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Telecommunications service and expense management in US businesses An Analysis of the Telecom Supply Chain and the Impact of Internet Tools by Hala Fadel MS in Business and Finance HEC (Hautes Etudes Commerciales), France, 1997 and Sunanda Narayanan Master in Computer Applications Anna ni!ersity, Madras, "ndia, 199# Submitted to the Sloan School of anagement in !artial Fulfillment of the "e#uirements for the $egree of aster in %usiness Administration at the assachusetts Institute of Technology &une '(() * $%%1 Hala Fadel and Sunanda &arayanan' All ri()ts reser!ed'

*)e aut)ors )ereby (rant to M"* permission to reproduce and to distribute publicly paper and electronic copies o+ t)is t)esis document in ,)ole or in part' Signatures of Authors Hala Fadel, Sunanda &arayanan M"* Sloan Sc)ool o+ Mana(ement February --, $%%1

Certified by .ro+essor C)arles Fine, *)esis Super!isor C)rysler /FM .ro+essor o+ Mana(ement

Accepted by Mar(aret Andre,s E0ecuti!e 1irector, MBA .ro(ram

Telecommunications service and expense management in US businesses An Analysis of the Telecom Supply Chain and the Impact of Internet Tools by Hala Fadel and Sunanda Narayanan Submitted to the IT Sloan School of anagement on February ++, '(() in partial fulfillment of the re#uirements for the degree of aster in %usiness Administration Abstract

Spendin( on telecommunications ser!ices is t)e second lar(est non2production e0pense in most industries, t)e +irst position bein( ta3en by "* e0penditure' 1espite t)is, S businesses +ace se!eral problems in mana(in( telecommunications ser!ices and e0penses due to t)e dynamic telecom en!ironment, !oluminous and numerous bills recei!ed +rom se!eral carriers across (eo(rap)ically dispersed client company locations, di++iculty in implementin( internal cost trac3in( mec)anisms etc' *)is t)esis opens ,it) a detailed description o+ t)ese issues, )i()li()ted t)rou() t)e results o+ a mar3et sur!ey o+ telecom mana(ers' A case study o+ telecom mana(ement practices ,it)in t)e Boston location o+ Manuli+e Financial, a lar(e insurance +irm ,it) se!eral locations in t)e S and Canada is also used to pro!ide a real2li+e e0ample o+ a lar(e business pla(ued ,it) t)ese issues' 4e t)en proceed to probe +or t)e sources +or t)ese problems t)rou() a detailed analysis o+ t)e telecommunications ser!ices supply c)ain' *)e impact o+ in+ormation +lo,s in suc) supply c)ains, t)e players operatin( in eac) se(ment, t)eir roles and outloo3 +or t)e +uture are discussed' Based on all o+ t)e abo!e, a ne, ser!ice is proposed to sol!e some o+ t)e issues mentioned in t)e initial section o+ t)e t)esis' *)is ser!ice is intended to dri!e optimi5ation in telecom procurement and mana(ement +or S businesses' 4e conclude by pro!idin( a detailed business plan +or t)e rollout o+ t)is ser!ice'

anagement Thesis AdvisorCharles Fine, Chrysler .F !rofessor of

anagement

Table of Contents INT"/$UCTI/N AN$ TH0SIS /UT.IN0111111111111111111111111111111111111111111111111111111111111111111111112 S0CTI/N )- !"/%.0 S IN ANA3IN3 T0.0C/ T/$A4 AN$ CAUSATI50 FACT/"S111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111112
Market research: results and analysis..........................................................................................................................5

S0CTI/N '- CAS0 STU$4 /F ANU.IF0 FINANCIA., %/ST/N AN$ US $I5ISI/NS11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111116

Process redundancies................................................................................................................................................10 Poor system tracking ................................................................................................................................................12 Managing suppliers within Manulife........................................................................................................................14

S0CTI/NS 7- SU!!.4 CHAIN ANA.4SIS1111111111111111111111111111111111111111111111111111111111111111111)2

ntroduction to !upply "hains..................................................................................................................................15 !er#ice chains #ersus physical product chains.........................................................................................................1$ nformation use for control %incenti#es&' coordination' and decision making..........................................................1$ nformation aggregation' analysis' and transmission................................................................................................1( )ole of technology in supply chain information flow..............................................................................................20 *enefits of information flows in supply chains........................................................................................................21 The Telecommunications Services Supply Chain....................................................................................................23 +elecom !er#ice Pro#iders.......................................................................................................................................25 +elecom "onsultants.................................................................................................................................................25 +elemanagement ,irms.............................................................................................................................................2$ Pro#isioning -gents..................................................................................................................................................2. /0ternal *illing -gents.............................................................................................................................................2( "ustomers..................................................................................................................................................................2(

S0CTI/N 8- TH0 %USIN0SS !.AN111111111111111111111111111111111111111111111111111111111111111111111111111111'9

Business Opportunity.................................................................................................................................................29 +he ndustry..............................................................................................................................................................21 +he "ompany and "oncept.......................................................................................................................................21 +he *ooleo Product and !er#ices.............................................................................................................................21 ,eatures and *enefits................................................................................................................................................21 /ntry and 3rowth !trategy.......................................................................................................................................22 The Market..................................................................................................................................................................32 "ustomers..................................................................................................................................................................22 Market !i4e...............................................................................................................................................................22 Market )esearch.......................................................................................................................................................22 Competition and Competitive Advantage.................................................................................................................3 "ompetition...............................................................................................................................................................24 Mapping the competiti#e en#ironment.....................................................................................................................25 !ources of "ompetiti#e -d#antage...........................................................................................................................2. The !conomics"#inancial $rospects..........................................................................................................................39

)e#enue Model.........................................................................................................................................................21 5perating Margins....................................................................................................................................................40 ,i0ed' 6aria7le' and !emi-#aria7le "osts.................................................................................................................40 Months to *reake#en................................................................................................................................................40 Marketing $lan............................................................................................................................................................ % Marketing !trategy....................................................................................................................................................41 !ales and 8istri7ution...............................................................................................................................................42 Technology& 'evelopment& and Operations.............................................................................................................. 3 8e#elopment !tatus and !chedule............................................................................................................................42 5#erall !chedule.......................................................................................................................................................44 5perations.................................................................................................................................................................45

C/NC.USI/N111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111118: A!!0N$IC0S-111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111189
Appendi( A) Market *esearch.................................................................................................................................. + Appendi( B) ,uotes -rom $otential Clients and $artners.......................................................................................% Appendi( C%) Booleo/s Competition and Competitive Analysis.............................................................................2 Appendi( C2) The telecom services supply chain...................................................................................................... Appendi( ') Organi0ation..........................................................................................................................................1 Appendi( !) *evenues and costs per su2scri2er......................................................................................................3 Appendi( #) Technical Architecture 'iagram -or Bill Aggregation and Analysis................................................+

Introduction and Thesis /utline

*)is t)esis concerns a !irtually uni!ersal and (ro,in( problem +aced by most S business

today, namely t)at o+ mana(in( telecommunication ser!ice in+rastructure and e0penditure' *)e issues +aced, causati!e +actors, and a possible solution to t)e problem are compre)ensi!ely presented )ere' *)is document is structured and presented in +our distinct sections8 Section 1 deals ,it) a (eneral description o+ t)e issues encountered in mana(in( telecommunications +or S businesses' *)e results o+ a mar3et sur!ey ,it) responses +rom o!er $#% telecom mana(ers at S businesses are used to illustrate t)e obser!ations'

Section $ is a case study on telecommunications mana(ement practices at t)e Boston o++ice o+ Manuli+e Financial, a lar(e insurance +irm ,it) locations in Canada and t)e S' *)is section is used to pro!ide a real2li+e e0ample to t)e problems described in Section 1 o+ t)e t)esis' Section $ deals ,it) tracin( t)e problems in telecom mana(ement discussed earlier to speci+ic se(ments in t)e telecommunications ser!ice supply c)ain' "n t)is conte0t, t)is section opens ,it) a (eneric description o+ ser!ice supply c)ains, and proceeds to analy5e t)e impact o+ tec)nolo(y and in+ormation +lo,s in suc) c)ains, and concludes ,it) an introduction to t)e telecom ser!ice supply c)ain, t)e players in eac) se(ment, and t)eir role' Section 6 re!ol!es around t)e discussion o+ a ne, ,eb2based ser!ice proposed to resol!e many o+ t)e issues identi+ied in Section 1' *)e !alue proposition o+ suc) a ser!ice is analy5ed in t)e li()t o+ competition and mar3et dynamics and a detailed business plan is presented to document t)e +undamentals o+ launc)in( suc) a ser!ice'

Section )- !roblems in managing telecom today and causative factors

ar;et research- results and analysis *)e telecommunications industry in!ol!es comple0 re(ulations, tec)nolo(ies, and pricin( structures' Successi!e rounds o+ dere(ulation, includin( t)e *elecommunications Act o+ 1999 ,)ic) allo,s all telep)one carriers to sell bot) local and lon( distance callin( ser!ices, )a!e led to increased competition, dri!in( prices do,n +or lon( distance and local ser!ices' *)e result )as been a proli+eration o+ strate(ic alliances and mer(ers amon( companies ,it) complementary assets' 1espite t)is industry consolidation, a myriad o+ ne, telecom pro!iders

is emer(in(, particularly in t)e +ast2(ro,in( internet2access, data ser!ice, and C/EC sectors' "ndustry e0perts predict t)at corporate consolidations ,ill ta3e time to translate into actual consolidation o+ ser!ices +or end2users' 1i++erences in E:. systems, billin( +ormats, and mana(ement teams ,ill clearly lead to lon( and e0pensi!e inte(ration e++orts amon( mer(in( companies' As a result, t)e mana(ement o+ telecommunications +or medium to lar(e S businesses is a

dauntin( tas3 in today;s en!ironment' *)e problem assumes e!en (reater importance (i!en t)at telecom spendin( is typically t)e second lar(est non2production e0pense in most industry !erticals, ,it) "* e0penditure ta3in( t)e +irst position' Accordin( to a Ca)ners (roup report, telecom spendin( accounts +or nearly 17< o+ non2operatin( e0penses (all e0penses e0cept payroll, ad!ertisin( and C=>S) in a typical S business'

4)en re+errin( to telecommunications e0penditure, it includes landline !oice ser!ice, ,ireless ser!ice, internet2access ser!ice, and data ser!ice' Current S business telecom spendin( is ?1%% billion annually, e0pected to reac) ?$7% billion by $%%6 (Source8 "1C and 1ata@uest)' *elecommunication spendin( !aries si(ni+icantly by industry, and t)e employee numbers presented belo, may not be accurate +or industries suc) as t)e +inancial, insurance and ban3in( sectors, or t)e consultin( industry t)at are )i() users o+ telecommunications t)ou() t)eir employee number may be lo, compared to ot)er !erticals'

Si<e of company => of employees? 1 to $79 $#% to 999 =!er 1,%%% (Source: IDC and Dataquest)

Annual telecom spending =@ bn? 77 $% 67

Number of firms

1%,$%%,%%% 7$,%%% 9,#%%

A recent and e0tensi!e mar3et sur!ey (+acilitated by Aoomeran( B an online mar3et researc) +irm) ,it) responses +rom more t)an $#% telecom mana(ers at medium and lar(e corporations nation,ide yielded interestin( results (presented in appendi0)' *)e analysis o+ t)ese results )i()li()ted some o+ t)e common issues pla(uin( mana(ement' S corporations as re(ardin( telecom

97< o+ telecom mana(ers said t)at t)ey are s,amped ,it) )u(e bills in !aryin( +ormats +rom di++erent carriers +or di++erent ser!ices and across di++erent business locations' *)ere is little !isibility into consumption and t)ere+ore spendin(' "nternal telecom e0pense mana(ement is cumbersome since t)ere is little in+ormation +lo, bet,een t)e tiers o+ employee, cost2center, and corporate mana(ement' *o a((ra!ate matters, t)e telecom mar3et is )i()ly dynamic in terms o+ c)an(es in t)e ser!ices and pricin( sc)emes o++ered' Contractual obli(ations and a percei!ed ris3 in tryin( ne, ser!ices or carriers add to t)e complication' 4)ile 97< o+ telecom mana(ers at t)e sur!eyed companies +eel t)e need +or t)ird party )elp in mana(in( telecommunication e0penses, 9C< o+ t)em are una,are o+ any unbiased ser!ice t)at meets t)is re@uirement, and 99< o+ telecom mana(ers ,ould consider usin( suc) a ser!ice i+ it ,ere a!ailable' 4)en cross2tabulatin( t)ese results ,it) t)e si5e o+ t)e company, it appears t)at t)e lar(er t)e or(ani5ation, t)e bi((er t)e problem' *)e +ollo,in( issues +aced by telecom mana(ers sur+aced +rom t)e sur!ey and ,e list t)em in order o+ percei!ed importance' (i) nderstandin( a !oluminous bill

Carriers usually pro!ide )ard paper copies o+ mont)ly telecom bills' For a medium si5ed business, t)is bill usually runs into a +e, )undred pa(es in len(t)' *)e s)eer !olume o+ in+ormation ma3es t)ese bills almost impossible to read' Some carriers do pro!ide bills in electronic +ormat' 4)ile data access is +acilitated t)e so+t,are pac3a(es pro!ided to !ie, and analy5e t)e data are e0tremely complicated and un2user +riendly' /earnin( )o, to access and manipulate t)e in+ormation is so cumbersome t)at +e, telecom mana(ers e!er ma3e t)e e++ort to do t)is' (ii) Many billin( +ormats and lac3 o+ transparency in priceDconsumption A carrier typically uses multiple billin( systems +or di++erent ser!ices t)at it pro!ides, e!en i+ t)e bills are ultimately meant +or a sin(le customer subscribin( to all t)ese ser!ices' *)ese systems are o+ten incompatible and result in a client recei!in( multiple bills ,it) multiple +ormats' "n addition, t)ere is little transparency t)at carriers pro!ide on t)ese bills re(ardin( t)e prices c)ar(ed and total consumption +or a client' For e0ample, to +ind t)is in+ormation +or !oice

ser!ice, t)e telecom mana(er ,ill )a!e to per+orm comple0 calculations and +i(ure out ,)at t)e company )as been c)ar(ed bot) on a per minute basis and as a total amount' (iii) *rac3in( errors in billin( and internal telecom e0pense mana(ement A report by 4ind+all Associates, a Massac)usetts2based telecommunications consultin( +irm, s)o,s t)at billin( errors occur in rou()ly 7#< o+ all bills and t)at curiously, t)ey are al,ays in +a!or o+ carriers' *)e errors arise due to t)e +act t)at it is di++icult to 3eep trac3 o+ billed rates and o++erin(s and compare t)em to t)ose in t)e contract si(ned ,it) a carrier' E!en i+ t)is cumbersome e0ercise o+ comparison and error trac3in( is per+ormed, it is a dauntin( tas3 to ma3e t)e claims on t)ese billin( errors, obtain a re+und, and ensure t)at t)e mista3e is not repeated' (i!) Multi2carrier re@uirement +or di++erent telecom ser!ices As s)o,n by t)e sur!ey results in t)e appendi0, C%< o+ companies use more t)an one carrier, t)e a!era(e bein( 6 carriers per company' Eac) carrier uses di++erent billin( +ormats and bill transmission met)ods' As a result, client companies are +aced ,it) t)e c)allen(e o+ a((re(atin( and compre)endin( all t)is in+ormation' *)is usually implies a lot o+ internal resource utili5ation or spendin( !ast amounts o+ money on e0ternal consultants' (!) >eo(rap)ic dispersion o+ t)e business Medium and lar(e corporations o+ten )a!e multiple locations' 4)en billin( se!eral locations, carriers usually send t)e di++erent bills to t)e di++erent locations alt)ou() a common contract mi()t )a!e been ne(otiated across t)ese locations' A((re(atin( t)e billin( in+ormation across locations is one c)allen(e, but ensurin( t)at t)e di++erent locations are a,are o+ a central a(reement i+ t)ere is one and trac3in( billin( discrepancies is an e!en (reater issue' (!i) 1ynamic mar3et bot) in terms o+ ser!ices and price o++erin(s *)e prices and tec)nical o++erin(s in t)e telecommunications mar3et c)an(es !ery o+ten' Competition dri!es costs do,n and continuous tec)nical inno!ation dri!es a steady introduction o+ ne, products in t)e mar3et' Client companies are +aced ,it) t)e c)allen(e o+ 3eepin( trac3 o+ and understandin( t)ese c)an(es' (!ii)1i++iculty in +orecastin( demand (e'(', net,or3 capacity re@uirements)

*elecommunication demands in t)e +uture are o+ten di++icult to estimate +or a telecom mana(er' *)is is because suc) +orecastin( re@uires !isibility into t)e strate(ic direction and (ro,t) e0pected in t)e company' >i!en t)e non2operational status assi(ned to telecommunications mana(ement, telecom mana(ers are rarely in!ol!ed in t)e real strate(ic issues and (ro,t) e0pectations o+ t)e company' As a result, t)ey )a!e little understandin( o+ t)eir or(ani5ation or its telecom consumption, in t)e li()t o+ ma3in( +orecasts' (!iii) .ercei!ed ris3 in tryin( ne, ser!ices or carriers

*elecommunication mana(ers o+ten lose t)eir Eobs i+ t)ey ma3e a sin(le ,ron( mo!e (i!en )o, !ital telecom is to a company and its employees' Fust as no "* mana(er ,as e!er +ired +or usin( "BM in t)e 19C%;s, no telecommunication mana(er today is +ired +or usin( A*G*' *ryin( ne, carriers or ser!ices is naturally percei!ed as a )i() ris3 mo!e by t)ese telecom mana(ers' E!en i+ an e0istin( carrier o++ers a ne, ser!ice (e'(', 1S/ "nternet access o!er *1 lines), telecom mana(ers are ,ary to ma3e a c)an(e to t)eir e0istin( in+rastructure' Employees ,ould )ardly be understandin( i+ t)ey needed to last a day ,it)out telep)one or "nternet ser!ice, Eust because t)e company ,as tryin( a ne, tec)nolo(y' As a result, companies tend to stic3 ,it) t)e same carrier +or lon( periods o+ time and are reluctant to c)an(e in t)e least' As +ar as industries (o, consultin( and +inancial ser!ices t)at are amon( t)e )i()est users o+ telecommunications, tend to be most a,are o+ t)ese issues and ma3in( e++orts to mana(e t)em' From a discussion ,it) 1on 1;A!i(non (*elecommunications Mana(er, American E0press), it ,as ob!ious t)at )e ,as only too acutely a,are o+ t)ese problems' He estimated t)at Ame0 could (ain up to ?$ Million a year Eust +rom simple auditin( o+ its telecom bills' Harious internal so+t,are initiati!es and e0ternal consultants ,ere used to tac3le t)e problem, but t)ere ,as no compre)ensi!e solution a!ailable to t)ese lar(e or(ani5ations as yet' *o illustrate t)e issues t)at ,e )a!e touc)ed upon abo!e, ,e ,ill no, proceed ,it) a case study o+ a lar(e +inancial or(ani5ation ,it) locations in SA and Canada' Section '- Case study of anulife Financial, %oston and US divisions

All the information documented in this case study on Manulife was gathered at an on-site interview involving the thesis authors and ancy !amel (!ead of "S Strategic #rocurement)$ Dave Minori (%elecom manager of the &oston division)$ and Ciara 'ogan (Assistant to Dave Minori and telecom analyst in the &oston division)(

Manuli+e Financial is a leadin( (lobal pro!ider o+ +inancial protection and ,ealt) mana(ement products, includin( li+e insurance, pensions, annuities and (roup bene+its, in Canada, t)e nited States, and Asia' "t is CanadaIs lar(est li+e insurance company as measured by balance s)eet assets, net income and s)are)oldersI e@uity, and )as t)e lar(est mar3et capitali5ation o+ any publicly traded li+e insurance company in Canada' Head@uartered in Canada, Manuli+e Financial )as more t)an $C,%%% employees and a(ents in 1# countries and territories ,orld,ide' Manuli+eIs Boston o++ice )as appro0imately #%% employees' Manuli+e;s Boston di!ision spends about ?1'$mn in telecommunications ser!ices per year and +its into t)e cate(ory o+ Jlar(e; company as per our earlier mar3et analysis and researc)' Manuli+e )ired &ancy Hamel to lead S strate(ic procurement in early $%%%' &ancy is no, c)ampionin( a t,o2year proEect to streamline purc)asin( ,it)in t)e or(ani5ation t)at ,ill lead to si(ni+icant sa!in(s' &ancy started ,it) areas suc) as o++ice supplies and computers and is about to embar3 on a similar process +or telecommunications ser!ice procurement as ,ell' *)is in!ol!es more coordination across (eo(rap)ies, in particular more communication bet,een t)e S and Canadian o++ices' *)e Boston di!ision o+ Manuli+e t)at ,as analy5ed +or t)e purpose o+ t)is t)esis )as about 1% people ,or3in( on telecommunications mana(ement' Most o+ t)e day2to2day tas3s o+ t)is di!ision is t)e issuance o+ tic3ets +or employee reported telecommunications problems and in )elpin( t)e resolution o+ t)ese tic3ets in a dili(ent manner' *ic3ets co!er problems +or bot) !oice and data lines' E0amples o+ suc) problems are t)e reco!ery o+ lostD+or(otten !oice mail pass,ords, p)one installation and de2acti!ation, t)e orderin( o+ a ne, cell p)one or pa(er, a data line t)at is do,n etc' Some time is also spent on supportin( t)e telecom in+rastructure t)rou() billin(, bud(etin(, and t)e mana(ement o+ telecom suppliers' Alt)ou() most o+ t)e tic3etin( tas3s are )andled t)rou() an automated and reliable tic3etin( system and by t)e telecom team, many o+ t)e day2to2day problems +aced by t)is team are due to system and process redundancies, poor system trac3in( o+ certain tas3s, and +rustrations in dealin( ,it) carriers' !rocess redundancies .rocess redundancies )appen ,)en employees need to repeat t)e same tas3 multiple times in order to respond to t)e needs o+ t)e company' Belo, are some e0amples o+ t)e process redundancies +aced by Manuli+e and some su((estions on )o, t)ey can be sol!ed'

1%

#hone installation 4)en a p)one is installed +or a ne, employee, )is or )er e0tension must be entered in se!eral directories +or easy re+erence' *)e telecom team )as to enter t)is in+ormation into t)e paper directory, t)e user directory, t)e lobby directory, t)e .B- or s,itc) o+ t)e company, and +inally into t)e telecom directory t)at trac3s all a!ailable e0tensions' *)e tas3 o+ enterin( t)e name and p)one number o+ t)e ne,ly )ired employee is t)ere+ore repeated # times in # di++erent systems' A simple solution is to )a!e a common data2entry inter+ace leadin( to si(ni+icant time sa!in(s' #hone deactivation 4)en an employee lea!es t)e company or mo!es ,it)in t)e or(ani5ation to anot)er p)ysical location, )is or )er telep)one, cell p)one, callin( card, and pa(er need to be de2acti!ated' *)e problem is t)at on a!era(e, t)e telecom department is noti+ied 6 mont)s a+ter an employee )as le+t t)e company' 4)en an employee lea!es t)e company, t)e )uman resource department )as to +ile a termination o+ employment +orm, t)en an "* termination +or email purposes, and +inally a p)one termination +orm' Human resource sta++ o+ten +ills t)e +irst t,o +orms and because "* and p)one systems are o+ten inte(rated in one department, assume t)at t)e "* termination +orm is su++icient to (et all t)e p)ones +or t)is employee de2acti!ated' Carrier )illing E!ery mont), t)e telecom department o+ Manuli+e recei!es bills +rom t)eir carriers, in t)is case mainly +rom A*G*' Manuli+e recei!es bot) paper bills and electronic bills on a C1' Ciara >o(an is in c)ar(e o+ re!ie,in( t)e recei!ed bills and submittin( it to 1a!id Minori and ot)er mana(ers +or appro!al' "n order to trac3 t)e bills and loo3 +or spendin( patterns, Ciara uses a Microso+t E0cel spreads)eet ,)ere s)e manually re2enters si(ni+icant items on t)e bill mont) to mont)' *)is process is !ery time consumin( and can only detect mista3es t)at result in a lar(e discrepancy bet,een one mont) and t)e ne0t' *)is process is redundant because Manuli+e already recei!es bills in t,o +ormats and yet needs to create a t)ird one to be able to understand t)eir content' *rustrations in dealing with carrier account re+resentatives Since t)ey are a lar(e account +or A*G*, Manuli+e bene+its +rom mont)ly meetin(s ,it) A*G*;s account representati!es +or t)e di++erent ser!ices it subscribes to (!oice, data, callin( cards and cell p)ones)' *)ese meetin(s are intended to discuss ser!ice problems encountered durin( t)e

11

past mont) and reac) a @uic3 resolution'

n+ortunately, Manuli+e )as not +ound t)ese account

representati!es +rom A*G* to be !ery responsi!e' *)e Manuli+e telecom team o+ten needs to repeat t)e problem description o!er se!eral mont)ly meetin(s and still recei!e little response' Many +actors can e0plain t)is situation' First, t)ere is a !ery )i() turno!er in t)e account representati!e sta++ at A*G*' Manuli+e sees ne, account representati!es on a!era(e e!ery +our to si0 mont)s' Secondly, t)e account representati!es )a!e no incenti!e to pro!ide better ser!ice to t)eir clients as t)ey are compensated on t)e basis o+ ne, clients si(ned on rat)er t)an on customer satis+action' Manuli+e is not re@uired by A*G* to e!aluate t)e per+ormance o+ t)ese account representati!es, and t)ere is, as a result, little incenti!e +or any account representati!e to do )is or )er Eob properly' An e0ample o+ Manuli+e;s e0perience in dealin( ,it) A*G* ,ould )i()li()t t)e +rustrations mentioned abo!e' Manuli+e ,anted to bloc3 employees +rom usin( t)e automatic call +eature at a cost o+ 6# cents per call a!ailable as an option ,)en usin( t)e 711 directory assistance +eature o++ered by A*G*' *)ey pre+erred t)at employees use 711 to +ind a telep)one number and t)en manually dial it at t)e lo,er rates ne(otiated on t)e contract' *)is simple re@uest in!ol!ed a 172mont) ,ait on Manuli+e;s part and se!eral repeated discussions ,it) t)e account representati!es be+ore bein( resol!ed since it ,as to t)e ad!anta(e o+ A*G* to c)ar(e )i()er rates' *)e A*G* account representati!e c)an(ed t,ice in t)e meantime, and eac) blamed )isD)er predecessor +or t)e lac3 o+ responsi!eness' Finally, ,)en Manuli+e too3 matters into t)eir o,n )ands and persisted in callin( t)e account representati!e about t)is e!ery day, t)e 711 automatic dialin( ,as bloc3ed' "t ,as still )o,e!er only bloc3ed +or t)e local directory assistance and not +or t)e C%% directory assistance or +or callin( lon( distance' Manuli+e per+ectly understands )o, o!er,)elmed an account representati!e can be ,it) multiple demands on t)eir time and )o, poorly t)ey are incenti!i5ed' *)e Manuli+e telecom team )as but simple e0pectations o+ t)e representati!es and only re@uires t)at t)ey report periodically on t)e status o+ re@uests and a timeline +or resolution' !oor system trac;ing ,ho has what- And who is allowed whatFor employee telecommunication de!ice mana(ement i'e', +or callin( cards, pa(ers, and cell p)ones, Ciara >o(an and 1a!e Minori;s (roup )a!e created a an Kin+ormal databaseL usin( E0cel t)at matc)es p)one numbers and employees' Ho,e!er, t)ey )a!e no in+ormation on

1$

employees ,)o obtained t)ese de!ices prior to 1a!e;s or Ciara;s arri!al at Manuli+e' *)is is an in+ormation (ap t)at is !ery di++icult to +ill (i!en t)e lar(e number o+ employees in t)eir di!ision and t)e time t)ey can allocate to suc) a tas3' *)e resultin( problem is t)at t)ey recei!e bills +or callin( cards, pa(ers, and cell p)ones t)at supposedly belon( to Manuli+e employees and t)is somet)in( t)at t)ey )a!e little means to !eri+y' *)ere is no clear appro!al process +or employee re@uests to purc)ase telecom de!ices and options' *oday, it is basically up to Ciara;s discretion to appro!e or deny a cell p)one re@uest' *)ere is no +ormal policy about ,)o is allo,ed to )a!e one and ,)at callin( plan s)ould accompany it' Suc) decisions are based on t)e title o+ t)e person in t)e +irm rat)er t)an on t)eir usa(e or location' Also, t)e re@uest is al,ays directed to t)e same !endor and t)e same plan is used no matter ,)at t)e usa(e o+ t)is p)one is (oin( to be' *)ere is clearly room +or a ri(orous process t)at ,ould pre2@uali+y employees +or a cell p)one re@uest and automatically select a plan t)at ,ould best matc) t)eir actual consumption' Cost Accounting For t)e time bein(, t)e accountin( +or telecommunications e0penses ,it)in eac) department o+ Manuli+e is done on a per )ead basis' *)e in+ormation re@uired to brea3 t)is do,n more accurately amon( departments and cost centers is a!ailable in t)e .B- o+ t)e company, but t)e reports +roma .B- are as !oluminous as telecom bills and e!en more di++icult to read' As a result, local departments ,it) little telecom e0pense (et c)ar(ed as muc) as )ea!y telecom2 user departments suc) t)e Asia (roup, on t)e basis t)at bot) departments )a!e rou()ly t)e same number o+ employees' A tool t)at ,ould be able to read bot) t)e telecom bills and t)e .B- reports ,ould enable Manuli+e to better understand its internal cost structure and relate re!enues to costs' "t ,ould also enable suc) a client2oriented company to better bill bac3 telecom costs to its clients ,)en necessary' #rice information. Contract monitoring *)e telecom mana(er;s role is lar(ely dependent on t)eir personal ,or3 style and pre+erences since t)ere is little documentation on t)ese practices t)at passes do,n +rom mana(er to mana(er and ensures continuity in tas3s' For e0ample, 1a!e Minori too3 o!er +rom t)e pre!ious telecom mana(er at Manuli+e about in mid 1999 and )as no in+ormation about t)e lon(2term A*G* contract t)at ,as ne(otiated by )is predecessor' As a result, )e could not c)ec3 t)e accuracy o+ t)e bills recei!ed by Manuli+e durin( )is early tenure in t)e company' "n addition,

16

t)is in+ormation is !ery di++icult to obtain +rom t)e carrier as it is to t)eir ad!anta(e to lea!e clients ,it) as little in+ormation as t)ey can' 1a!e )ad to ,ait +or t)is in+ormation until t)e Manuli+e contract ended and )e could re2ne(otiate a ne, contract t)at is t)e current basis +or re!ie,in( bills e!ery mont)' anaging suppliers Aithin Service level agreements Accordin( to &ancy Hamel, )ead o+ S strate(ic procurement +or Manuli+e, t)e same +rustrations and in+ormation (aps t)at arise ,it) telecom apply to ot)er 3inds o+ procurement suc) as "* (computers) and o++ice supplies as ,ell' *)e 3ey success +actor in mana(in( t)e relations)ip ,it) suppliers is compre)ensi!e ser!ice le!el a(reements' Hendor mana(ement combined ,it) increased communication ,it) suppliers is 3ey to a success+ul client2!endor relations)ip' Accordin( to &ancy, K=ne needs to mo!e a,ay +rom a relations)ip ,)ere you meet occasionally to report problems' *)e relations)ip needs to become one ,)ere +re@uent interactions lead to reliability and reliability to trust'L Ha!in( ser!ice le!el a(reements +orces bot) side to commit on a process +or problem resolution' =pen discussions ,it) clients about areas +or impro!ement and success+ully mana(in( client e0pectations puts suppliers in a muc) stron(er position, ,)ereas intuiti!ely one ,ould assume t)at ser!ice le!el a(reements protected only t)e clients' "ncreased communication +rom t)e supplier tends to calm buyers do,n and )a!e t)em react positi!ely to Kune0pected problemsL' KAll ,e need is a re(ular up2date on t)e status o+ our @ueriesL, says Ciara >o(an' Centrali/ed +urchasing &ancy Hamel Eoined Manuli+e to establis) a centrali5ed procurement +unction +or all non2 operatin( supplies' S)e )as already built t)is +unction +or o++ice supplies, and t)e process ,as to build an internal so+t,are t)at ,ould catalo( all !endors' K 4e considered procurement plat+orms suc) as Ariba or Commerce =ne, but most o+ t)e +irms ,e tal3ed to said t)at t)ese systems ,ere be)ind on deli!erin( promised results and ,e ,ere unable to +ind a real success story'L As a result, Manuli+e elected to build its o,n procurement so+t,are and is not usin( an o++2t)e2s)el+ pac3a(e' &ancy also mentioned t)e comple0ity o+ startin( to use Kyet anot)er systemL' /earnin( )o, to use a ne, system and maintainin( it comes at a cost, and t)ese costs are muc) )i()er +or o++2t)e2s)el+ so+t,are pac3a(es t)an +or internally built so+t,are ones' anulife

17

*)e causati!e +actors +or t)e !arious problems mentioned abo!e ,ill no, be discussed in t)e conte0t o+ supply c)ain analysis, ,)ereby t)ey can be traced bac3 to di++erent se(ments o+ t)e telecom supply c)ain' "t is important t)at ,e +irst understand t)e dynamics o+ a (eneric ser!ice supply c)ain be+ore ,e proceed to analy5e t)e telecom supply c)ain in particular'

Sections 7- Supply chain analysis

Introduction to Supply Chains A traditional supply c)ain is a related net,or3 o+ businesses t)at obtains ra, materials, con!erts t)em into intermediate (oods and +inis)ed (oods and t)en deli!ers t)ese (oods to clients' Harious customer c)annels comprisin( a distribution system are used +or t)e deli!ery o+ t)e +inis)ed (oods' *)ere is a +lo, o+ in+ormation, (oods and payments alon( t)e supply c)ain' Supply c)ains e0ist in !irtually e!ery industry, but are especially apparent in manu+acturin( industries t)at )a!e an ob!ious +lo, o+ (oods +rom suppliers to manu+acturin( +acility to end2 customers' Mana(in( a supply c)ain is a non2tri!ial tas3 since it in!ol!es a lar(e amount o+ coordination and lo(istics plannin( amon( di!erse entities t)at are (eo(rap)ically dispersed' *)e bi((est c)allen(e is coordinatin( in!entory and production capacity across t)ese or(ani5ations in t)e supply c)ain net,or3, (i!en t)e +luctuatin( demands at t)e end2customer le!el' "n t)e traditional manu+acturin( conte0t, t)e metrics normally used to (au(e supply c)ain per+ormance are in!entory le!els, procurement costs, and order +ul+illment time' 4it) lac3 o+ in+ormation across t)e supply c)ain components in t)e past, procurement mana(ers +ocused on streamlinin( operations only ,it)in t)eir domain' "t )as no, become apparent t)at t)is need not translate into an optimal solution +or t)e supply c)ain as a ,)ole' Modern supply c)ain mana(ement tec)ni@ues tend to study t)e entire supply c)ain +rom end2to2 end optimi5in( in a more compre)ensi!e manner' *)is streamlinin( o+ operations all alon( t)e c)ain leads to process e++iciencies t)at translate into cost sa!in(s, better products, and impro!ed customer ser!ice' *)is is easier said t)an done t)ou()' C)allen(es arise because eac) o+ t)e componentsD+irms alon( t)e supply c)ain act in t)eir o,n interest and are subEect to di++erent constraints' *)ou() it is apparent t)at t)ey are dependent on eac) ot)er and t)at it ,ould be to t)eir mutual bene+it to ali(n (oals, t)e actual incenti!es to cooperate and coordinate e++ort continues to be a c)allen(e'

1#

Service chains versus physical product chains 4)ile supply c)ain mana(ement systems are usually associated only ,it) manu+acturin( industries and in!entory2mana(ement issues, t)ey are increasin(ly becomin( applicable to ser!ice industries li3e telecommunications and utilities ,)ere t)e items traded are not in!entory2 able' *)is is because cost reduction t)rou() process e++iciencies represents one o+ t)e primary !e)icles +or +irms to ac)ie!e a competiti!e ad!anta(e, re(ardless o+ t)e industry' Streamlinin( procurement +unctions and increasin( !isibility into consumptionDspendin( immediately translates into cost sa!in(s +or clients' *o identi+y t)ese cost sa!in(s, procurement o++icials need access to rele!ant cost in+ormation to ma3e e++ecti!e cost comparisons bet,een !arious acti!ities' Businesses )a!e increasin(ly +ocused on dri!in( process e++iciencies in procurement ,it)in t)eir o,n or(ani5ations and in t)eir dealin(s ,it) e0ternal suppliersDdistributors to dri!e cost reductions' *)ese e++iciencies also contribute to product impro!ement and better customer ser!ice t)at (i!e t)e business a competiti!e ad!anta(e and source o+ di++erentiation +rom its competition' *)e reason ser!ice industries la((ed manu+acturin( industries in implementin( supply c)ain mana(ement systems is probably because manu+acturin( industries already tend to )a!e muc) o+ t)e ra, data (in!entory data, procurement cost data, supplier per+ormance data etc') a!ailable in electronic databases' 4)en t)e data is a!ailable, it is o+ course easier to manipulate it +or decision2ma3in(' *)is lac3 o+ data ,it)in ser!ice companies ,as not an issue in a re(ulated en!ironment' 4it) t)e dere(ulation o+ ser!ice industries li3e utilities and telecommunications in t)e 199%s, t)e number o+ !endors )as increased dramatically, intensi+yin( competition' *)e need +or in+ormation to +acilitate decision2ma3in(, per+ormance control, and coordination e++ort is increasin(ly apparent in t)is dere(ulated, competiti!e en!ironment' Information use for control =incentives?, coordination, and decision ma;ing *)e traditional supply c)ain c)allen(es o+ coordination and incenti!e ali(nment are e@ually rele!ant in t)e ser!ice industry conte0t as ,ell' 4e ,ill )i()li()t t)is ,it) t,o e0amples in t)e telecommunications and utilities industries respecti!ely' "n t)e early 199%s, telecommunications +irms li3e A*G* and MC" be(an usin( e0ternal sales a(encies +or customer (consumer and corporate) mar3etin( e++orts' *)ese a(ents ,ere

19

compensated on a per transaction basis i'e', +or eac) Js,itc); made +rom anot)er carrier to A*G* or MC"' *)e a(ents in turn resorted to Jslammin(; customers and s,itc)in( t)em ,it)out t)eir consent +rom an e0istin( carrier to A*G*;s or MC";s ser!ice' *)is )ad an ad!erse impact on A*G* and MC" bot) +rom a customer loyalty perspecti!e and +rom a cost perspecti!e since FCC re(ulations )a!e since made Jslammin(; ille(al and in!ol!ed customer compensation +rom t)e ne, carrier' Bot) A*G* and MC" )a!e since ceased to use e0ternal sales a(encies +or mar3etin( e++orts' *)is is a stri3in( e0ample o+ control or incenti!e ali(nment issues in a supply c)ain' *)e recent ener(y crisis in Cali+ornia is anot)er e0ample o+ mis2ali(ned incenti!es on t)e supply c)ain' *)e leadin( ener(y retailers in t)e state 2 Edison and .aci+ic >as G Electric paid more +or ,)olesale po,er t)an t)ey could c)ar(e residential and small2business customers' *)ese customers are co!ered by a rate protection plan t)at +ollo,ed t)e electricity dere(ulation in 199C, ,)en ,)olesale po,er prices ,ere lo,' *)e price protected ,as implemented to +orce consumers to pay arti+icially )i() prices and to (i!e t)e utilities t)e time and resources needed to pay o++ debts le+t +rom t)eir days as re(ulated monopolies' *)at plan bac3+ired in t)e summer o+ 1999 ,)en t)e cost o+ ,)olesale po,er soared, but retail prices remained +ro5en' Edison and .>GE are rearin( to collect t)e de+icit +rom customers since t)ey no, ,ant to be compensated +or t)e po,er t)at t)ey buy at a )i()er cost' 4)ile ,)olesalers enEoy lar(e mar(ins, and end2customers enEoyin( price protection )a!e little incenti!e to conser!e ener(y, t)e middle node on t)e supply c)ain i'e', t)e utility retailers are (ettin( s@uee5ed' *)e a!ailability o+ rele!ant in+ormation in real2time is a 3ey dri!er in tac3lin( t)ese issues' "n+ormation alon( t)e supply c)annel can )elp in t)ree ,ays8 ControlDper+ormance e!aluation8 4)en in+ormation about t)e per+ormance parameters o+ di++erent entities in a supply c)ain net,or3 is a!ailable, it is easy to identi+y ,)ic) components are ali(ned in t)eir incenti!e +or o!erall supply c)ain optimi5ation' For e'(', trac3in( order +ul+illment time +rom !arious suppliers can )elp identi+y t)ose t)at are most responsi!e and t)at can be included in a Jpre+erred !endor; list' Coordination8 For ob!ious reasons, coordination is +acilitated on t)e supply c)ain t)rou() in+ormation' "n t)e mobile telecommunications conte0t, )ere is an e0ample' A*G*;s mobile

17

ser!ice plan +or customers +alls into se!eral cate(ories dependin( on t)eir usa(e pro+ile ((eo(rap)ic location, consumption !olume etc')' "n+ormation re!ealed about t)e customer;s usa(e patterns o!er time )elps A*G* su((est alternate plans t)at t)e customer could consider t)at better +it t)eir re@uirements' *)is is optimal +or bot) A*G* and t)e customer because t)e customer (ets a better solution and potential cost sa!in(s, ,)ereas A*G* (ets a more loyal customer and lo,ers customer c)urn' 1ecision2ma3in(8 :ele!ant and updated in+ormation about entities on t)e supply c)ain is !ital in decision2ma3in(, especially in t)e procurement conte0t' *)e decisions could ran(e +rom a simple adEustment o+ purc)ased ser!ice !olume, price, !endor selection, and in contract re2ne(otiation ,it) ser!ice pro!iders' Access to t)ird party ratin(s and re+erence in+ormation can also dri!e optimal decision2ma3in( and miti(ate t)e underlyin( ris3 +or mana(ers' Information aggregation, analysis, and transmission 4)ile t)e bene+its o+ in+ormation +lo, across t)e supply c)ain are apparent, t)e t)ree steps to obtainin( t)is in+ormation are presented belo,' *)e +irst step in settin( up in+ormation +lo, is a((re(ation' "n ser!ice procurement, a((re(ated in+ormation s)ould be obtained across suppliers, across related ser!ices, across (eo(rap)ically dispersed locationsDcost centers, and o!er a period o+ time' *)e a((re(ated in+ormation s)ould be in a common +ormat and ,it) common parameters t)at +acilitate collation and analysis' .ertinent mar3et data about ne, productDprice o++erin(s, ser!ice ratin(s etc' can also be a((re(ated at t)is sta(e to create a more in+ormed basis +or decision2ma3in(' *)e second step in in+ormation +acilitation is analysis' "t is at t)is sta(e t)at mar3et data and data +rom t)e supply c)ain is studied to create !alid recommendations +or process impro!ement and cost cuttin( e++orts' *)e t)ird step is t)e actual transmission and presentation o+ t)e in+ormation' *)e )ard,are re@uirement is t)e actual transmission mec)anism and band,idt)' 4it) broadband data access becomin( more and more common, )ard,are is less o+ a constraint in t)e current conte0t t)an t)e presentation' *)e so+t,are problems t)at are usually encountered )ere are in+ormation o!er+lo, and customi5ed presentation' Analy5ed in+ormation may need to be

1C

presented !ery di++erently to di++erent parties on a supply c)ain' For e0ample, ,)ile procurement e0pense trac3in( at a micro2le!el can )elp bud(etin( ,it)in a client business, a more macro !ie, o+ t)e consumption may be rele!ant to t)e ser!ice pro!iders to better price and customi5e t)eir o++erin(s' "t is ,ort) notin( t)at t)is cycle o+ operations in settin( up in+ormation +lo, ,it)in a supply c)ain repeats endlessly and t)at t)e usa(e o+ )istorical data in analysis can )elp ma3e t)is a sel+2 rein+orcin( loop'

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nformation -ggregation' -nalysis' 9 Presentation

'1 Analy<e data by comparing it to aggregated mar;et information

CustomerBs 0xpressed /bCectivesQu al ity yr ice yt her constr aints an d r equ ir em ents

Continuous Analysis
71 !resent analysis in relevant and customi<ed format to each party on the supply chain

)1 Collect data and aggregate into common format

"ole of technology in supply chain information floA *)e role o+ in+ormation tec)nolo(y ("*) in supply c)ain mana(ement is to )elp mana(ers by pro!idin( t)em an in+ormed basis +or decision ma3in( ac)ie!ed t)rou() data a((re(ation and dispersion across supply c)ain components' "t is +elt t)at t)is ,ill result in better internal processes t)rou() better coordination and cost reductions ac)ie!ed by (i!in( decision2ma3ers t)e in+ormation necessary to optimi5e procurement' "* usa(e enabled supply c)ain mana(ement systems to transition +rom simple distribution mana(ement systems to a +ully inte(rated system ,it) t)e supplier at one end and t)e customer at t)e ot)er' *)e "*2related entities t)at support t)is compre)ensi!e supply c)ain are electronic data, )i()er band,idt) communications, and automated decision2support systems +or plannin( and implementation' *)e recent e0plosi!e de!elopment o+ t)e "nternet and communications tec)nolo(y ma3es it possible to )a!e more rele!ant data on a real2time basis, and +rom se!eral sources' Access to in+ormation is +acilitated t)rou() t)e "* in+rastructure pro!ided by tec)nolo(ies suc) as Electronic 1ata "nterc)an(e (E1") and Application Ser!ice .ro!iders (AS.)' E1", as a

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tec)nolo(y, re+ers to t)e computer2to2computer transmission o+ business in+ormation bet,een +irms in a supply c)ain' But, more importantly, E1" as an enabler o+ business process re2 en(ineerin(, is t)e dri!in( +orce +or supply c)ain e++iciency' AS.s are a completely ne, ,ay to sell and distribute so+t,are and in+ormation ser!ices' *)e ease o+ implementin( an AS. business model on t)e "nternet )as contributed to its incredible popularity in t)e recent past' AS.s )a!e considerable ad!anta(es ,)en compared to traditional in+ormationDso+t,are distribution c)annels' Here are some o+ t)e most important ad!anta(es8 "t lo,ers entry costs +or small and medium si5ed businesses t)at may not consider t)e pro)ibiti!e cost o+ so+t,are implementation and maintenance' E!en +or lar(er businesses, "* personnel tend to be !ery e0pensi!e and outsourcin( so+t,are applications is one ,ay to reduce "* )eadcount' AS. models trans+er t)e onus o+ )ard,are and so+t,are maintenance to t)e pro!ider' *)e cost o+ pro!idin( "nternet data band,idt) is s)i+ted to t)e AS. and t)ey can o+ten pro!ide it at lo,er cost' An AS. model ,)en lin3ed to t)e enterprise "* systems o+ buyer and seller +irms in a supply c)ain can )elp in a((re(ation, analysis, and decision2ma3in( aspects' *)e supportin( in+rastructure can also inte(rate intelli(ent mar3et in+ormation about competitors and competiti!e bids on t)e "nternet' *ec)nolo(y )as dri!en a number o+ si(ni+icant c)an(es in t)e ,ay supply c)ains in !arious industries are mana(ed, !ery o+ten leadin( to a s)i+t in po,er +rom suppliers to buyers' *ec)nolo(y )as in +act Eust )ad an impact on t)e transmission o+ critical in+ormation at t)e ri()t time bet,een t)e di++erent players ,it)in t)e supply c)ain, actin( as an in+ormation +lo, enabler and accelerator' *)e a!ailability o+ rele!ant in+ormation in a s)orter time c)an(ed t)e dynamics o+ industry players; interactions in terms o+ mar3et po,er and ultimately price' 4)ereas most applications o+ "* based SCM )a!e been in p)ysical supplies and in!entory2able products, little ,as done +or ser!ices supply c)ain mana(ement in (eneral, and telecommunications ser!ices supply c)ain in particular'

%enefits of information floAs in supply chains "n+ormation +lo, in a supply c)ain dri!es speed, coordination, and ready access to product in+ormation' *)ese result in t)e bene+its outlined belo,8

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(i) #ush versus +ull mechanisms in manufacturing a++lied to service delivery: As in+ormation +lo,s mo!e upstream +rom end2users in t)e procurement c)ain to t)e ser!ice pro!ider;s desi(n se(ment, ser!ices are customi5ed to meet indi!idual re@uests' *)is trend is t)e 3ey dri!er to (ainin( competiti!e ad!anta(e +or suppliers as better ser!ice no, re+ers to t)e ability to (reater customi5ation' *)e ability to trac3 buyin( )abits !ia t)e "nternet in tandem ,it) popular Customer :elations)ip Mana(ement (C:M) systems t)at are used by +irms today re!eal muc) ric)er customer in+ormation to suppliers t)an ,as e!er a!ailable in t)e past' *)e cost o+ obtainin( t)is in+ormation is also t)us si(ni+icantly lo,ered, t)ereby lo,erin( t)e barriers to customi5in( o++erin(s +or customers' (ii) #rice reduction resulting from )etter information flows8 *)e "nternet )as made price s)oppin( and comparison tri!ial +or procurement mana(ers, especially +or commodity (oods' Entire supplier catalo(s are a!ailable online and auctions, open bids, and e2 mar3etplaces are some o+ t)e mec)anisms used today +or price in+ormation access and procurement' "t is not clear t)at price comparison +acilitation is all (ood +or eit)er party in!ol!ed in t)e transaction t)ou()' For suppliers, it )as lo,ered t)e costs o+ entry and distribution, ,)ile at t)e same time s@uee5in( t)eir mar(ins' For buyers, it can lo,er costs, but t)ey also assume t)e ris3 o+ dealin( ,it) relati!ely anonymous suppliers' 4it) real2time access to rele!ant in+ormation, process inte(ration bet,een t)e decision2 ma3in( systems o+ suppliers and t)eir customers becomes bi2directional and ti()tly inte(rated' Suppliers and clients can interact dynamically and initiate automated decision2 ma3in( processed ,it)in eac) ot)erIs in+ormation systems by pre2de+inin( business rules' /ess )uman inter!ention is re@uired at eac) step, as t)ese processes become more automated and rules2based' *)is sets t)e sta(e +or more intelli(ent business decisions to be automated' For e0ample, pricin( in+ormation a!ailable electronically +rom a supplier catalo( can tri((er a customer procurement system to automatically place an order i+ t)e price decreases beyond a pre2de+ined le!el' Anot)er e0ample 2 i+ one supplierIs @uality is seen as bein( abo!e t)at o+ ot)er suppliers, t)e customerIs application mi()t automatically mo!e t)at supplier up in t)e !endor o+ c)oice list based on t)e de+ined business rules' (iii) Internal +rocesses within )uying organi/ations made clearer8 =ne o+ t)e clear bene+its to in+ormation +lo, is t)at bud(etin( and cost accountin( are de+initely made easier' 4it) price

$$

transparency and e0pense trac3in( measures, resource costs can be better assessed +or indi!idual transactions' Also, re@uirements are better trac3ed and t)ere+ore better bud(eted' *)e "nternet can pro!ide t)e necessary inter+aces t)at support process automation bet,een businesses instead o+ bein( limited to internal business transactions' *)e bi2directional +lo, o+ in+ormation creates process e++iciencies t)rou() better coordination, decreases costs, and streamlines t)e ,ay resources +lo, t)rou() t)e supply c)ain' *)is also increases customer loyalty and reduces c)urn, an area o+ deep concern +or most ser!ice industry +irms' >i!en t)at in most ser!ice sectors, customer ac@uisition is !ie,ed as +ar more e0pensi!e t)an customer retention, t)e mi(ration o+ businesses +rom transaction2centric to customer2centric seems ine!itable' "n today;s e2business settin(, suppliers are increasin( t)e usa(e o+ t)e "nternet to create ti()t lin3s bet,een all t)eir in+ormation systems, bot) ,it)in t)eir or(ani5ation and in t)eir dealin(s ,it) supply c)ain entities' *)is mo!e is a bid to increase customer loyalty t)rou() pro!ision o+ in+ormation t)at aids decision2ma3in( +or bot) parties' Customer2centric e2business suppliers ,ill compete not only on t)e price and @uality o+ t)eir products and ser!ices, but also on t)e @uality o+ t)eir in+ormation ser!ices and e2business lin3s' Suppliers ,)o operate ,it)in intelli(ent supply c)ains ,ill be able reduce cycle time, be more responsi!e, and impro!e customer ser!ice' *ar(eted mar3etin( and customer se(re(ation accordin( to certain parameters is +acilitated' Customer2centric computin( brea3s do,n barriers bet,een suppliers and t)eir customers and impro!es decision2ma3in(' "ntelli(ent supply c)ains pro!ide suppliers ,it) a competiti!e ed(e' 4it) t)is introduction to supply c)ains, ,e ,ill proceed to t)e ne0t section, ,)ic) analy5es t)e telecom ser!ice supply c)ain in detail' The Telecommunications Services Supply Chain *elecommunications is one o+ t)e most dynamic industries in t)e nited States economy' An annual sur!ey o+ telecommunications ser!ice pro!iders released by t)e Federal Communications Commission (FCC) +ound t)at industry re!enue (re, 9 percent in t)e year $%%% to ?$99 billion, up +rom ?$79 billion in 1999' &e, !oice, data, and mobile ser!ices )a!e created ne, opportunities in t)e o!erall mar3et as consumers and businesses loo3 +or ne, ,ays to e0pand t)eir in+ormation net,or3s and, as a result, spend more money t)an e!er on

$6

communications' 4)ile !oice ser!ice (local, lon( distance, international callin( etc') is mo!in( to,ards standardi5ation in @uality and price, telecom ser!ices suc) as data and ,ireless ser!ices still re@uire substantial customi5ation and are areas o+ )u(e (ro,t)' Hoice ser!ices )a!e no, assumed a commodity status +or consumers' For businesses )o,e!er, !oice ser!ice is still pro!ided on ne(otiated rates based on a term2!olume commitment +rom t)e client' "t is more meanin(+ul to discuss a telecom ser!ice supply c)ain in t)e business rat)er t)an t)e consumer mar3et, (i!en t)e many parties concerned in mana(in( comple0 bundles o+ telecommunications ser!ices +or businesses' "n t)e business telecom ser!ice supply c)ain, ,e )a!e t)e ser!ice pro!iders as suppliers at one end and t)e businesses as clients at t)e ot)er' *elecomDnet,or3 consultants, telemana(ement +irms, pro!isionin( +acilities, and e0ternal billin( a(ents +ill t)e intermediate positions' *)e typical supply c)ain processes are as +ollo,s8 1' *)e customer contacts telecom carriers +or initiatin( ser!ice' $' A contract is dra,n up and rates ne(otiated on a term2!olume basis' A customer a(ent is assi(ned by t)e carrier to t)e customer to maintain t)e relations)ip and resol!e any issues t)at arise' 6' *)e contractual details are recorded by carriers and t)e parameters +or settin( up ser!ice passed on to pro!isionin( a(encies' 7' .ro!isionin( a(ents ,ill +acilitate t)e micro2processes re@uired to actually initiate ser!ice +or t)e customer and set up t)eir billin( records ,it)in t)e carriers; billin( systems' #' Ser!ice is initiated and t)e client starts to pay +or mont)ly ser!ice' Billin( may be done directly by t)e carriers or t)rou() e0ternal billin( a(ents' 9' *)e customer uses eit)er an in2)ouse telecom department or e0ternal telecom consultants to re!ie, t)e bills and audit t)em +or errors' 7' =n an occasional basis, t)e customer ,ill )ire telecom or net,or3 consultants to re!ie, t)e telecom tec)nical solution and ma3e recommendations +or impro!ement, contract re2 ne(otiation' 4e ,ill no, loo3 at eac) entity ,it)in t)e supply c)ain and re!ie, t)eir respecti!e ser!ices, mar3ets, competition, and +uture prospects'

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Telecom Service !roviders *)e S telecom ser!ice pro!ider mar3et is a concentrated (roup o+ suppliers ,it) # players accountin( +or more t)an 7%< o+ t)e total mar3et' *o (i!e a brie+ )istory o+ S telecom ser!ice pro!iders 2 until t)e early C%;s, t)e Bell System and A*G* (t)e parent )oldin( company) )ad a monopoly )old on telecommunications in t)e S' "n 19C7, t)e Bell System ,as dismantled into se!en separate :e(ional Bell Holdin( Companies 3no,n as MBaby Bells'M 1ere(ulation increased competition and companies suc) as MC" and Sprint became stron( +orces in t)e mar3et +or lon( distance ser!ice' As telecommunications competition intensi+ied o!er t)e 199%;s and into t)e current decade, ad!ancements in tec)nolo(y mo!ed at an e!en +aster pace' &e, tec)nolo(ies suc) as broadband )i()2speed data communication and mobile communication c)an(ed t)e +ace o+ t)e telecom industry' *)is caused t)e +ederal (o!ernment to enact s,eepin( re+orms in t)e *elecommunications Act o+ 1999' *)e Act remo!ed t)e last barriers to entry in telecom ser!ice pro!ision and spurred t)e entry o+ Competiti!e /ocal E0c)an(e Carriers (C/ECs) +or !oice ser!ice and cable tele!ision companies to o++er data ser!ices' 4)ile t)e industry is seein( se!eral mer(ers and ac@uisitions today and some de(ree o+ consolidation, t)ere is still little coordination in customer2+acin( processes e!en bet,een mer(ed entities' /e(acy computer billin( systems and a di!erse ran(e o+ underlyin( tec)nolo(ies +urt)er complicate t)ese mer(er e++orts' *)e only ser!ice pro!iders t)at (o some distance in respondin( to customer re@uests +or ser!iceDbill a((re(ation are t)e C/ECs t)ou() t)ere is mountin( pressure on t)e lar(er carriers to mo!e in t)is direction as ,ell' Telecom Consultants *)e term Jtelecom consultin(; is used in a ,ide !ariety o+ conte0ts dependin( on t)e ran(e o+ ser!ices implied' Accordin( to t)e Broo3side >roup;s in2dept) re!ie, o+ t)e )i()ly +ra(mented telecom consultin( mar3et, t)ere are $,7%% telecom consultin( +irms t)at collecti!ely employ an estimated 67,%%% indi!idual telecom consultants' *)ere are se!eral t)ousand telecom consultants in t)e S in +irms ran(in( +rom sin(le2person companies to lar(e, establis)ed +irms li3e Andersen Consultin(, .rice,ater)ouseCoopers and 1eloitte G *ouc)e' *otal telecommunications consultin( re!enues ,as ?7'7 billion in 1997, )as increased at t)e rate o+ 1#< eac) year t)rou() 199C and 1999, and is predicted to reac) ?11bn in $%%%' Ser!ices are usually priced on a t,o2part tari++ model ,it) a one2time consultin( +ee plus #%< o+ one2year;s sa!in(s on telecom procurement'

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Businesses o+ all si5es are potential customers, dependin( lar(ely on t)e si5e o+ t)e consultin( +irm and t)e scale o+ t)e cost structure' *)e usual ser!ices o++ered include8 :F. de!elopment and support Hendor or carrier e!aluationsDrecommendations &et,or3Dsystems analyses G plannin( .roduct or ser!ice e!aluationsDrecommendations &et,or3Dsystems desi(n Cost reduction consultin( Client application )ostin( and ,eb )ostin(

Telemanagement Firms *elemana(ement +irms mainly +ocus on bill auditin( and a((re(ated billin(' Se!eral telemana(ement companies e0ist in t)e S, but t)e only establis)ed +irm ,it) an establis)ed customer base is *eleMana(ement *ec)nolo(ies, "nc' (**")' **" +ocuses on .C2based telemana(ement so+t,are systems' *)ey are an o++line ser!ice t)at pro!ides t)e +ollo,in( ser!ices8 "nternal .B-DAC1 c)ar(ebac3, toll +raud detection *elecom :F. de!elopment +or !oiceDdata net,or3s *elecom net,or3 contract ne(otiation *elecom net,or3 implementation *elecom bill auditin( and !alidation *elecom net,or3 strate(ic plannin( *elecom sta++ outsourcin( Consumption report (eneration

**" ma3es money bot) +rom sales o+ its so+t,are and on a per2proEect basis +or one2time consultin( ser!ices' *)e so+t,are is priced accordin( to t)e si5e and comple0ity o+ installation at client locations' Because o+ t)e )i() costs o+ consultin( ser!ices t)at **" o++ers, it mainly ,or3s ,it) lar(e clients suc) as 6Com, "BM, and Fapan Airlines' "n (eneral, telemana(ement so+t,are prices ran(e +rom under ?1,%%% +or small call !olume call accountin( pac3a(es to ,ell o!er ?$%%,%%% +or a complete system o+ telemana(ement

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applications' .ricin( depends on t)e number o+ so+t,are applications purc)ased, a!era(e mont)ly call !olumes, and t)e client;s computin( plat+orm' *ypically, main+rame and clientDser!er telemana(ement products cost +ar more t)an .C2based or stand2alone products' !rovisioning Agents *)e settin( in place and con+i(urin( o+ t)e )ard,are (net,or3, e@uipment etc') and so+t,are (e'(', billin( records) re@uired to acti!ate a telecommunications ser!ice +or a customer is called pro!isionin(' Accordin( to a recent Frost G Sulli!an article on t)e S pro!isionin( mar3et, K*)e rapid rate o+ tec)nolo(ical de!elopment )as (i!en rise to comple0 multi2!endor net,or3 en!ironments ,)ic) re@uire si(ni+icant s3ill and e0perience +or e++icient inte(ration into le(acy net,or3 systems'L Frost G Sulli!an *elecommunications Analyst 1onna .usey predicts t)at ,it) t)e increased competition +or t)e pro!isionin( o+ net,or3 inte(ration ser!ices by tec)nolo(y pro!iders, telecommunications carriers and consultin( companies, t)e ability to o++er a total end2 to2end solution t)at includes t)e e++ecti!e mana(ement o+ an enterprise net,or3 ,ill ser!e to di++erentiate mar3et participants' Many t)ird party +irms t)at pro!ision telecom ser!ice and pro!ide =SSs )a!e mus)roomed in t)e S' *)e leadin( =SS pro!ider in t)e S is *elcordia *ec)nolo(ies and more recently e@uipment manu+acturers and net,or3 companies li3e /ucent and &ortel are also enterin( t)is space in a bid +or !ertical inte(ration' *)ey pro!ide consultin( and mana(ement ser!ices in addition to pro!isionin( t)e e@uipment and tools' =peration Support Systems (=SSs) are computer systems used by telecommunication ser!ice pro!iders to automate t)e essential business +unctions in!ol!ed in pro!isionin( ser!ice +or customers' Since business clients normally use se!eral carriers to pro!ide t)eir telecom ser!ice, carriers must be able to interconnect t)eir =SSs in real2time ,it) ot)er carriers so t)at t)ey can operate as tradin( partners' Multiple =SS products e0ist in t)e mar3etplace, many are proprietary, and t)e standards in t)e industry are e!ol!in(' Accordin( to Ho,ard Andersen, .resident o+ t)e Nan3ee >roup, M*)e *elecommunications Act o+ 1999 created a substantial and (ro,in( mar3et +or =SS interconnection solutions 22 our estimates are t)at t)e mar3et opportunity ,ill e0ceed )al+ a billion dollars by t)e end o+ 1999 in t)e S'M

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0xternal %illing Agents Accordin( to "1C reports, telecom billin( is an area carriers can no lon(er a++ord to i(nore' By $%%6, 'S' telecom billin( industry re!enues ,ill reac) ?9'9C billion' *)e importance o+ billin(, and t)e (ro,t) in t)e mar3et, is bein( dri!en by subscribers si(nin( up +or more and more ser!ices and demandin( one bill, and by dere(ulation and intensi+yin( competition creatin( t)e need +or carriers to introduce ne, ser!ices @uic3ly and be able to bill +or t)ose ser!ices' *o deal ,it) t)ese c)allen(es, most carriers today e0ternal billin( a(ents' Some o+ t)e bi( names in t)is industry are Oenan Systems, Sa!ille Systems, A//*E/ "n+ormation Systems, Cincinnati Bell "n+ormation Systems (CB"S)' Computer :esources Mana(ement, E : 1atacenter, and more recently ,eb2based billin( companies suc) as CallHision' *)is industry too )as seen lar(e consolidation ,it) carriers and e@uipment +irms ac@uirin( billin( +irms in a bid +or con!er(ence' For e'(', in Fanuary 1999, telecom (iant /ucent *ec)nolo(ies purc)ased Oenan Systems' Customers Corporate customers complete t)e supply c)ain in business telecommunications ser!ices' "n t)e +irst section o+ t)e t)esis ,e sa, some o+ t)e issues t)at are pertinent to mana(ement o+ telecommunications ,it)in S businesses' A case study o+ telecom mana(ement ,it)in Manuli+e Financial ,as used to )i()li()t t)ese issues' *)e in+ormation )iatus bot) ,it)in tiers o+ a client company and in its dealin(s ,it) e0ternal !endors is at t)e )eart o+ se!eral telecom mana(ement problems' "n t)e second section o+ t)e t)esis ,e elaborated on supply c)ain mec)anisms and t)e S telecommunications supply c)ain in particular' >i!en t)is bac3(round, ,e can no, proceed into t)e t)ird section o+ t)e t)esis, ,)ic) +ocuses on t)e business plan +or a proposed ne, ,eb2based ser!ice B JBooleo;, intended to add e++iciencies to t)e business telecom supply c)ain' Booleo attempts to resol!e some o+ t)e incenti!e related issues in t)e telecom supply c)ain t)at causes t)e client2 sided problems listed earlier in t)e t)esis' "t +ills !ital in+ormation (aps in t)e c)ain and pro!ides lin3s t)at do not e0ist today bet,een parties bot) internally ,it)in a client or(ani5ation and in its dealin(s ,it) e0ternal parties' *)is ser!ice addresses most o+ t)e main issues +aced by S businesses today in mana(in( t)eir telecommunications e0penses and ser!ices'

Section 8- The %usiness !lan

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%usiness /pportunity The Industry *)e telecommunications industry in!ol!es comple0 re(ulations, tec)nolo(ies, and pricin( structures' Successi!e rounds o+ dere(ulation, includin( t)e *elecommunications Act o+ 1999, )a!e led to increased competition, dri!in( prices do,n +or !oice ser!ices' *)e result )as been a proli+eration o+ strate(ic alliances and mer(ers amon( companies ,it) complementary assets and t)e emer(ence o+ ne, telecom pro!iders, particularly in t)e internet2access, data ser!ice, and C/EC sectors' "ndustry e0perts predict t)at it ,ill ta3e time +or corporate consolidations to translate into actual consolidation o+ ser!ices +or end2users' *)e industry includes landline !oice ser!ice, ,ireless ser!ice, internet2access ser!ice, and data ser!ice' Current S business telecom spendin( is ?1%% billion, e0pected to reac) ?$7% billion by $%%6'1 1espite t)e +act t)at landline ser!ices are rapidly becomin( commodities, t)e recent and predicted e0pansion o+ ,ireless and data ser!ices, t)e increasin( comple0ity o+ carriers and ser!ice c)oices, and t)e c)an(in( structure o+ +irms ensure t)at t)e potential mar3et ,ill continue to increase in si5e' The Company and Concept Booleo (meanin( K" decideL in ancient >ree3) pro!ides a ser!ice t)at a((re(ates t)e total telecom costs and in+ormation o+ lar(e companies, resultin( in better mana(ement o+ t)eir internal cost structure as ,ell as better ne(otiation o+ prices ,it) e0ternal suppliers' *)is is accomplis)ed t)rou() a user2+riendly ,eb inter+ace'

Businesses across t)e S spend billions o+ dollars eac) year on telecommunications ser!ices in an increasin(ly comple0 en!ironment' >i!en t)e !ast array o+ a!ailable ser!ices and pro!iders, and lac3 o+ user2+riendly bills, companies can only ,it) (reat e0pense and di++iculty understand t)eir o,n consumption and be(in to t)in3 about +indin( ,ays to impro!e internal processes' Armed ,it) little use+ul in+ormation about t)eir o,n spendin( and needs, t)ese companies cannot ne(otiate ,it) pro!iders in a ,ay t)at is most appropriate and bene+icial +or t)e company'

Source "1C and 1ata@uest'

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*)e Booleo solution pro!ides a client company ,it) t)e means to mana(e internal processes more e++iciently and to strate(ically position itsel+ !is2P2!is its e0ternal en!ironment' Booleo pro!ides8

A((re(ated, customi5able, online bills (+or all pro!iders, ser!ices, and client sites) A+ter2a((re(ation ser!ices suc) as bill analysis, call2trac3in( +or billin( clients, cost allocation *)e ability to mana(e telecom e0penses and ser!ices to t)e employee le!el

One

Furt)er, Booleo T4o uses a client;s pro+ile and telecom consumption pattern combined ,it) dynamic mar3et in+ormation about telecom ser!ice o++erin(s, tec)nolo(y and pricin( to deli!er8

:ecommendations o+ t)e most appropriate telecom ser!ice mi0 :is3 mana(ement in tryin( ne, pro!idersDser!ices based on pro!ider ratin(s, client re+erences, #our and client pro+ilin( "n+ormation and tools +or better ne(otiatin( contracts ,it) ser!ice pro!iders'

>i!en t)e (ro,in( comple0ity o+ telecommunications ser!ice o++erin(s +or businesses, it is not surprisin( t)at telecom procurement is replete ,it) ine++iciencies and unin+ormed decision2 ma3in(' 1espite consolidation in t)e mar3et and t)e emer(ence o+ C/ECs, companies still to )a!e multiple carriers, especially +or mobile telep)ony' Businesses purc)asin( telecommunications ser!ices ,aste !aluable time ma3in( decisions based on incomplete in+ormation, and as a result pay )i() prices' 1ue to t)e absence o+ dynamic mar3et in+ormation and credible re+erences, t)ese businesses also assume si(ni+icant ris3s ,)en tryin( ne, carriers or ser!ices' Booleo is see3in( to establis) itsel+ as t)e pioneer and leadin( pro!ider o+ complete telecommunications e0pense mana(ement' "ts patent2pendin( business model streamlines t)e procurement process, promotin( process e++iciency and cost reduction bot) ,it)in t)e client or(ani5ation and in its dealin(s ,it) telecom carriers' *)e Booleo solution ,ill be a!ailable at t,o le!els ,it)in t)e client or(ani5ation B corporate (telecom mana(er) and cost2center le!els' *)e decentrali5ed Booleo solution promotes cost trac3in( and mana(ement enablin( client or(ani5ations to dramatically cut do,n on ma!eric3 telecom spendin( and optimi5e telecom procurement by capturin( consumption in+ormation at di++erent le!els ,it)in t)e business' *)e ,ealt) o+ in+ormation t)at Booleo captures and presents to a telecom mana(er dri!es in+ormed decision2ma3in( and allo,s t)e mana(er to +ocus on !alue2added acti!ities'

6%

The %ooleo !roduct and Services *)e Booleo ser!ice pro!ides detailed in+ormation on telecommunication ser!ices spendin( resultin( in (reater e++iciencies and sa!in(s bot) ,it)in t)e or(ani5ation and ,)en dealin( ,it) outside suppliers' Booleo a((re(ates and analyses strate(ic in+ormation t)at ,ould not be used ot)er,ise, leadin( to complete in+ormation mana(ement internally and to strate(ic procurement e0ternally' sers o+ t)e Booleo ser!ice include controllers and CF=s ea(er to (et !isibility into t)eir company;s spendin( and to mana(e costs e++iciently ,it)in eac) department or location o+ t)eir company' "t also includes telecom mana(ers at all le!els ,it)in t)e or(ani5ation ,illin( to better purc)ase telecommunication ser!ices' "t ac)ie!es t)is t)rou() a cyclical process o+ t)ree steps8 1) 1ata a((re(ation8 Booleo captures procurement obEecti!es at di++erent le!els in t)e or(ani5ation and consolidates billin( in+ormation across ser!ices, pro!iders and client sites' $) 1ata analysis8 sin( t)e a((re(ated billin( in+ormation +rom step 1 and t)e client;s obEecti!es, Booleo analy5es t)e data t)rou() an intelli(ent searc) and matc) process' 6) Ad!ice and action8 Based on data analysis, Booleo pro!ides !alid recommendations +or optimi5in( telecom procurement' Clients can t)en act con+idently upon t)is ad!ice' Features and %enefits Current client situation Ma!eric3 spendin( on telecom ser!icesDe@uipment %ooleo product feature=s? E0penseDconsumption trac3in( at all le!elsQ centrali5ed control o!er &o easy bill2bac3 to clients; "nternal or(ani5ation customers (e(8consultin() &o centrali5ed source +or telecom resources or in+ormation 1i++icult to relate spendin( to cost pools +or acti!ity2based costin( or +orecastin( "nappropriate solutionsDser!ices +or (i!en consumption patterns 4eb2based monitorin( o+ solutionsQ Automatic :FR (eneration orders Cost trac3in( per client at employee le!el :esource library ,it) telecom contacts, ne,s, in+ormation Cost trac3in( at t)e cost2 center le!el Easy bill2bac3 process' Sa!in(s +rom accurate bill2bac3 procedure' *ime sa!in(s +rom reduced searc) time +or in+ormation Accurate mec)anism +or cost2 allocation and bud(etin( across cost2 centersDdepartmentsDlocations' Customi5edDcurrent solution at best priceQ compre)ensi!e dynamic mar3et in+ormation 5alue to clients Sa!in(s +rom cost2trac3in( and mana(ement at e!ery le!el

61

/ittle !isibility into spendin(Q impossible to compare bills across carriers, ser!ices Holuminous, E0ternal or(ani5ation incompre)ensible telecom bills Comple0 pricin( contracts Hi() percei!ed ris3 in tryin( ne, carriers or ser!ices =!ersta++ed telecom mana(ement departments

Bill a((re(ation across locationsD departmentsDcarriersDser!ices Customi5ed billin( reportsQ Easy2to2use so+t,are inter+ace Contract inte(ration into system :atin(s and re+erences

Clarity on spendin(DconsumptionQ a((re(ated !olume +or (ood ne(otiatin( Clear, rele!ant, reports +or corporate decisionsQ daily access to )andy telemana(ement tool Clarity into contract terms and implications +or re2ne(otiation Minimi5es ris3 tryin( ne, pro!idersDser!icesQ pro!ides a credible comparison plat+orm Sa!in(s +rom reducin( telecom2 related )uman resourcesQ Client can +ocus on core business

Most compre)ensi!e, online telecom mana(ement tool

0ntry and 3roAth Strategy Booleo ,ill initially tar(et companies in industries ,it) t)e )i()est telecom spendin( per +irm and t)e most compellin( need +or decision support' "ts early ac@uisition o+ se!eral lar(e, ,ell2 3no,n clients ,ill pro!ide e0cellent re+erences +or t)e company' *)e solution is bein( de!eloped as a +le0ible and scalable model and ,ill t)ere+ore be applicable to ot)er mar3ets and ser!ice cate(ories' The ar;et

Customers Alt)ou() Booleo;s !alue proposition appeals to all companies o+ all si5es, t)e relati!e !alue o+ di++erent components c)an(es ,it)in eac) se(ment, and Booleo )as identi+ied t,o di++erent client se(ments' 1' Tier )- Firms ,it) mont)ly telecom e0penditures a!era(in( ?7#%,%%% $' Tier '- Firms ,it) mont)ly telecom e0penditures a!era(in( ?1%%,%%%

6$

ar;et Si<e Large businesses (Tier 1) *)is se(ment includes mainly SG. $%%% companies spendin( more t)an ?6% billion combined on telecommunications' *)eir a!era(e annual telecom spendin( can ran(e +rom se!eral million dollars to o!er ?#%% million' Many o+ t)ese companies are implementin( e2procurement solutions and can clearly bene+it +rom t)e addition o+ a telecommunications component' "n (eneral, t)e burnin( need o+ companies in t)is se(ment is to (ain !isibility into spendin(' As a result, CF=s and Controllers are critical tar(ets +or t)is se(ment' *ier 1 companies represent appro0imately @7( bn in annual telecom spendin(' Medium-large businesses (Tier 2) A pro0y to estimate t)e number o+ companies in t)is se(ment is t)e number o+ businesses ,it) $#%2999 employees' *ar(et indi!iduals are telecom mana(ers and procurement mana(ers, but ot)er indi!iduals suc) as CF=s are also critical' Accordin( to t)e S Census Bureau, t)ere are appro0imately 7%,%%% +irms in t)is se(ment ,it) about $% million employees' Based on "1C, Ca)ners "n2Stat, and S Census Bureau data, and Booleo;s calculations, t)is se(ment represents about @'( bn in annual telecom spendin(' Belo, are estimates o+ telecommunications e0penditures +or *ier 1 and *ier $ clients8 Customer Se(ment &umber o+ +irms *otal spendin( by se(ment (?mn) A!era(e Communication Spendin( per +irm per year (?) 8( Tier ) customers are re#uired to brea;Deven1 Tier ) 9,771 ?6%,179 ?7,9C#,%6$ Tier ' 71,#9$ ?19,69# ?79#,#9%

"t is ,ort) notin( t)at telecom consultants (telecom consultin( is a lar(e and (ro,in( mar3et as outlined earlier in t)e t)esis) are also li3ely +uture customers o+ t)e Booleo ser!ice' ar;et "esearch Booleo conducted a ,eb2based @uantitati!e and @ualitati!e mar3et researc) sur!ey o+ $%% telecommunications and "* mana(ers +rom medium2si5ed companies usin( Aoomeran(' Booleo also personally inter!ie,ed o!er 6% potential clients' *)e results o+ t)e mar3et researc) con+irmed a )i() le!el o+ client interest in Booleo' 1etails o+ t)e researc) are pro!ided in Appendices A and B'

66

Competition and Competitive Advantage Competition Booleo )as identi+ied se!eral solutions in t)e mar3et t)at address !arious pieces o+ Booleo;s entire !alue proposition includin( o++line cost reduction consultants, telemana(ement +irms, telecom portals, e2mar3etplaces, and procurement so+t,are pro!iders' Booleo )as also identi+ied one company ,)ose solution resembles Booleo;s8 RuantumS)i+t' *)e barrier to entry created by RuantumS)i+t;s +irst mo!er position is @uite lo, on t)e +ollo,in( t,o accounts' For one, RuantumS)i+t;s in!estment in intellectual property protection is not !ery ob!ious at least +rom publicly a!ailable in+ormation about t)e company' Secondly, t)ey seem to be (eo(rap)ically con+inin( t)eir operations to t)e 4est Coast +or t)e present' RuantumS)i+t is discussed in (reater detail later in t)is section' Booleo o++ers a complete optimi5ation solution relati!e to t)ese ot)er solutions because it8 Aims at brin(in( process e++iciencies ,it)in an or(ani5ation at all le!els o+ t)e internal procurement and mana(ementD trac3in( c)ain "s easily implemented, especially +or clients ,it) e0istin( e2mana(ement plat+orms "s an easy to use solution ,it) minimal trainin( re@uired .ro!ides unbiased access to A// a!ailable pro!iders Fully automates A// time2consumin( tas3s and is an online, on(oin( solution Focuses on telecom auditin( ,)ile pro!idin( lon(er term strate(y2oriented ser!ices .resents accurate selectionDrecommendation o+ ser!ices based on actual consumption Primary telecom consultants *elecom consultants in t)e S pro!ide a !ariety o+ ser!ices ran(in( +rom cost reduction consultin( to net,or3 inte(ration and ,eb )ostin(' *)eir customers are businesses o+ all si5es and t)eir ser!ices are mostly o++2line, one2time, and non2dynamic, and typically do not include bill a((re(ation or consolidation'

67

Telecom Portals Many telecom portals and online telecom mar3etplaces suc) as *ele5oo and *elecomE0c)an(e )a!e emer(ed in t)e last +e, years, +allin( into t,o basic cate(ories8 auction a((re(ators and e0c)an(es' *)ese portals attempt to create e++iciencies +or )i()2end band,idt) pro!iders and customers t)rou() t)e sale and pro!ision o+ surplus band,idt)' Ho,e!er, clients ma3e c)oices ,it)out a((re(ated consumption in+ormation' Furt)ermore, almost all telecom portal sites pro!ide t)eir ser!ices +ree to buyers and (enerate re!enues in t)e +orm o+ commissions +rom pro!iders +or ne, customers s,itc)in( pro!iders, ma3in( t)em a less credible source +or unbiased in+ormation' QuantumShift RuantumS)i+t pro!ides and online solution ,it) a similar !alue2proposition to t)at o+ Booleo' "t pro!ides bill a((re(ation, net,or3 desi(n and mana(ement, billin( ser!ices, and sells telecommunications ser!ices' RuantumS)i+t )as about 9% customers and )as recei!ed o!er ?1%% million in t)ree rounds o+ +undin(' An enterprise system, RuantumS)i+t;s solution re@uires a reasonable implementation time (rou()ly a mont) +or a mid2si5ed +irm accordin( to RuantumS)i+t;s ,ebsite) includin( +ormal, in2dept) trainin(' RuantumS)i+t re@uires t)at clients completely outsource t)eir telecom departments and mana(ement to t)em' *)ou() t)is is possibly t)e ,ay o+ t)e +uture, at present client companies, especially t)e mid and lar(e2si5ed companies t)at bot) Booleo and RuantumS)i+t tar(et are not com+ortable ,it) t)e idea o+ relin@uis)in( internal control on telecommunications mana(ement to an unpro!en t)ird party' *)is +indin( is corroborated by t)e Booleo team;s mar3et researc) and customer inter!ie,s' Also, it is interestin( to note t)at t)ou() RuantumS)i+t )as been in business +or 6 years, probably due to t)eir outsourcin( re@uirements and moderately )i() subscription +ees (?$#%% to ?1#,%%% per mont) +rom t)e RuantumS)i+t ,eb site), t)ey )a!e no name brand clientele' A detailed table o+ percei!ed potential competition is in Appendi0 C1' apping the competitive environment *)e +ollo,in( +i(ure describes t)e competiti!e mar3et en!ironment as !ie,ed t)rou() t)e process o+ purc)asin( telecommunication ser!ices and ,it) respect to t)e players ,it)in t)e mar3et' *)is s)o,s t)at t)e Booleo solution co!ers t)e bill a((re(ation and analysis, and t)e optimi5in( purc)ase order parts o+ t)e process' Booleo;s solution ,ill also co!er t)e des3top

6#

re@uisitionin( part o+ t)e process and it can potentially be inte(rated ,it) e0istin( solutions suc) as Ariba or Commerce=ne' A map o+ t)e supply c)ain can be +ound in Appendi0 C$' *)e matri0 belo, attempts to map competition as percei!ed by Booleo8

69

Optimi0ation o- procurement

Booleo

eMarketplaces Telecom *#, $ortals 5BM AT6T MC5

,uantumShi-t

Teletron C7!Cs Telemanagement -irms Call8ision !docs

*BOCs

$rocess e--iciencies
Sources of Competitive Advantage )1 !atent !rotection 2 Booleo )as +iled a business process patent t)at ,ill pro!ide intellectual property protection to t)e solution' *)e patent ,ill also co!er t)e so+t,are de!eloped +or t)e +ull launc) e0pected in mid2$%%1' *)e patent )as been +iled ,it) 4ol+, >reen+ield, and Sac3s B t)e premier intellectual property la, +irm in Boston, MA' Claims on t)e patent ,ill be ,ritten a+ter t)e +ull so+t,are is de!eloped since t)is ,ill pro!ide more compre)ensi!e protection and be more attuned to t)e +unctionality built into t)e product' *)e le(al cost +or ,ritin( t)e claims is estimated at ?$#,%%%' '1 !roprietary softAare 2 Booleo is currently desi(nin( proprietary so+t,are t)at ,ill be co!ered by t)e business process patent' Since t)e +unctional scope and lo(ic o+ t)e product are uni@ue, t)ere ,ill be minimal usa(e o+ o++2t)e2s)el+ so+t,are to build t)e +ull solution' *)is ,ill also ensure t)at t)e product is )ard to replicate and t)ereby pro!ide a stron( barrier to entry' *)e lo(ic +or t)e analysis o+ telecom bills is bein( care+ully desi(ned usin( t)e input (i!en by Booleo;s telecom consultin( partners' 71 High sAitching costs for customers B >i!en Booleo;s access to all client telecom bills, a client lea!in( Booleo +or a direct competitor ,ould +ace t,o maEor issues8

*)e loss o+ all pro+ilin( and consumption in+ormation and Booleo analysis8 *)is is per)aps t)e most serious implication +or a client ,)en s,itc)in( to a competitor o+ t)e

67

Booleo solution' 4)ile t)e Booleo client continues to o,n t)e billin( in+ormation recei!ed +rom carriers, all t)e analysis +rom t)e consolidated bills ac)ie!ed t)rou() usa(e o+ t)e Booleo solution o!er time belon(s to Booleo, and ,ill be lost to t)e client i+ t)ey c)oose to s,itc) to a competitor' >i!en t)e use+ulness o+ t)is )istorical in+ormation and t)e e0pense and time in!ol!ed in accumulatin( it, Booleo anticipates t)at t)is ,ill create )i() s,itc)in( costs +or its clients' =ur mar3et researc) re!eals t)at client companies are una,are o+ any competitors to Booleo today' >i!en t)is situation and t)e +act t)at potential competitors are unli3ely to come ,it) lo, e0it barriers t)emsel!es, it is probable t)at clients ,ill be inclined to si(n up ,it) Booleo, +ully a,are o+ t)e s,itc)in( costs' "t ,ould be ad!anta(eous +rom t)is standpoint +or t)e customer to si(n a lon(2term (62years or so) contract ,it) Booleo' Suc) a contract ,ill ser!e as a credible commitment on Booleo;s part to not raise prices and e0ploit t)e customer;s )i() s,itc)in( costs'

*)e lo(istical and le(al o!er)ead o+ re2routin( all telecom bills8 *)ere is si(ni+icant le(al and lo(istical o!er)ead in!ol!ed in re2routin( telecom bills +rom carriers to a Booleo competitor' *)is o!er)ead increases ,it) t)e si5e o+ t)e client, t)eir (eo(rap)ical dispersion, and t)e number o+ telecom carriers used by t)em'

>i!en t)e unprecedented !alue t)at Booleo ,ill pro!ide its customers, it is con+ident o+ maintainin( an e0cellent client retention record' 81 Capitali<ing on early mover advantage by loc;ing customers in 2 Hery +e, competitors co!er all elements o+ Booleo;s e0tensi!e !alue proposition' As a result, it is a !ery early mo!er in t)e telecommunication procurement space' Booleo ,ill o++er t)e ser!ice in a p)ased manner ,it) ne, and modular ser!ices added in eac) p)ase t)at pro(ressi!ely increases t)e !alue proposition and credibility ,it) clients' *)e )i() e0it cost +or e0istin( clients )elps Booleo capitali5e on its early mo!er ad!anta(e and translates it into a competiti!e ad!anta(e'

6C

21 ClientDside credibility 2 Fe, competitors to Booleo are client2sided and earn all t)eir re!enue +rom clients instead o+ pro!iders' Companies t)at resell ser!ices and partner ,it) pro!iders to earn transactional s,itc)in( re!enues undermine t)eir credibility as client2side procurement a(ents' Booleo is a client +ocused, unbiased a(ent' E1 UserDfriendly solution 2 Booleo )as in!ested )ea!ily in ma3in( t)e solution user2+riendly' *remendous attention )as been paid to t)e desi(n o+ t)e ,eb inter+ace +or end2users' Se!eral +eatures t)at ma3e t)e site user2+riendly suc) as minimi5in( t)e number o+ clic3s to access data, color codin( o+ di++erent +unctions, na!i(ation t)at is easy to master and remember, (rap)ical representation o+ data ,)ere applicable etc' )a!e been incorporated' *)ere is minimal user trainin( re@uired to be(in usin( Booleo' Suc) a solution, accessible to indi!iduals and companies o+ all tec)nical abilities, pro!ides Booleo ,it) a tremendous mar3et ad!anta(e'

The 0conomicsFFinancial !rospects "evenue odel

*)e Booleo re!enue model is based on a multi2part tari++' 1) =ne2time, set2up +ee based on t)e comple0ity o+ t)e client;s current telecom solution and a percenta(e o+ t)e proEected sa!in(s to be brou()t to t)e client (+lat +or *ier 1 clients) $) Flat mont)ly subscription +ee based on t)e company;s le!el o+ mont)ly telecom e0penses 6) .er2use +ee +or detailed recommendation and pricin( reports (mainly *ier $ clients) *)is leads to ?$1'% million in re!enues, 1%% subscribers, and brea3e!en in $%%$' Pricing Clients ,ill be c)ar(ed a one2time setup +ee and a +lat mont)ly subscription +ee' *)is allo,s t)em to access t)e secure client ,ebsite and )a!e unlimited access to all in+ormation re(ardin( t)eir telecom accounts as ,ell as in+ormation rele!ant to t)eir ser!ices' 4)ile customers ,ill be c)ar(ed per use +ees +or detailed recommendation and pricin( reports, +eatures suc) as t)e :FR (enerator ,ill be accessible at no e0tra c)ar(e' Additional +eatures to be added in later !ersions may incur additional c)ar(es' Client Set2up +ee Tier ) ?#%%,%%% on Tier ' Appro0' 6%< o+ proEected 1#< sa!in(sD appro0'

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Mont)ly subscription

a!era(e ?$%,%%%

?$%,%%% ?1,#%%

*or %ier 0 customers only$ 123 savings assum+tion: :e!ie,s o+ bills one o+ Booleo;s beta clients and current pro!ider o++erin(s su((est a sa!in(s o+ up to 6%<' Cost reduction consultants and RuantumS)i+t also claim to o++er up to 6%< sa!in(s' 4)ile ,e are con+ident t)at Booleo can be e@ually i+ not more attracti!e to clients in terms o+ sa!in(s compared to our competitors, ,e )a!e opted to be conser!ati!e in our proEected +inancials presented to in!estors ,)ere ,e assume a sa!in(s o+ only 1#< (i'e', minimum sa!in(s ac)ie!able)' /perating argins

Booleo;s re!enue model is based on +ees +rom customers, leadin( to pre2ta0 mar(ins around 6%<' *)e table belo, s)o,s detailed +inancial proEections +or Booleo8 *elecom E0penses under Mana(ement &umber o+ subscribers *ier 1 *ier $ Total "evenues Salaries S,>GA Net Income Mar(in Fixed, 5ariable, and SemiDvariable Costs Booleo;s +i0ed costs include so+t,are de!elopment, ser!ers and )ostin(, content ,ritin(, pricin( database +illin( and maintenance, o!er)ead salaries, (eneral e0penses and )ead@uarters e0pense' Hariable costs per client include customer ac@uisition cost (sales and mar3etin(), stora(e, content !eri+iers and customer support' *)e cost brea3do,n per client se(ment per subscriber is presented in appendi0 E' onths to %rea;even Booleo s)ould brea3 e!en by t)e end o+ $%%$ pro!ided it recei!es +undin( by Fanuary $%%1' "ts mont)s to brea32e!en are comparable to its mont)s to cas) +lo, brea32e!en since its assets are not typical assets depreciated o!er time and its ,or3in( capital re@uirements are e0pected to be stable o!er time (clients pay mont)ly)' '(() 7 19 1,C$% 777 ','E8 #,$91 7,7#C =:,892? 2661< '((' 69 1%9 17,9#$ 6,%7C '),('6 16,6%C 9,7$1 ),7() 9< '((7 1%% $76 6#,1%% 9,967 8',(78 $$,7%$ #,%$9 6,29E $6< '((8 $%9 ##C 7$,#C% 16,$$6 92,9(7 6C,7$1 9,6$7 '2,2(( 6%<

7%

ar;eting !lan ar;eting Strategy >i!en t)e )u(e opportunity +or increasin( e++iciency in telecom e0pense mana(ement processes and t)e !ariety o+ solutions a!ailable today, Booleo must clearly e0plain t)e problems it sol!es and )o, it sol!es t)em' *)e e0istin( con+usion about telecommunication ser!ices, ,)ile creatin( a tremendous opportunity +or Booleo, also ma3es it )arder +or Booleo to di++erentiate itsel+ clearly +rom alternate solutions' Booleo must raise brand a,areness o+ its product and ser!ices, ma3in( its messa(e as clear and simple as possible' As a result, t)e +irst step o+ t)e Booleo mar3etin( strate(y is customer education and t)e creation o+ mar3et demand' Education 4eb seminars8 Booleo ,ill o++er ,eb seminars to demonstrate Booleo to a tar(eted audience o+ telecom mana(ers and CF=s' 1emos8 Booleo;s ,ebsite +eatures an easy2to2understand demo, illustratin( Booleo;s clear and lo(ical user inter+ace' *)is demo ,ill be critical in attractin( clients to si(n2up +or ser!ice' *elemar3etin(8 *)e Booleo telemar3etin( sales +orce ,ill use t)e demo ,it) potential clients' Con+erences8 Booleo also intends to ma3e presentations at popular telecommunications2related con+erences t)at are attended by telecom procurement mana(ers +rom our tar(et mar3et' "n t)is re(ard, it is ,ort) notin( t)e Fosep) Nacura (Booleo Ad!isory Board Member and Board Member o+ t)e 4all Street *ec)nolo(ies Association) )as o++ered t)e Booleo team presentation opportunities at t)e upcomin( )al+2yearly con+erence o+ telecom mana(ers +or 4all Street companies in &e, Nor3' Suc) a !enue pro!ides an ideal sales plat+orm +or Booleo' rand a!areness :e+erence customers8 .ublic !isibility is essential to buildin( a positi!e reputation and a client base, so Booleo ,ill +ocus initially on ac@uirin( *ier 1 clients to ser!e as re+erences +or sellin( to *ier $ clients' .artners)ips8 Booleo intends to partner ,it) a +inancial institution t)at )as access to CF=s' *)is ,ill raise a,areness on Booleo by le!era(in( t)e partner;s telemar3etin( sales +orce and its direct mail e++orts' 4eb mar3etin(8 Booleo;s ,eb mar3etin( strate(y is mainly to tar(et sites and portals pro!idin( e2mana(ement plat+orms suc) as Ariba portals, or e2procurement plat+orms suc) as Mar3etMile'

71

Articles8 Booleo ,ill publis) ,)ite papers and articles t)at clari+y its competiti!e positionin(' Qualified leads *ar(et list o+ customers ,it) e0istin( e2procurement solutions8 Booleo ,ill try to use t)e net,or3 e++ect created by e0istin( e2procurement systems and ,ill tar(et t)ose customers t)at already )a!e t)ese solutions in place at t)e outset' "t ,ill try to sell its ser!ices as an add2on to an e0istin( Ariba or Commerce=ne plat+orm' *)e Booleo team )as (ained !aluable introductions to Ariba t)rou() its ad!isory board members, but considers it too early to act on t)ese leads (i!en t)e early sta(e o+ t)e company' :e+errals +rom partners and e0istin( customers8 Establis)ed partners)ips ,ill also )elp (enerate @uali+ied leads' "n addition, e0istin( customers ,ill be (i!en incenti!es to pro!ide re+errals to Booleo' Sales and $istribution Booleo;s sales strate(y ,ill be closely tied to its mar3etin( initiati!es' Booleo percei!es understandin( o+ customer needs and ensurin( customer satis+action as critical to its success' As a result, a direct sales model pre!ails in its sales and distribution strate(y' *)ere are also t,o distribution c)annels t)at could, )o,e!er, increase t)e e++iciency o+ t)e Booleo sales model' "irect sales force# 1 deal a !ee$% &'-day sales cycle Booleo;s direct sales +orce is critical to establis)in( KpersonalL relations)ips ,it) clients and ,ill be used primarily +or tar(etin( *ier 1 clients' An inbound sales +orce ,ill support in@uiries (enerated by ad!ertisin( and promotions, and ,ill +ield inbound calls and ,eb re@uests' "nitial sales e++orts ,ill be conducted out o+ t)e Boston location, but e!entually Booleo ,ill open re(ional sales o++ices'

7$

"istribution channel 1# (onsultants Booleo ,ill also partner ,it) telecom consultants and net,or3 desi(n consultants on a re+erral or success +ee basis' Consultants suc) as Art)ur Andersen, .4C or 1eloitte t)at are currently in!ol!ed in telecom and ot)er cost2cuttin( consultin( ,or3 ,it) clients can use t)e Booleo solution to t)eir ad!anta(e' *)e automated solution can +acilitate data analysis and minimi5e t)e labor2intensi!e aspects o+ t)eir ,or3' Since t)eir sales models are )ea!ily +ocused on direct contact ,it) e0istin( and potential clients, t)eir e0istin( relations)ips ,ill be an asset to Booleo' "+ pro!ided stron( re!enue2s)arin( incenti!es, t)ese partners could (enerate si(ni+icant sales +or Booleo' "istribution channel 2# )ac$age ooleo !ith an e*isting e-)latform ltimately, clients li3e to implement one solution t)at ta3es care o+ all o+ t)eir non2core purc)ases and mana(es all related processes' Booleo, respondin( to t)is trend, and t)an3s to its open arc)itecture, can be included in suc) a pac3a(e (li3e Ariba) attendin( to all procurement and process mana(ement needs' Technology, $evelopment, and /perations $evelopment Status and Schedule *)e Booleo team created and !alidated t)e Booleo process +lo, and tec)nical arc)itecture ,it) se!eral ,eb desi(n +irms and t)e tec)nical talent on t)e Ad!isory Board' *)e emp)asis )as to been create a )i()ly open arc)itecture t)at is desi(ned to be Ariba2compatible' *)e prototype ,it) representati!e +unctionality )as been de!eloped and t)e Booleo team is currently in t)e process o+ testin( it ,it) beta clients' *)e prototype de!elopment ,or3 ,as out2sourced to *an3 Hill, a San Francisco de!elopment +irm and ,as completed at a cost o+ around ?$#,%%%' Booleo is in t)e process o+ recruitin( a +ull2time C*= and ,ill de!elop t)e +ull solution under )isD)er (uidance in2)ouse' *)e de!eloped so+t,are ,ill be proprietary to Booleo and ,ill be co!ered by t)e pendin( patent' A+ter obtainin( additional +undin(, +ull product de!elopment ,ill be initiated (e0pected to be around 1ecember $%%%)' So+t,are de!elopment and @uality testin( is e0pected to ta3e 7 to 9 mont)s and +ull launc) o+ t)e product is planned +or mid2$%%1' *)e +ull solution is e0pected to cost around ?$ million' *)e Booleo process +lo, is a cycle o+ t)e +ollo,in( t)ree steps8

76

1' E0traction, a((re(ation, and normali5ation Booleo ,ill e0tract telecom consumption2related in+ormation +rom di++erent le!els (employee, cost center, and telecom mana(ement le!els) t)rou() an online re@uisitionin( system' *)e procurement obEecti!es and contractual details ,it) current pro!iders ,ill be a((re(ated across t)e di++erent sites o+ t)e company to dri!e optimi5ation in procurement' =n t)e billin( side, all client bills obtained +rom t)e clientDpro!ider ,ill be translated into a standard electronic +ormat' Bot) pieces o+ in+ormation (bills and procurement obEecti!es) constitute t)e client +rofile information' Finally, pricin( plans +rom pro!iders obtained dynamically +rom +irms li3e t)e Center +or Communications Mana(ement (CCM"), ,eb2sites, online mar3etplaces, t)e FCC, or t)rou() :F.s, ,ill be a((re(ated into a repository' $' "ntelli(ent multi2criteria searc)2matc) analysis Client pro+ile in+ormation ,ill be matc)ed ,it) Booleo;s dynamic database o+ pro!iders; current ser!ices and prices' *)is ,ill result in customi5ed procurement recommendations' By (oin( do,n to t)e employee le!el in +uture !ersions, t)e @uality o+ analysis o+ t)e Booleo en(ine is !astly impro!ed' At t)e cost center le!el, t)e client or(ani5ation can deri!e bene+its +rom call bill2bac3 re!enues as ,ell as bein( able to identi+y employees t)at )a!e le+t t)e company and ,)ose telecom ser!ices need to be terminated' 6' Ad!ice and recommendations Booleo can pro!ide t)e client ,it) procurement recommendations and +inite action steps +or impro!in( t)e current telecom solution and +or rene(otiatin( contracts ,it) pro!iders' A dia(ram o+ t)e tec)nical arc)itecture mappin( t)e Booleo process +lo, is a!ailable in Appendi0 F' /verall Schedule *)e Booleo team )as e0ceptional e0ecution s3ills and )as ac)ie!ed si(ni+icant milestones to2 date' *)e sc)edule o+ acti!ities is presented in t)ree p)ases based on ,or3 completed be+ore an(el +undin(, ,or3 completed bet,een t)e +irst and ne0t rounds o+ +undin(, and ,or3 t)at ,ill be initiated and completed a+ter suc) +undin( is obtained'

77

Fun din g yyyy mn y y

!hase I

y has e yy

yuild beta system Launch complete y beta customers secur ed Run yyy infrastructure desig ned pilots solution Recruit yTy and yatent filed Recruit full team yyy ted Value proposition valida yonsolidate yon with over yy prospects an d duct additional customer base qualitative and a maryet research (yyy yuild distribution quantitative maryet respondentsy partnerships research yuilding advisory board

y has e yyy

ypr to m id yy u g yyyy (yompl et ed y

y id yy u g to Nov yyyy yt art in g D ec yyyy yosty yyyyyyyy

*)e main uses o+ +unds raised bet,een p)ases $ and 6 are outlined belo,' 1' Full product launc)8 Booleo intends to )a!e t)e +ull product built in2)ouse ,it) t)e de!elopment lead by a C*= and a team o+ de!elopers' *)e core product de!elopment is e0pected to ta3e about t)ree mont)s' $' /ar(e2scale recruitin( to +ill senior e0ecuti!e and ot)er positions8 =ne o+ t)e main +ocus areas in p)ase 6 ,ill be recruitin( to +ill t)e many core positions in t)e company' A possible +uture or(ani5ation c)art +or Booleo is presented in Appendi0 1' 6' Establis)in( client base8 Booleo ,ill ,or3 on solidi+yin( its client base' *)e e++ort ,ill be (eared to,ards sellin( to lar(e, re+erence clients' 7' Establis)in( distribution partners)ips8 1istribution c)annels t)rou() national +inancial +irms, supplies companies, and a++iliate net,or3s on t)e ,eb ,ill be establis)ed' "ncenti!e strate(ies to dri!e customer ac@uisition ,ill be de!eloped and implemented' /perations *)e operations speci+ic to eac) o+ t)e 6 process steps are detailed belo,8 Ste) 1# "ata aggregation *)e Booleo system ,ill a((re(ate and maintain data +or t)e +ollo,in( repositories8

7#

a) Billin( :epository8 Contains all t)e billin( in+ormation +or clients obtained +rom consolidatin( t)eir bills +rom di++erent pro!iders and locations' b) *ec)nical Solutions :epository8 Contains in+ormation on +easible and current tec)nical telecom solutions pertinent to Booleo;s clients' c) .ricin( .lan :epository8 Contains all dynamic mar3et in+ormation on pro!iders; pricin( plans' d) Customer .rocurement =bEecti!es :epository8 Contains eac) client;s stated procurement obEecti!es at di++erent le!els ,it)in t)e client or(ani5ation' e) .ro!iderDSer!ice :atin(s :epository8 Booleo ,ill o++er clients access to a ratin(s database ,)ere t)ey can enter and !ie, ratin( in+ormation on pro!iders and ser!ices' Ste) 2# +nalysis *)e searc) and matc) en(ine is an intelli(ent en(ine t)at pulls to(et)er inputs +rom t)e +i!e repositories, namely a((re(ated billin(, tec)nical telecom solutions, pricin( plans, procurement obEecti!es, and carrier ratin(s' *)e output is a list o+ recommendations t)at t)e client can !ie,' Ste) ,# +d-ice./ecommendations 4)en t)e client selects a recommendation +rom t)ose listed, a display o+ some o+ t)e supportin( in+ormation ,ill be made a!ailable' At t)is point, t)e client can also re@uest a more detailed recommendation report +rom Booleo t)at ,ill be c)ar(ed and pro!ided on a per re@uest basis'

79

Conclusion
"n summary, ,e present t)e )i()li()ts o+ eac) o+ t)e +our sections o+ t)is t)esis' At t)e outset, ,e embar3ed on a mar3et sur!ey o+ telecommunications mana(ers at S companies' *)e sur!ey results clearly pro!ed t)at telecom mana(ers ,ere +indin( ser!ice and e0pense mana(ement increasin(ly comple0 and t)at t)ey ,ould ,elcome an unbiased, t)ird party to )elp t)em in t)ese tas3s' *)e dere(ulated and dynamic telecom en!ironment, comple0 telecom bills, and t)e (eo(rap)ical dispersion o+ client companies ,ere all +actors t)at contributed to t)e c)allen(e o+ mana(in( telecommunications +or lar(e businesses' >ainin( !isibility into consumption and t)ere+ore costs )as assumed critical importance at t)ese businesses (i!en t)e increasin( reliance and e0penses on telecommunications +or any +irm' "n section t,o, ,e used a case study o+ telecom mana(ement at Manuli+e Financial to pro!ide a real2li+e e0ample o+ t)e issues discussed in t)e prior section' .rocess redundancies, labor2 intensi!e e0pense mana(ement tas3s, and +rustrations in carrier dealin(s ,ere amon( t)e main problems re!ealed by analysis o+ t)is case' "n t)e t)ird section, ,e loo3ed at t)e concept o+ supply c)ains in ser!ice settin(s and t)e role o+ in+ormation +lo,s +acilitated by tec)nolo(ical ad!ances suc) as t)e "nternet +or ser!ice supply c)ains' *)e telecommunications ser!ice supply c)ain ,as t)en analy5ed in detail, speci+ically in t)e conte0t o+ S businesses rat)er t)an consumers as end2customers' All t)e di++erent se(ments o+ t)e telecom supply c)ain, t)e players, competition, and in+ormation +lo,sD(aps ,ere discussed' *)is e0ercise re!ealed t)e potential opportunity +or a ne, ,eb based ser!ice t)at ,ould ser!e primarily lar(e business clients and +ill many o+ t)e in+ormation (aps percei!ed earlier in t)e section' *)e +ourt) and +inal section ,as a detailed business plan to implement t)e ,eb2based ser!ice B Booleo, introduced as a concept at t)e end o+ section 6' *)e !alue proposition o+ t)e business, mar3et potential and si5e, sales and mar3etin( models, re!enue model and +inancials, operations and tec)nolo(y ,ere all presented in t)is business plan section' Alt)ou() t)e problems +acin( S businesses in mana(in( telecommunications ser!ices and e0penses are real and comple0, t)ey also present si(ni+icant cost2sa!in( opportunities to t)ese companies ,)en usin( Booleo;s solution'

77

A!!0N$IC0S-

Appendix Aq

ar;et "esearch

Booleo conducted a ,eb2based mar3et researc) sur!ey (usin( t)e mar3et researc) +irm Aoomeran() ,)ere $%% respondents (all telecom mana(ers or people responsible +or purc)asin( telecommunication ser!ices at medium si5ed companies) ans,ered @ueries pertainin( to telecom mana(ement'

v "n (eneral, )o, di++icult you t)in3 it is to understand di++erent tec)nical telecommunication solutions (e0ample8 1S/ !s *1, "nterstate !s "ntrastate, local area, analo( !s di(ital, ,ireless co!era(e, call centers, H.&, +rame relay etc')S 8ery !asy
7G ''G 8'G '9G

5ery $ifficult

2G

v 1o you t)in3 unbiased )elp is re@uired to ma3e in+ormed decisions about t)e best telecommunication solution +or your businessS 9es No
)(G

6(G

v Ho, di++icult do you t)in3 it is to clearly understand t)e pricin( o+ telecom solutions pro!ided by telecom carriers suc) as A*G*, Sprint, MC", R,est etc'S 8ery !asy
EG '2G 72G '2G

5ery $ifficult

9G

7C

v 1o you t)in3 unbiased )elp is re@uired to compare t)e #uality and price o+ di++erent telecom carriers +or your businessS 9es No
'8G

:EG

v Ho, many *elecom carriersD pro!iders do you t)in3 t)ere are in t)e mar3et t)at are able to pro!ide your business ,it) its current telecom solutionS

7ess

'6G 7(G

than .

Bet4een . and %< Bet4een %< and 2< )9G More One than 2< T4o Three #our
'G )(G

''G
'2G

'9G

'6G

#ive
EG

More than -ive

v Ho, many telecom carriers currently pro!ide your business ,it) t)e di++erent telecommunication solutions re@uired to do business (data communications, lon(2distance, local, call center, mobile p)one, toll +ree numbers etc') Three T4o v 4)at ,ould you t)in3 o+ a sin(le bill a((re(atin( all your telecom carriersD ser!ices eac) mont), t)at ,ould be sent to you electronicallyS ;ot :se-ul
EG )(G ':G '2G

8ery :se-ul

77G

79

v Select ,)at ratin( comes closest to best describin( )o, you +eel about t)e described ser!ice'
7G 9G 88G 72G

;ot :se-ul

8ery :se-ul

))G

v .lease rate t)e +eatures belo, in importance to you' /ist o+ top items +ound K!ery important'L
:2G E:G E8G E)G 26G 2:G 2)G

#air market price Checking past 2ills Customi0ed technical advice

Bill Aggregation Bill Aggregation

Carrier *atings Contract re=negotiation Client re-erences

#air market price v =!erall, )o, interestedContract are you to buy t)is ser!ice i+ itIs a!ailableS Client re-erences re=negotiation Customi0ed technical Carrier *atings Checking past 2ills
)'G ):G '2G 76G

;ot 5nterested

!(tremely 5nterested

9G

#%

Appendix %- Huotes from !otential Clients and !artners !otential Client or !artner $ean Haac;er 1irector, B$B Mobile Commerce, otorola "esponse 4Managing monthly )ills is a great idea( It is a real headache and not much is ha++ening to su++ort )usinesses( A tool to more strategically manage recurring e5+enses is more valua)le than 6ust finding the lowest cost((( I thin7 you have the right timing and the right $avid inori conce+t(8 49ur +rocurement o)6ectives are not focused only on +rice( ,e are equally if not more interested in +rocurement advice and +rocess efficiency(8 4I need su++ort when ma7ing a telecom decision$ someone who would )ring decisions to the last mile$ and +ut together all the information to ma7e the right decision( I want to avoid having to gam)le when com+aring different +ricing structure and 7now what are the most a++ro+riate $on $BAvignon, *elecom .rocurement Mana(er, American E0press %ill "eed, Corporate 1e!elopment E0ecuti!e, Sprint "ichard Alston, Former Head o+ Mar3etin( at %ell Atlantic A*G* Account Mana(er, $igitas telecom services for my firm(8 4:ou have chosen a sweet s+ot in the telecom industry that has tremendous +otential(8 4#roviders are always loo7ing to e5+and their distri)ution networ7 and will )e more than willing to +rovide accurate +ricing information through channels li7e the consultantliaison +rogram(8 4All ma6or telecom +roviders today issue electronic )ills and it should )e easy for you to gain access to this information(8 4%he cost of losing a customer is 6ust infinite( It cannot )e com+ared to anything$ and any +rice to retain a customer is worth it(8

S *elecom Mana(er, anulife Financial ichael orris "* Mana(er, Iolf, 3reenfield and Sac;s

#1

8ery 'i--icult

Appendix C)- %ooleoBs Competition and Competitive Analysis

Firms (012(E =n(oin( =nline Solution %ooleo RuantumS)i+ t *eletron =mnic)oice Call!ision *elecompare S,i+t :i!er 4inbill Cymbia StoneHouse *elcoe0c)an (e *ele5oo 1ecide Simple0ity Buy*elco *elecom:FR *elcoonline =n!ia Essentials 1emandline *elep)one A"> *elecom J J J J J J J J J J J J J J J J J solution J J J J Customi5 &eutrali Sells ed solution J J J J J J J J J J J J J ty J J J J J J J J J J J J J J J J Ser!ices J J J J J J J J J Bill on J J J J J J J J J J J J J J J J Contract on J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J *ec)nical &et,or3 desi(n

A((re(ati rene(otiati ad!ice

Firms

Time

Price

(omments

#$

.rocess e++iciency %ooleo RuantumS)i+t

=nline Billin(

Bill Auditin(

.ricin( ad!ice

Sells telecom

:e!enue Model

e@uipment T Subscription and T transaction2based Subscription +ee (?$,#%% to ?1#,%%%) .aid as telecom consultants *ransaction2based U so+t,are So+t,are purc)ase so+t,are solution U telecom consultants So+t,are purc)ase so+t,are solution AS. .aid as telecom consultants *ransaction2 or +ee2based Fees +rom pro!iders *ransaction2 or +ee2based *ransaction2 or +ee2based *ransaction2 or +ee2based Uso+t,are Band,idt) 1atacommunication U :FR 1atacommunication U :FR A tradin( )ub 1atacommunication U :FR 1atacommunication U :FR 1atacommunication U :FR 1atacommunication U :FR .oolin( .oolin( auctionD comparison bidsD sales U .oolin(

*eletron =mnic)oice Call!ision *elecompare S,i+t :i!er 4inbill Cymbia StoneHouse *elcoe0c)an( e *ele5oo 1ecide Simple0ity Buy*elco *elecom :FR *elcoonline =n!ia Essentials 1emandline *elep)one

J J J

J J

T J

T J J

Consultin(

J J J J J J J

J J J J J J J J J J J J J

J J J J J J J J J J J

J T T T T J J T J T J J J T

J T T J T J J

Fees +rom pro!iders *ransaction2 or +ee2based *ransaction2 or +ee2based *ransaction2 or +ee2based *ransaction2 or +ee2based

#6

A"> *elecom

*ransaction2 or +ee2based

.oolin(

Firms

/is$ 1ther Minimi5e .ro!ider Custome .atent s s,itc)in( ris3 ratin(s r e T T T re+erenc process

A!era(e ar

*ar(et

Si5e

/ocation

protected (ro,t)Dye

%ooleo RuantumS)i+t

ediumDsi<ed $# < in Dmont) sales U1%%< per year

%oston,

businesses Mid2 to lar(e2si5ed 7% clients a!(' &o!ato, CA U9 eac) mont) Small to lar(e Businesses House)olds, but soon to businesses Carriers *elecom consultants and mana(ers Businesses Businesses Mid2 to lar(e2si5ed businesses *elecom carriers and lar(e companies' Small to medium Businesses Anyone Businesses Businesses Bloomin(ton, "& 4ayne, .A Seattle, 4A &H

re!enues businesses *eletron T T T T

=mnic)oice Call!ision *elecompare S,i+t :i!er 4inbill Cymbia StoneHouse *elcoe0c)an( e *ele5oo 1ecide Simple0ity Buy*elco *elecom :FR *elcoonline

T T T

T T

T T

T T T T

T T T T

T T T T

T T

4alnut Cree3, CA Austin, *1allas, *HA

T T T T T T

T T T T T T

T T T T T T

T T T T T T

Arlin(ton, HA Santa Clara, CA Herndon, HA 4as)in(ton, 1C

Small to lar(e Businesses

A(ency a(reements

Seattle, 4A

#7

,it) carriers =n!ia Essentials 1emandline *elep)one T T T T T T T T T T T T T T T T Small Businesses Businesses Small Businesses Anyone 77# employees Burlin(ton, MA San Bruno, CA Atlanta, >A Seattle, 4A

Appendix C'- The telecom services supply chain

%ills received from carriers electronically %ill $isaggregation %ill Aggregation Internal Cost anagement %illing

$es;top "e#uisitioning

%ill Analysis

/ptimi<ed !urchase /rder

Telecom service

NetAor; $esign

Information collection

/nDgoing consumption Information profile upDdate standardi<ation %ooleo

Service $elivery

##

Appendix $- /rgani<ation *)e +ollo,in( is a possible or(ani5ation c)art +or Booleo in $%%1'

#9

8ery 'i--icult

Appendix 0- "evenues and costs per subscriber Segment Tier ) &umber o+ subscribers A!era(e set2up +ee A!era(e mont)ly subscription +ee .er usa(e +ees per year *otal re!enue per subscriber e0cl' set2up +ee Cost per sales person Cost per Customer ser!ice rep' Cost per recommendation c)ec3 =!er)ead (includin( mar3etin( G installation) *otal Cost per subscriber Tier ' &umber o+ subscribers A!era(e set2up +ee A!era(e mont)ly subscription +ee .er usa(e +ees per year *otal re!enue per subscriber e0cl' set2up +ee Cost per sales person Cost per Customer ser!ice rep' Cost per recommendation c)ec3 =!er)ead *otal Cost per subscriber '(() 6 #%%,%%% $%,%%% % $7%,%%% C1,666 1C,%9C n'm' $,197,$9$ '((' $9 #%%,%%% $%,%%% % $7%,%%% 1%,717 1,79% n'm' 697,9%$ '((7 9# #%%,%%% $%,%%% % $7%,%%% 9,$#9 719 n'm' 197,9C% '((8 17$ #%%,%%% $%,%%% % $7%,%%% 6,199 6$C n'm' 1$9,$C9

17 19,7$9 1,#%% $,%%% $%,%%% 17,999 $,79C $16 197,#C6

C6 $1,$7C 1,#%% $,%%% $%,%%% 6,997 #9% $16 9$,1C7

$%C $1,C97 1,#%% $,%%% $%,%%% #66 C9 $16 1$,%7$

719 $6,C99 1,#%% $,%%% $%,%%% #C7 79 $16 9,997

#7

Appendix F- Technical Architecture $iagram for %ill Aggregation and Analysis

Electronic bills on C1DFloppy

Email

Bill E0traction, &ormali5ation, and A((re(ation

Bill :epository

*elecom :atin(s :epository

*elecom E!aluator

Secure 4eb site .ricin( plans on C1DFloppy

Intelligent "ecommendation 0ngine

Automated S,itc)in( Module

Email :esponse to :FR

.ricin( plan E0traction, &ormali5ation, and A((re(ation

.ricin( plan :epository

.rocurement =bEecti!e :epository

Client .ublic 4eb site

#C