Service providers’ profit margins are being squeezed by the cost to serve exploding traffic growth and competitive pressure on prices.
Why is exploding traffic growth stressing service providers’ business cases? New services including video streaming, cloud services and mobile broadband are driving network traffic demand at annual rates of 35% to 85%. At the same time service providers’ business models are changing so that there is no longer a simple linkage between traffic growth and revenue growth? This puts tremendous pressure on service providers’ cost structures, service portfolios, and pricing policies. Service providers are looking to their systems vendors for solutions supported by rigorous business case analysis to help them control costs and develop differentiated and profitable new services.
Why do service providers require business case analysis in planning network expansion programs? The rates of service innovation and traffic growth as well as competitive intensity are much higher today than they were a decade ago when services rarely changed and cost plus pricing models still dominated the industry. Rapid increases in subscribers, market share and even revenue growth do not necessarily flow-through to increasing profits and shareholder value. Even investment in next generation network equipment with high capital efficiency may not assure profitable operations because each dollar of capital investment carries with it about five dollars of operations expenses. Competitive pressures, furthermore, may force prices below levels needed to cover the Total Cost of Ownership of new equipment investments. Service providers, consequently, require rigorous analytic proof that new equipment investments will meet their financial performance criteria (ROI) and that the cost of a prospective systems vendor’s solution is less than that of its competitors.
What level of solution support do service providers expect from their system vendors? Vendor selection goes way beyond product price and performance. Service providers are looking for strategic partners that provide solutions that extend across the entire market ecosystem. Increasingly service providers are engaging with systems vendors to provide turnkey solutions that include network design, construction and operation as well as sourcing of content and business planning services. Use cases, Total Cost of Ownership, and financial modeling support are integral to such comprehensive vendor offerings.
How can ACG position you as a leader in business case analysis? Advisory and Consulting Group (ACG) provides independent and unbiased business case analyses that are well respected in the industry. Our financial models are driven by our rigorous and comprehensive projections of market trends, market share and traffic growth. Our CapEx estimates are detailed and reflect our in-depth understanding of next-gen infrastructure. Our OpEx models are based upon more than ten years of cost analyses performed for the industry’s leading systems vendors and service providers. Analyses of new revenue opportunities leverage ACG’s large database of market intelligence embodied in its subscription service offerings.
What areas do ACG’s business case analyses cover? ACG’s business case analyses can be developed for any of the markets covered by ACG’s Carrier Infrastructure Service, optical, video, data center and cloud services. Modeling services include TCO models used to compare differing network architectures, TCO in support of sales activities, ROI analysis for turnkey solutions and use cases, and ROI analysis of incremental revenue opportunities and comparison of service pricing policies. Models can incorporate the following in-depth modules: Traffic, demand and revenue projections; includes analysis of churn and market penetration; Traffic engineering: Erlang, protection schemes, OSPF, multicast/unicast, content networking, SONET/SDH rings, video distribution; Automated equipment configuration algorithms; Detailed OpEx modeling; Cost of service modeling and Analysis of the ecosystem value chain
Financial metrics and analysis: TCO, ROI, cash flow, full financial statements (income statement, balance sheet, cash flow statement), shareholder value, value of a customer account, pay back, breakeven, NPV
How are the modeling results delivered? Business case models can be delivered in many forms ranging from published whitepaper backed up by an underlying Excel workbook to customized tools with user friendly front-ends packaged as a Visual Basic application, web-based or for simpler models as a Smartphone app. One popular format is an Excel workbook used by sales support personnel that automatically creates a whitepaper in Word customized for a specific customer/prospect. Business case results can be communicated by ACG as whitepapers, webinars, videos or ghost written articles.How are the modeling results delivered? Business case models can be delivered in many forms ranging from published whitepaper backed up by an underlying Excel workbook to customized tools with user friendly front-ends packaged as a Visual Basic application, web-based or for simpler models as a Smartphone app. One popular format is an Excel workbook used by sales support personnel that automatically creates a whitepaper in Word customized for a specific customer/prospect. Business case results can be communicated by ACG as whitepapers, webinars, videos or ghost written articles.
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Contact sales@acgresearch.net for more information about ACG's business case analysis service.