Testing

Tag: Capex

  • Introducing ROC Asset Assurance

    Introducing ROC Asset Assurance

    Your network has a story to tell you about wasteful Capex practices which are likely reducing your Return on Capital.   If you are like most Operators, you may not be listening.

    Much of the Telecom Industry’s recent focus has been placed on CEM and related analytics.  Certainly, customer acquisition and retention programs are critical as these drive revenue.   Network augments and migrations to new technologies are an unavoidable “price to pay” and the lion’s share of management’s attention is placed on squeezing as much revenue traffic onto pipes and spectrum as possible.

    Trouble is, EBITDA margins are being squeezed for reasons that I’m sure you are all too familiar with.  Amongst many Operators with whom Subex has spoken recently, there is a growing recognition that network costs must be better managed, but also a frustration that lack of visibility and insights undermine the ability to do so.

    As I said, your network has a story to tell you—in fact, many stories.  What’s more, it will give you critical information that your ERP or Asset Tracking system simply can’t.  Without this information, your ability to optimize Capex throughout the asset lifecycle can be significantly eroded.

    Can you answer:

    Where are my assets?

    ERPs are important for managing vendor relationships, driving supply chain process and tracking warehouse inventory. Once an asset leaves the warehouse, responsibility for tracking and managing the asset typically shifts to technical OSS’s (e.g. Network Inventory).  Data quality within technical OSS’s is notoriously poor.  As a result, assets can become stranded, under-utilized and/or lost.   Consequently, Operators spend Capex that could otherwise be avoided if existing assets were effectively harvested and redeployed.

     

    The Asset Lifecycle and Relative Positioning of ERPs vs. Technical OSS

    When are my assets generating returns?

    A critical capital management objective is minimizing the cash-cash cycle.  This is the interval between paying cash to a vendor, and receiving cash from a customer once an asset becomes productive (i.e. carries revenue traffic).   Each extra day in the cycle increases your cost of capital.  Reducing the cycle requires that you know the answer to:

    • How much time elapsed from the purchase of an asset until deployment in the network?
    • How much time elapsed from deployment of the asset until it became productive?

    Equipped with such time-to-value analytics, finance can better hold Network Operations accountable for any excessively long intervals.  Network Operations also has the actionable information it needs to identify and correct inefficient deployment and service delivery processes.

    Where did my assets go?

    A very common dysfunction is mismanagement of assets once they are decommissioned or retired.  Some assets remain powered but unproductive, contributing to excessive energy costs.  Others simply disappear (whether moved, shelved or pilfered) and are no longer available for re-provisioning or salvage.  A recent PwC survey found that “one half of wireline operators and over one-third of wireless operators indicated that less than 50% of their assets are currently catalogued and managed.”  Network Intelligence enables Operators to track movement of assets in the network and provides an early alert when an asset has been removed and does not reappear elsewhere.

    What assets do I need?

    A critical component of avoiding unnecessary Capex is having accurate and timely Network Intelligence to guide the budgeting, forecasting and planning process.  This is especially important for portions of the network which are most sensitive to traffic growth.  It is essential to monitor resource utilization and equip planners with metrics and trending to ensure assets are purchased when needed, where needed and for the right purpose.

    Introducing ROC Asset Assurance

    Drawing on our industry leadership in Data Integrity Management, Capacity Management, Network Discovery and Analytics, Subex is launching ROC Asset Assurance to harness Network Intelligence throughout the asset lifecycle and do for Asset Assurance what Subex has famously done for Revenue Assurance and other business optimization areas.   Look for more exciting details on ROC Asset Assurance in the days and weeks to come.

  • Chasing the Elusive Business Case

    Chasing the Elusive Business Case

    Let’s say that you’re ready to take the plunge and  launch a business optimization project to make the world a better place.  You’re convinced that the benefits of the project will be quite compelling.  Who could argue the value of reducing revenue leakage, mitigating fraud risk or recovering stranded network assets?   There’s only one thing standing between you and your dream of making a significant impact to the bottom line—a winning business case!

    In times past, the decision to pursue a new project was generally driven by a combination of need and budget.   If there was a manifest need, and appropriate budget had been allocated, then it was generally a matter of stack-ranking solution alternatives and picking a winner.   Ah, for the good old days…  today’s reality is that Opex and Capex are tightly managed and projects need to sink or swim based on rigorously scrutinized financial metrics such as NPV, ROI and Payback Period.    Business optimization projects that remove costs from operations, improve the leverage of Capex dollars or manage risk more effectively tend to score quite favorably against these metrics compared to many other candidate projects competing for enterprise budget allocation.

    Which brings us back to the business case.    Years ago, when I worked for a major North American operator, the business cases I developed to get IT projects over the line were founded on “guestimates”.  Remember those?   They were cool because everyone knew that once the budgeting exercise was done, and the project approved, no one was going to come back and hold you accountable.   Remember what I said about the good old days?   In today’s business climate, defending a business case is akin to defending a master’s thesis.

    In our Managed Services practice, I have spent a lot of time coaching clients on their business cases.  Before you read this as “here’s how to overstate the case to bump it to the head of the line,” think again.  Executives and finance departments are too savvy.  Plus, overstating a case ultimately serves no one’s interest.  My approach is to gather the best possible information to produce a solid and realistic case.  Look at the business case as a tool—it can help ensure that you are pointing scarce resources in the right direction and may indicate that your original direction needs to be changed.

    Based on my experience, a well-constructed business case should:

    • Illustrate not simply costs and benefits but the expected timing of each.   It may be just as important to understand how long the project will be generating negative cash as the 3-year NPV.
    • Garner buy-in.  No, not just from the executive committee who will evaluate the project, but from the impacted stakeholders.   Do the groups most impacted by your projected Opex or Capex savings agree with your assumptions?  When they line up behind you, they can be a powerful force to help promote the benefits of the project.
    • Avoid “MBA math”, i.e. a small percentage of a large number is still a large number—look what we can save you!   Benefit calculations need to be specific, as granular as possible and have defensible and traceable assumptions– ideally using data sampling techniques or a limited-scope assessment.
    • Use a WACC (Weighted-Average Cost of Capital) that is approved by Finance for calculating discounted cash flows.
    • I could go on, but you get the idea…

    Once you have completed a draft of the business case, there are other questions I suggest you consider, including:

    • Do I have Opex or Capex dollars to spend?
    • Does the project need to be self-funded?
    • How is the case improved if there is limited up-front investment or if I spread out my payments?
    • Do I need an operational assessment to derive my business case assumptions?
    • Will my solution and/or services partner stand behind the numbers in the business case and offer to put some “skin-in-the-game”?

    Admittedly, these are leading questions.  Managed Services can influence the answers to these questions in a significant way and may just give you the flexibility you need to get the business case, and your project, over the line!