Open Source Solution to Amway TEM?
December 19, 2008
I recently received an email question about the skepticism and resistance to Telecom Expense Management (TEM) services, especially software solutions. A reader wrote:
I’m writing to get your input on why TEM (Telecom Expense Management) companies seem, to me any way, to have sort of a “Multi-Level Marketing” feel to them. The reason I ask is that we are a small management consulting firm that specializes in business development, sales, marketing and profitability consulting for the A/E/C industry. We have one client with 2,500+ wireless units who we matched up with some friends, (former co-workers…many moons ago) who have their own wireless consulting company that have written their own rate plan optimization program for Sprint/Nextel. (They are former Sprint/Nextel execs.) Anyway, they saved our client $326,000 in 12 months so now we both look like heroes.
Being a big believer in networking and since part of what we do is help our clients increase profitability, we have recommended these guys to other companies in our industry but seem to get ‘pushback’ as if I was trying to get the to join Amway or something. (Apologies if you are an Amway rep)
Telecom Expense Management or TEM can mean a lot of different things to different people. Depending upon the size of an enterprise, a TEM process can range from simple spreadsheet tools to a software platform to an outsourced provider. Some stats I have seen claim that 20% of most telecom bills to enterprises have errors. Given that no billing standards exist, short of ILEC bonding, the TEM industry is highly fragmented – lots of custom software. Software is my life’s nemesis. I often get asked after 20+ years in and around telecom network software applications, why I started AFS. My answer was simple: once you install the fiber optic sheath, add the laser and shoot the OTDR — it works or it does not. No mystery bugs, crashes or patches. Believe me when I say software is hell on earth, I am talking first hand experience. I could go on about this … I am so tempted.
Anyhow, the Amway-like pushback you might be getting has more to do with the human condition than anything else. What I mean by this is any individual in an enterprise dealing with telecom expenses, especially if he or she has grown an in-house solution, will be on the defensive. The economy is slowing, and someone or something better and/or more efficient is a viable threat to a fiefdom. Perhaps there is a need to go higher – like to the CFO – if the referral has been to whoever may be threatened. The savings you cite are impressive and a good testimonial — I would ask the customer who saved this money to be proactive in assisting with the marketing.
The problem you are facing is there are a lot of scammers out there when it comes to software solutions, given the low barrier to entry. Everyone is an expert, and given the fragmented aspects of the segment, no one looks different.
My suggestion, if you want to knock the socks off the TEM world, is have your former co-workers contact the Open Source Community and make its software available as an Open Source TEM platform. Literally over night, thousands of software types will add extensions, bolt-ons, etc., in driving a technical consolidation of a fragmented industry. (Boy, did I just make some enemies).
In the long run, the need for TEM solutions will wane as flat rate services over big IP pipes take hold, thus eliminating the aspects of complex usage billing. As this happens, a device and IP address inventory system will become more important than an integrated TEM software platform. Full disclosure…I am a local fiber bigot.
Go Open Source – change the telecom world!
What are your issues and comments regarding Telecom Expense Management? Shoot Dave an email or post your thoughts below.
Opportunity Abound for XO Despite NOL’s
September 16, 2008
I recently received the following comment in response to What Frontier Means on a Resume:
The viability for PAETEC will be integrating the McLeodUSA fiber into the PAETEC environment.
I have been challenging tax assessments on this industry specifically focusing on CLEC’s and IXC’s back to 2000. Because of the NOL’s, property tax was a major part of the CLEC operating expense. A CLEC without fiber going forward will soon see the end. I am sure if the credit markets would allow and the PAETEC stock price would rise, Arunas would be after more fiber…possibly XO.
XO is next. Question is who is the buyer.
Thanks Brian.
I believe if anything reasonable were in M&A play, XO is in a better position to go on an acquisition spree. Mr. Icahn recently cleaned up their balance sheet and they are now debt light. The owners of metro fiber like an XO can benefit by adding customers and applications to their local fiber infrastructure at a reasonable valuation. The net effect of doing this is the acquired customers’ margin contribution to the fiber-based entity can increase as much as an incremental 40%.
The converse, an asset-light company buying a metro fiber based company with its customers, is a different animal altogether. The same 40% in margin increase can be had by the acquirer as it comes with the fiber platform, however, the valuation profile of such a local fiber-based company will be much higher than an asset-light company. The thinking behind such a scenario isn’t as much about the local the cost of acquiring the metro fiber business but the value of its metro fiber; it quickly becomes a valuation of “what does it cost me if I don’t have access to the metro fiber M&A play and get locked out by a competitor?” It is not an industry secret that there is a shortage of metro fiber and having to build it if you can’t buy it is a costly proposition. It costs 60% more today for the same metro fiber build than what it cost to build 5 short years ago.
In an acquisition or merger, NOL’s get fractionalized to such an extent by the IRS, they are of marginal value. Whether you agree with Mr. Icahn or not, he restructured XO in such a manner within his holdings that he can take advantage of the lion’s share of XO’s NOL’s.
Shoot me an email or add a comment below.
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