the current team does such obvious things. We, as an operator, and I hope other operators will join in this, are certainly grateful to the industry leadership. A real interest in the assigned task is visible. Respected leaders work, as they say, not out of fear, but out of conscience.

What was worth it back in the 90s to abolish the norm, in accordance with which in each subject of the federation each operator must have its own switching center. I think that the industry lost a lot just from this, investing money where it could not have been invested. And so on and so forth. We have seen a lot of positive changes in regulation in the last period. Including changes that allowed us to build a network together with our colleagues from Beeline.

M.S. One more comment. We certainly see positive changes. And, of course, I would like everything to happen faster and earlier. And one of the next things that can be compared to another step is spectrum sharing, which we expect in the first half of next year. This will allow us to optimize costs at the technological level, as well as provide services best quality based on the combined frequency range. This is one of those innovative things that we expect to be adopted in the first half of 2015. And this is the next step beyond RAN sharing. Spectrum sharing will be in our country! And this is a direct increase in the efficiency of using the radio spectrum, i.e. Our extremely limited resource is improving the quality of service.

Q&A session

Q: There was information from Mr. Slobodin that in the first half of 2015 we can expect the adoption of legislation that will make spectrum sharing possible in Russia. Will Mr. Alkhazov, as a representative of the regulator, confirm this information and these deadlines? When will the relevant laws and regulations be adopted?

YES. Answering a question about the bill. We, as an industry regulator, are “all in favor” of this innovation. But we must understand that laws are adopted by the Duma. We're just cooking. We are, of course, in favor of the bill being heard and adopted at the very first plenary sessions after the New Year. However, unfortunately, we cannot guarantee any deadlines for our Duma colleagues. We can say that what depends on us in terms of promoting this bill, in agreement with the relevant federal authorities that are involved in the process, we do what is called “day and night.” Indeed, this innovation promises a better service, we need it. To be honest, this decision is long overdue.

Q: In connection with the RAN sharing project with VimpelCom, where Comstar provides television broadcasting services based on the MMDS standard, what creates obstacles to the reuse of band 7 frequencies by LTE operators? Will you begin to free these frequencies, or will it remain as it is now?

HELL. In answering this question, I would like to draw your attention to the fact that some practical, extremely negative influence this does not currently have an impact on the development of LTE networks. Especially considering the level of penetration, CAPEX, and the speed of network development. Yes, the issue exists, it will be resolved. How? I won't tell you now.

M.S. We selected territories based on the level of readiness of at least one of the players. The model is this: one operator leads and builds the entire infrastructure. The other only takes part in the use of this infrastructure. In 15 regions, MTS is the leader. In 17 regions - VimpelCom. We selected territories for MTS leadership where we had not yet started, for example, but our colleagues had already begun development. And vice versa. Some regions started with a clean slate after agreeing to divide efforts. The question of which region someone would have was not the subject of much debate. We mainly develop in regions where there is commercial feasibility and where the risks of non-recoupment are low. The penetration of LTE-enabled terminals today is low. Comparing with the markets of a number of countries that are advanced in the field of LTE.
We estimate savings at the level of 25-30% CAPEX. And up to 50% in terms of OPEX.

Q: How do RAN sharing arrangements provide for the separation of CAPEX and operational costs? Income? Will operating costs be allocated based on traffic or some other way? How will the responsibility of operators be distributed in the event of any unforeseen expenses, for example, associated with violation of operating rules?

HELL. Suppose there is a region X, where MTS is the leading operator and VimpelCom is the slave operator. Those. MTS built the entire LTE network in this territory. MTS subscribers are served in this network. VimpelCom subscribers are also served in this network. No one is in the position of a roamer or someone who is served on another network. Everything is the same as in a normal situation. We agreed to make mutual settlements once every six months. There will be payments from one operator to another for the operation of this network. Naturally, the operator who builds this network bears all responsibility for the technical condition, maintenance, and development of this network. On the contrary, it will be where VimpelCom is building a network that we can use. I would like to note that the agreement provides for the opportunity for both parties to carry out some kind of complementary construction of network elements required by one or another operator, regardless of which operator is the leading one in this region. For example, in region X from our example, if VimpelCom has a corporate client, the company can build a network segment for its client that will be included in the MTS network. And vice versa in regions where VimpelCom is the leading operator.

(A.D. and M.S. chose not to answer the question about the principles for calculating the amounts of mutual settlements, noting only that the conditions were “fair, mirror-like in nature”).

Q: Are you ready to invite Tele2 and MegaFon to cooperate within the framework of RAN sharing? Which regions will MTS and Beeline have without LTE after the implementation of the RAN sharing project?

M.S. We will not run after any operators with invitations. In general, we, like Beeline, are open to any form of cooperation if it can bring us benefits. If colleagues want to join on some conditions, we will consider it. In those regions where we already cooperate with MTS, we will consider them independently, where we do not cooperate. I think that now the demand for cooperation has increased significantly. That's why I said that next year we will witness even deeper integrations. Maybe not in this configuration, but in another. Just don’t ask who we’re negotiating with now.

HELL. On the first issue, we are ready to cooperate with anyone and in any way. Everything is possible.
Regarding regions... we have 65 regions at the end of 3Q2014. Sooner or later there will be full coverage.

M.S. What can I add here? We have almost everything the same.

Q: How many base stations will be built as part of the RAN sharing project? Could the collaboration expand to 3G base stations? GSM?

HELL. As part of the cooperation, I don’t remember the number of base stations. We have not announced this data. They are secret (half joking). In general, the number of LTE bases in our country is in the tens of thousands. (AB’s note: MTS has 10,900 as of 3Q2014. According to RAN sharing, we are talking about up to 2 thousand “joint” base stations in 2014. Estimate by A. Boyko, MForum.ru).

M.S. The joint construction of 2G / 3G was discussed and we recognized it as inappropriate. 2G/3G networks are mostly built. Such a big gain as in the case of LTE cannot be achieved through RAN sharing. But again... everything in this life is possible.

The usual model of bank relationships with solution and service providers no longer works. Head of Directorate strategic development information technologies UBRD Mikhail Sverdlov proposes to consider profit sharing as a natural partnership model that corresponds to market realities.

A classic that has outlived its usefulness
The current market situation does not allow banks to think about significant investments in projects with vague ROI. But now, more than ever, the financial sector is facing more and more challenges that require immediate solutions. It is vital for banks to meet all these challenges head-on, without significant financial and time costs. And as we all understand, classical approaches to organizing work within a company and in relationships with vendors also require significant rethinking. No one has canceled the well-known triangle “Fast-Cheap-Quality” and the fact that vendors remain one of the important sources of both technological solutions, and competencies for their use. But in order to keep up in reality, financial institutions It’s high time to use lean technologies, non-traditional revenue sharing models for the sector, as well as partnerships with startups that can significantly optimize the costs of business processes and make the client happier.

Produce structures within yourself or build close relationships?
Engaging in the creation and development of internal bank divisions to meet all internal needs, which bankers have successfully done at all times, is now becoming an unaffordable luxury, and subsequent exercises to increase productivity and efficiency have not brought quick victories for a long time. This worked 5-7 years ago, but now almost all structures have already been brought into maximum “sports” shape. Therefore, for those who have not yet started looking for resources to solve problems outside, it’s time to quickly restructure in order to catch up with reality. Yes, you can and should look at the startup market, but in order not to add color and shape to the already patchwork quilt of the IT landscape, it may be more advisable to turn to vendors.

Rate of change and opportunity cost
According to analysts, many figures financial sector It’s common not to leave your comfort zone, because “we don’t need to rush, we will have time to build and launch all the necessary services and platforms on our own, we are flexible and technologically advanced, there is no reason to rush.” Unfortunately, this is an illusion. We should have started launching new services yesterday.

Have you ever considered the losses from not launching a project on time? When preparation takes place for months, then discussion, then budgeting, then agreeing on goals, then agreeing on plans... And now, when all the project participants have already forgotten how it began, you, as a manager, are finally ready to launch just the launch process project. Surely familiar.

Every day of delay is lost profit, money that the business loses. What if we link this to motivation and demotivation? What if employees are not ready to provide results on time due to a lack of competence, skills, time, resources or desire? Or there is no money to implement the project?

Why not do everything in such a way as to resolve all these issues before launching the project? This approach may not be the most universal, but it has allowed us to successfully implement 3 large projects over the past year. This is a new model of interaction with contractors - revenue sharing. This principle of interaction with external companies allowed us to launch these projects in a matter of weeks.

Revenuesharing as a new model of interaction with vendors
Banks would like to see more specifics and willingness of vendors and partners to be responsible for results, and not just sell. Moreover, for the result, not a technical one, equal to a simple installation of a solution, but for a business result, when the vendor subscribes to KPI in the money earned from the implementation of each technological solution.

The revenue sharing model allows us to ensure the direct interest of the partner company in optimizing the operation of the system and minimizing risks. Instead of paying for software at the start and burdening the budget, we pay a percentage of the profit from the implemented system. This allowed the bank to launch the solution without initial capital costs and start earning money from the first month of operation and resolve the issue of further operation and associated costs.

The advantages of this work model:

Quick launch of the service and the fastest possible access to the break-even point;
Minimum implementation costs, limited by the payroll of employees;
No staff expansion required;
Platform support on the partner side;
The partner is no less interested in the development of the system than the bank;
There is often no need for equipment;
Minimizing the risks of “no takeoff”;
No capital costs.

Minuses:

Dependence on partner;
Lack of 100% control of the system operation;
It is difficult to convince a partner to agree to a revenue sharing model of work.

The disadvantages are easily compensated for by checking the security system and the right contract, as well as good project managers and building the process.

Does this seem like a dream? We made it. Here are three cases.

1. Managing cash balances at ATMs
4 years ago we had the idea of implementing an automatic ATM control system based on daily statistical data and machine learning. A mathematical model of cash outflow and inflow is being built in each device throughout the bank’s presence, which today includes more than 200 settlements. The program would make it possible to plan optimal routes and frequency of departures, which would reduce collection costs, especially in remote areas. And by integrating data on salary projects into the system, bank specialists were able to take into account the so-called “overshoots” - cash consumption that does not fit into statistical patterns. At that time, nothing similar was implemented on the market, so we began to defend the project and budget. But a problem arose: no one was ready to sign for the project. Then we took responsibility and risk upon ourselves, launched the pilot, received the results of the pilot, they were higher than expected, but again, projects that save and optimize are more difficult to sell within the company than projects with actual profit. Then we, together with our partners, decided that we would implement the project according to the revenue sharing model. The economic effect is more than 20 million per year minus payments to partners, and the effect has increased in relation to the pilot, since partners are directly interested in increasing it and modernizing the operation of the system. Win-win and Profit/

2. Mobile application with PFM and PUSH
In December we launched the My Account application. We launched it with a budget of 0 rubles 0 kopecks. In the first month, 5,000 active users and millions of rubles in savings on the marketing budget for communication with clients.

3.Outsourcing of outflow modeling in the SME segment
Have you seen Bennett Miller's film "The Man Who Changed Everything"? Highly recommend! The story that formed the basis of the plot occurred in 2002 with Billy Beane, the general manager of the Oakland Athletics baseball team. He found himself in a hopeless situation - all the team's best players were bought out by other clubs. He had to assemble a team from scratch, with virtually no budget. Bean decided to give up buying baseball stars and relied on Yale University economics graduate Peter Brand, who offered to select players using statistical analysis their individual characteristics. As a result, the team won twenty matches in a row.

To build a high-quality and sustainable model you need to have experience and expertise. For example, only 2-3 companies in Russia know how to implement the customer outflow model for small and medium-sized businesses. Last year we offered ten top companies build 5 models using analytics. Only two of them took the SME outflow model as a pilot, and only one succeeded. And this is one of the most important segments and challenges of the banking business today.

And it’s important to note that we managed to organize our work with fashion designers, again according to the revenue sharing model. In our experience, modeling is the simplest and most understandable direction for starting and implementing a revenue sharing model with partners in a bank.

Digital transformation and blue oceans for service providers
For vendors who are ready to work on this model (90% of the work is on the contractor’s side): please note that banks may currently need the following models:

the likelihood of purchasing banking products (in order to minimize communication costs);
cross-selling model;
sales model of non-financial and commission products;
SME customer churn model;
model of the probability of customers leaving investment products.

Can you? And if you are ready to come to the bank and bring your own sources of external data, then you are simply a king! The niche is practically empty. Why not a blue ocean?

Mikhail Sverdlov will tell you the details of building effective interaction with partners using the revenue sharing model on December 2 at the forum

New times dictate new approaches to business, and classic models of cooperation between a company and clients or between two companies are giving way to innovative ones that meet the challenges today. Thus, until recently, a popular model of cooperation was CPA (Cost per action), when a partner received a reward for a specific action - attracting a new client, reaching out to new market etc. At the same time, the model does not take into account the actual contribution of the action to the company’s income, because one new client– this is not always profit.

Therefore, the Revenue Sharing cooperation model (literally “income sharing”) is becoming increasingly widespread. Partnership under this scheme provides for the payment to counterparties of a certain percentage of income, regardless of their overall level of sales or attracted clients without forming a joint legal entity. Revenue Sharing Agreement allows you to focus on quality (not forgetting, of course, about quantitative indicators), because the income from one target client can be more than from 10 attracted non-target ones.

Customers, including banks, online stores, and telecommunications companies, are increasingly resorting to this model. An undeniable advantage is the speed with which you can start implementing the project, that is, almost from the moment you attract a partner (developer company), instead of preparing for the start of the project and then waiting for the developer to hand over the entire scope of work. Plus, the initial investment is zero. The customer does not pay his partner, this is the meaning of Revenue Sharing - the partner receives the remuneration due to him in the form of his share of the income from the operating service.

Revenue Sharing Model

Revenue Sharing Model can be very useful in other situations. Why hire employees who do not work for results, but within the allotted 8 hours a day, or who strive to finish one project as soon as possible in order to receive a bonus for it and move on to the next? It is much easier to interest third-party developers in the opportunity to share future income - in this case, a specialist is much more likely to do his part of the work efficiently and without flaws, knowing that his earnings depend on it.

Another case where a profit sharing agreement can be very useful is in early-stage business projects (startups), when a legal entity has not yet been created or when not all developers are members of an existing legal entity. Usually, in the first stages of cooperation, until the startup makes a profit, no one thinks about any kind of documentation of the partnership. But when the first income arrives, the question of how to divide it can completely quarrel the participants and ruin the project. In this case, the Revenue Sharing agreement, signed at the early stages, completely resolves this issue.

Features of the Revenue Sharing agreement

Like any other type of agreement, Revenue Sharing has its own characteristics. The purpose of the agreement is to take into account all the nuances of income distribution before the start of cooperation and to spell out the obligations that the parties must fulfill to receive their share. A good revenue sharing model contract should cover the following:

The principle of income distribution between the parties

Common options are a fixed percentage of income;

Contribution of each party

Conditions under which a contract has legal force

for example, only when a certain amount of work is completed, sales goals are achieved, a project is completed, etc.;

Responsibility of the parties in case of violation of the terms of the contract

termination of the contract, refusal to pay part of the income, etc.

What should a Revenue Sharing agreement contain?

A competent Revenue Sharing agreement must contain the following elements:

Names of the parties

who sign the agreement, indicating their registration and contact information;

The essence of cooperation

Contribution of the parties to the agreement to the common cause

investments, preparation of a software product, provision of a platform on the Internet, access to a client base;

Profit distribution principle

on pre-agreed conditions by agreement between the parties, which may or may not coincide with the monetary value of contributions to the project;

Terms of the agreement

upon reaching given level market penetration, upon completion of writing the program code; There are also unconditional contracts - when each party will receive its due share if the project turns out to be profitable;

Other provisions

conditions for termination of the contract, liability for violations of its terms, deadlines for implementation, etc.

The agreement is signed by all participants, and from the moment of signing is considered valid, unless otherwise indicated in the text (for example, entry into force on a certain date or the occurrence of some event - the start of sales, etc.) When drawing up the agreement, it is important to maintain a balance between the contributions participant and his share in future income, since violations will lead to infringement of the rights of one of the parties and may harm the further implementation of the project or, worse, cause litigation. Therefore, in order to avoid mistakes, it is advisable to enlist the support of a qualified lawyer.

Everything new is based on past achievements, so before we talk about new experience, let's turn to the recent past.

In the second half of the 19th century, a system of relations between employee and employer appeared - gainsharing, or “share in profit”. By the beginning of World War II, it was successfully used as a tool for material motivation of personnel in industry, logistics and transport, medicine and other industries in 200 companies in the USA and Europe. This system gave good effect and became an alternative to individual motivation.

This approach allowed enterprises to gain additional efficiency from teams and flexibly manage resources and production capacity. In the profit-sharing system, each employee depended on the success of the company, and vice versa.

However, since the second half of the 20th century, businesses have found a new method for optimizing costs and began to transfer some of their non-core functions to a third-party service provider. At the same time, the key way to influence the external supplier was the system of fines. Although it has undeniable advantages, it has a limited impact on the partner’s motivation, and sometimes leads to the opposite effect. This approach began to be called “outsourcing”, contrasting it with “insourcing”, that is, the use of one’s own resources.

At the intersection of two methods of business optimization: transferring functions to an external contractor or giving an employee a share of the profits, a new method has emerged. Revenue sharing (gainsharing), or “share in revenue” is a model of transferring non-core functions to outsourcing, in which the outsourcer receives part of the customer company’s revenue under the terms of the contract.

Benefits of the revenue sharing approach

The revenue sharing approach is radically different from the system of fixed remuneration for the performer. And I am sure that this is not a revolutionary, but an evolutionary path to business optimization and development.

I will describe further practice of revenue sharing relationships using the example of telecom operators, since this approach has already been used in working with them. I will list some important advantages, and also talk about possible pitfalls that sometimes arise when using such a model.

Risk distribution

In the case of gainsharing, the risks of the operating company are partially redistributed to the outsourcing company. This is a complex financial and legal part of the relationship, in which it is necessary to take into account risks that directly affect financial indicators business owner and managed by an outsourcer.

For example, in IT outsourcing for telecom operators, this risk becomes the quality of service of infrastructure equipment and communication lines. The collection of traffic in the territory of presence depends on the work of the outsourcer, the decline of which inevitably leads to a decrease in the operator’s revenue and the contractor’s income.

True, there is also a significant share of uncontrollable risks for the outsourcer company - in particular, the outflow of subscribers associated with the natural movement of people or the position in the telecom services market: tariff reductions, the emergence of a new operator, and others.

Efficiency

By providing the outsourcer with a share in the revenue, the telecom operator guarantees the effectiveness of the team’s actions, which will strive to maintain high-quality service with all its might.

At the same time, the outsourcer depends on the operator’s revenue, and therefore will ensure maximum collection in order to load its own specialists with work.

Cost reduction is also a performance indicator. And although the topic of the economic benefits of this approach is worthy of a separate article, below is an example of cost reduction from our practice.

Sales market development

Depending on the number and volume of transferred services, the operator guarantees itself additional marketing in the outsourcer’s territory of operation. In addition, it is the employees of the latter who communicate most with subscribers when calling for accidents. And this resource can be used not only to retain or increase the subscriber base, but also to develop new products.

This approach is beneficial for the outsourcer because, without spending additional funds, he will earn greater rewards as revenue grows. The operator will also receive greater revenue without additional costs for salespeople and marketers.

Simplicity

The main feature of the gainsharing model is the simplicity of budgeting and mutual settlements. Transparency is added to it. It doesn’t matter what the outsourcer’s actual expenses were or how many resources he spent. The number of completed requests also does not affect the reward. However, the quality of request execution matters, and it is this that affects the amount of income. The quality parameter becomes part of the service level agreement and determines possible sanctions.

Speed

It doesn't matter at all whether you believe in the technological singularity or not. Today it is no longer possible to deny the fact that we live in a period when changes occur constantly or so quickly that it is impossible to separate one change from another. Processor manufacturers are still mastering one technical process for producing chips, but the next one has already appeared. Or two. Not all residents of Africa have a connection, and in Europe and Asia they are already introducing the 5th generation standard. We see a similar picture in all industries.

Attracting external resources has allowed companies to live faster. Launch products to market faster, attract consumers faster, collect feedback faster. However, the outsourcer, who receives a share of the proceeds, is interested in further increasing the speed of bringing products to market - responding to business requests even faster.

This means that the outsourcer is ready and willing to:

Reduce the time required to connect new subscribers;

Find and repair damage more quickly;

Put new capacities into operation.

The telecom operator receives high speed reactions, instant response and reduces development costs and loses less in lost profits. In addition, the revenue sharing approach provides companies with the opportunity to create and introduce new products to the market at zero cost by joining forces with partners.

Revenue sharing practice in Russia

In Russia, it is difficult to find a current practice of partners participating in the company’s revenue. There are several non-public examples in the banking industry. Among telecom operators they are completely absent.

One can, of course, include the use of telecom operators by such projects. general infrastructure, for example, antenna mast structures, fiber-optic communication lines and other things, however, these projects have a difference - they share some money or benefits, and the risks are borne by the owner of the infrastructure, and he compensates for them with the cost of services.

In 2015, our company undertook to implement the first major project built on the principles of revenue sharing in terms of providing communication line support services. Today this is the largest ongoing project in which payment for work is a percentage of revenue in a certain territory.

IN this project Key objectives were to reduce operator risk and reduce operating costs. Both goals were achieved. On the way to them, the company was able to demonstrate additional benefits from using outsourcing. Thus, the service division or IT division can now generate additional profit for the main business. And not just spend money. In addition, the use of revenue sharing has increased the transparency of IT service management processes. It is not beneficial for anyone to hide applications, underestimate or overestimate the SLA. Payment is based on achieved result, and with a high SLA with a low result there is no benefit.

I am deeply convinced that there can be more areas of use and effect from the revenue sharing approach. In particular, there are opportunities to expand the project or create a new one to create models for working with subscriber churn. There are obvious reasons for the outflow - the transition to lower tariffs of competitors, the abandonment of unclaimed services ( landline phone and etc.). However, there are less obvious behavioral patterns. And the ability to work with them can reduce churn or create additional revenue. Rebuilding models or conducting research is expensive and time consuming. You can give part of the proceeds from this function to professionals and reduce the costs of your budget.

Another promising direction work - sales of services in poorly developed territories. In this case, the telecom operator gets rid of the costs of the sales and marketing function and at the same time increases its presence and revenue. Three quarters of Russians over 12 years old already use the Internet for work and entertainment. However, there is still a quarter of the population that can be attracted.

There can be many similar directions, the main thing is to use your imagination. And at this moment it is necessary to talk about the difficulties of the revenue sharing approach.

Difficulties of using the revenue sharing approach

I sincerely believe that the revenue sharing model is the next stage in the development of connections between business and external performers. And the basis of this relationship is partnership.

However, the current stage of development of the outsourcing market and economic industries does not imply the introduction of such an approach everywhere. I would like to point out the following obstacles:

1. The underdevelopment of some industries does not allow the outsourcer to find ways to optimize and, as a result, does not provide the necessary income.

2. Distrust of partners towards each other. It is extremely difficult to convince a telecom operator or any other company to switch to this model.

3. A complex, multi-layered revenue and risk management system entails a long and thorough process of financial modeling, analysis and forecasting.

4. Long process of adaptation and transitional roughness. Hidden errors and problems are revealed that have existed in companies for years and were an obstacle to work, but were convenient for someone.

In addition, there are subjective factors: the dependence of partners on each other, the need to reduce or transfer thousands of jobs, and the personal interests of top managers.

These factors influence the evolution of relations between companies, many of which continue to exist in the old, inconvenient, but familiar paradigm: they held a competition - they chose a cheap partner, after a year or three of agony they looked at the budget - they took away 10% and again sent everything to the competition. And so on from year to year. This leads to very sad consequences— accumulation of errors and breakdowns, decreased communication quality, subscriber flow between operators, dissatisfaction of top managers and shareholders.

But not everything is so pessimistic. Today in the market there are shifts in the understanding of the situation and the advantages of the revenue sharing model among global market players. I am sure that in four to seven years the review of this practice in Russia will be much wider.

Alexey Yakovenko, Director of Key Account Relations at MAYKOR

Recently, telecom operators have found themselves in a rather difficult situation: competition in the market is growing, the cost tariff plans is constantly declining, revenue is falling. At the same time, the margins of classic voice and data services are insufficient for sustainable development. This trend is observed not only in Russia, but throughout the world. Operators, whether they want it or not, are often an “unlimited pipe”, while the income from providing subscribers with end services and the services of partner companies passes them by. CROC, a Russian system integrator that also works with telecom operators, sees two main paths for further development for market participants: optimization and reduction of infrastructure costs and expansion of the product portfolio by introducing new proprietary services. How to achieve this?

Cost optimization

The high level of competition forces operators to invest in infrastructure development. Without this, it is impossible to provide high quality service and maintain customer loyalty. At the same time, this increases capital and operating costs (Capex/Opex), and affects the profitability of the business. There are several ways to reduce costs and TCO (Total Cost of Ownership). This is virtualization (rejection of physical equipment in favor of virtual power); partner models, in particular, RAN (Radio Access Network) Sharing (sharing of cell tower operators); new ways of interacting with suppliers, for example, Network as a Service (network as a service), Software as a Service ( software as a service); Revenue Sharing (implementation of high-margin services on a technological network aimed at clients in the B2B, B2C sectors according to the no Capex/no Opex model with the division of received income with suppliers of such services). All this allows operators to optimize IT costs in the medium and long term.

I would like to note that all participants in the telecom market, both global and Russian, each at their own pace, are moving towards virtualization. This allows operators, in addition to reducing capital costs, to ensure high speed of launching new services for subscribers (Time to Market) by creating a single entry point for more convenient and efficient IT management throughout the geographically distributed network. Moreover, virtualization allows you to avoid “vendor dependence”, in other words, to become vendor-agnostic (independent of a specific service provider).

In our country, it has historically been the case that equipment manufacturers are responsible for building the infrastructure of telecom operators. However, the new business paradigm requires a fundamentally different approach. Operators are faced with the task of quickly and efficiently integrating a large number of IT solutions with a guaranteed high degree of reliability and fault tolerance. Only a team that has unique experience in combining various types hardware and software from numerous manufacturers. In other words, such projects are impossible without the participation of system integrators with extensive expertise.

New services

Operators are actively looking for additional opportunities to make a profit and are beginning to offer new services for B2B and B2C markets. Typically, providers focus on services that are most relevant to their region. For example, in Asia they receive additional revenue from providing voice mail services, and in Europe, subscribers are in demand for a data storage service in a local secure cloud. However, operators are also developing in directions atypical for their business. In particular, in the USA and Russia, telecom is taking its first steps in the banking sector, in other words, it is launching banking products linked to the subscriber’s mobile account (for example, MTS and Megafon cards). A bonus for owners of such bank cards is virtually a single window for making any transactions. The mobile financial services model is very promising, but requires complex technological integration and business process reengineering.

There may be a large number of services and services that are atypical for the operator business, but it is very expensive for the provider to invest in their launch. Therefore, for him, interaction with technology partners using the Revenue Sharing model is the optimal solution.

The advantage of Revenue Sharing is that the operator does not need to create its own infrastructure for each service; this is done by a developer or integrator. The provider’s task is to ensure delivery of the service to the consumer (“transport”) and the sales channel (sales channel). Once the service is launched and offered to consumers, the operator and its technology partner receive a percentage of the additional revenue generated.

Our experience shows that the Revenue Sharing model is becoming increasingly popular, regardless of the area in which it is applied. In particular, we are actively launching service projects for telecom operators based on Zeep products, which help generate additional revenue, and also, thanks to business analytics tools, allow us to segment the subscriber database and bring new personalized products and tariffs to the market.

These projects are already successfully operating in more than 10 countries and their number is constantly growing. Zeep's products are aimed at more efficient use of the operator's network, and, as a result, at improving the quality of services provided to customers.

A specific example is a system for automated marketing and subscriber profiling in real time with additional subscriber notification functions. The system analyzes the state of each subscriber, providing the opportunity to use the services of the mobile operator, for example, in a state of absence Money, intelligently completes events that failed for any reason: attempts to make calls or use data services. Ultimately, the subscriber receives an understandable, convenient and relevant service, and the operator receives additional income. Such a service has very simple logic for users, a significant economic effect for the operator and a rather complex technical implementation. At the same time, all infrastructure, integration, and ongoing support are within CROC’s area of responsibility and do not require the operator to spend any money on implementing solutions of this class.

The next step in the development of the Revenue Sharing model as part of the transition to virtual infrastructure will be the creation by the operator of a single technological platform that will ensure faster aggregation, connection and launch of services from various development partners that are relevant to users. This model will continue to be beneficial for the operator, because will not require investment in development, and for the development partner, because will provide them with access to consumers (extensive subscriber base, targeting capabilities, sales offices, etc.).

Bringing new services to market requires significant investment from all participants in the process, especially for small companies that provide end-use services. And here the task of a system integrator is multifaceted. It consists of consulting in the framework of developing a financial model, and in infrastructure virtualization, and directly in expert assessment attractiveness of launching services atypical for the operator.

Regarding the financial model, there are many ways to wisely distribute the initial investment. In particular, the world's leading manufacturers offer short-term and long-term project financing. For example, a program from Cisco Capital. Its advantage is that financing covers not only Cisco equipment and services, but also third-party IT solutions from other vendors necessary for project implementation.

To summarize, I note that in order to survive, operators have to not only offer an ever-increasing range of services to consumers, but also develop new areas of activity. Projects are becoming more complex, technologically complex, and require the introduction of fundamentally new IT tools for the telecom industry. Their set is multifaceted. Today this means virtualization, partner models, tomorrow - financial services, cloud services for B2C, proprietary platforms for IoT and “incubators” for promising startup developments, plus the creation of ecosystems with partners and manufacturers. By the way, an example of such ecosystems is the infrastructure of smart cities - San Francisco, Paris, created in partnership between Cisco, telecom operators and local authorities. The bottom line is this: within the framework of the IoT concept, a large number of devices (sensors, sensors, cameras, etc.) are connected to a single operator technology platform, which allows centralized management urban infrastructure. This, of course, allows not only to reduce the city’s costs, for example, on electricity consumption, but also to increase the level of safety and quality of life of citizens.

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