Astounding Statistics Regarding Order Fallout & Revenue Leakage

Sometimes it’s really nice working for a profitable and established public company. With the launch of Actional 8, we’ve put some discipline on our focus around Business Transaction Assurance (BTA). We’ve rolled out lots of internal materials to train our field to understand the “problem” from a customer perspective, so that they can engage in conversations around the problem, rather than “pitch products.”

In any case, I’m reading through some research around order fallout (revenue leakage) Progress just sponsored that was completed by Vanson Bourne. Vanson Bourne carried out over 200 company interviews (these, to my knowledge, were not all Progress customers). The companies are in the USA, Europe, and Asia/Pacific and all had a minimum revenue of $200M. The study was not limited to the Telecommunications industry, but does call out specifics about both the Telecommunications and Hospitality industries because of their heavy reliance on consumer transactions.

Even realizing that we sponsored the research and so it is perhaps somewhat suspect, I can’t help but be amazed at the raw statistics the report showed. Some examples:

• 86% of telecommunications companies believe that order fallout causes delayed or lost revenues; 64% believe it causes customer churn also
• 98% Say that order fallout “definitely” or “probably” causes increased operational costs
• 75% say that having to deal with increased order failures increases demand on resources (warning: circular reference here... increased demand on resources causes order fallout to worsen, and so on...)
• Transaction volumes increased in 2008 by 16% on average, yet transaction failures increased 35% on average over the same period of time
• 86% of companies reporting high levels of IT complexity admitted to an increase of transaction failures; those with the most complex environments had their transaction failures increase by almost half in 2008
• On average, these companies have 11 full-time employees manually finding/fixing transactions, and it takes approximately 2 hours on average to fix them; Telcos have teams of 18 people, on average.

There are phenomenal implications to these numbers. The inefficiency is outstanding. And, there is plenty more where that came from!

I’m a student of life, and in particular of software companies. I’m always amazed when companies spend huge efforts to win new business, only to discard the relationship once the deal is won. Sure, no one does this purposely, but... through compensation and other more subtle motivations, there aren’t too many people in companies whose job it is to deal with happy customers without problems to keep them happy. I find this curious, because “relationship revenue” has a much lower cost of sale than “RFP revenue” and puts much less burden on every aspect of the company.

I digress a little, only to make the point that the companies in this survey are LOSING MONEY THEY HAVE ALREADY EARNED. Therefore, these lost transactions represent the most profitable ones they process! It’s like there’s a queue for service, with someone at the head saying “I’ll take yours, I’ll take yours, I’ll take yours, Nope - you, drop that on the floor, but don’t worry, keep our service.”

The report goes on to talk about some of the interesting “management” facts that usually are part of press releases about “new software versions” but often don’t actually make it into the software release (hasn't anyone developed a compiler that can compile press releases yet... it's a product some companies really need). It seems like there are a lot of difficulties with the software meant to solve these problems. Such as:

• The performance of the apps being monitored is negatively impacted (>60% companies reported this to be the case)
• The management system requires additional servers (~48%)
• Management systems need additional people to run them  (~47%)
• Can’t run all the management/monitoring features in production due to their resource requirements (~42%)
• They use up too many CPUs (~38%)
• 44% of companies don’t manage the end-to-end order process because of the above reasons!

All that said, I still have a personal favorite...

It goes without saying that I believe Actional solves the problems in the first list, without introducing the ones in the second.

Who cares what I think though when you have Forrester studying two of our IN PRODUCTION customers, and finding the same results:

• Staff required to fix root-cause messaging problems was reduced by 85%
• Service quality reports are available in near real time, and created automatically; in the past they were difficult to prepare and were not readily available
• Of the two companies studies (admittedly, not a large sample!), one had a payback of <12 months, the other around 20 months

I’ve blogged before about the importance of the scalability and performance of the management system, without which features don’t really matter. This report validates my earlier post, and calls out specifically that many management features can’t be used in production because of the impact on performance. I wonder if the vendors of these management systems didn’t oversell their products... I wish they had asked that question in the survey! (And, when looking for that link, I found another post that was also mentioned in the report... the importance of actually knowing you have a problem.)

Thank you for reading this far. Email me if you like a copy of the Vanson Bourne report and the Forrester case studies. (These case studies are anonymous, but all research was completed by and validated by Forrester Research).