Over the past couple of weeks, I had several posts on the topic Revenue Under Contact. Telecom is a recurring revenue business. Most services are under 1-, 3-, or 5- year terms. The gist of the posts was that the amount of revenue under contract is an important metric–one that should be measured and tracked. I showed how Zayo uses Salesforce.com to capture the data.
How is the information used to improve the business? As an example, take a peek at the following table:
This table gets published each month as part of our executive review deck. Month-to-month means that the original term has expired and the service is no longer under a longer term contract. At any point in time, the customer could decide they no longer need the service and send us a disconnect notice.
Ian Gilyeat posted a comment earlier in the series: “If I’m managing revenue under contract wouldn’t I want to see how much of that revenue is set to expire in the near future?” In a response to Ian’s comment, Jeremy foreshadowed “Something like an evaluation of ‘high risk’ circuits might be very appropriate. This evaluation could … tell you what large circuits would be coming out of term in the near future.”
The table above is one piece of the puzzle. It highlights–systematically–those large services that are no longer under longer-term contracts. It provides a subjective risk assessment and a comments column. No simple rule-of-thumb guides what to do with a “month-to-month” service. The great account executives are able to ascertain the best course of action through conversations with their customers. Should we let a sleeping dog lie? Should we offer a modest price discount in exchange for a new term? Should we suggest an upgrade to a higher speed service? Should we raise the price with an offer to reduce it if and when the customer is able to commit to a longer term service?
Depending on the circumstance, any of these might be the appropriate course of action. I applaud those account executives and product managers who, working in collaboration, show command of the detail and a knack for choosing a good path.
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