Start With the Basics
If you are in the market for new operational support solution, there are a few basic yet important considerations that can make the difference between a profitable right choice and a potentially expensive mistake.
Can Do vs. Does Do
These are two commonly used phrases that are part of most software sales presentations. However, they describe the ability of the software’s existing features and functionality to meet buyer expectations in two very opposite ways.
While It is true that, with a large enough customization budget, most software can do almost anything, in comparing applications, it is best to look for the one that already does do the greater portion of the business-critical functionality required by your daily operations.
After all, why train a software company to cater to your requirements, pay for customization, wait for it to be delivered and struggle through the testing and refining processes when another application has already been through these processes and is mature, refined and ready to go?
In other words, “can do” is not the same as saying “does not do”, and it represents a risk that should be carefully weighed against additional costs, time to market delays and the potential for receiving deliverables that will require additional extra-cost refinement. Even so, “does do” does not always mean done elegantly. So, for the most critical of functionality, contact vendor references and ask their opinion regarding the completeness, operational value and reliability of such functionality. Otherwise, “does do” can prove to be more a matter of vendor interpretation than of actual requirements fulfillment.
Price vs. Cost
All operational support software has a “price” and a “cost”.
While its “price” is usually the purchase amount, its total operating “cost” (TOC) can easily become an entirely different amount. This is because the true TOC of software is determined by the + / – sum of the following factors:
- Purchase Price
- Customization Costs
- Migration Costs
- Training Costs
- Staffing Costs
- Revenue Impact
- Required Third-Party Applications
- Accounting Accuracy
- Process Automation
- Support & Operational Costs
- Product Life
- Market Valuation Impact
All too often, these potentially costly / cost-saving factors take a backseat in the purchase decision-making process to the quoted price or discounts offered. In fact, some buyers repeat this mistake multiple times. In reality, most vendors are aware of the price, capabilities and support levels offered by their competitor’s products, and they position their own solutions accordingly. So, while not always the case, the least expensive and most highly discounted solutions may ultimately prove to be by far the most expensive to own over time. It’s all a matter of the true cost behind each of the considerations listed above.
For example, let’s assume that price of Software A is $1.20, and its annual cost of support is $0.20. Meanwhile, its included functionality, process automation and operational support capabilities result in a staff reduction savings of $0.15 and in increased revenue, goodwill and new and retained customers equal an additional $2.00. If amortized over 5 years, its TOC would be $1.20 + (5 x $0.20) – 5 x ($0.15 + $2.00) = <$8.55> (profit).
Now, let’s assume that the price of Software B is $1.00, and its annual cost of support is $0.18. However, its moderate functionality adds $0.30 to purchase business-critical add-ons and customization, and additional annual costs of $0.25 for additional staff, $0.35 for revenue, customer and goodwill leakage and $0.05 to support add-on software. If amortized over 5 years, its TOC would be $1.00 + $0.30 + 5 x ($0.18 + $0.25 + $0.35 + $0.05) = $5.45 (loss).
This is a net return on investment (ROI) difference over 5 years of $14.00. Furthermore, if well-supported, Software A could have useful life in excess of 20 years or more. Meanwhile, once the escalating unforeseen costs of Software B become apparent, it could require full replacement in as little as 3 years or less.
When the example figures are scaled up to the price of typical telecom operational support software, many millions of dollars could be at risk. In addition, whenever multiple migrations become necessary due to a mistaken choice, the toll on staff and stain on customer relations can add immeasurable costs as well.
None of this is meant to imply that buying the most expensive software guarantees the best ROI. That would rarely be true. Instead, the goal is to get the best software for the best price.
First, prioritize your options by their percentage of match to your daily operational requirements, without going overboard on a product with a lot of additional functionality that you may never need. This can be done though printed and on-line material, product demonstrations, GAP analysis, and by contacting existing users. Next, carefully compare the product differences across the factors above. The right choice will usually be very obvious.
Infrastructure Vendor Provided Solutions
For many years, vendors of switching and other network elements have offered billing systems as “Package deals”, and often include the cost in the overall system financing offer or make it appear to be “free” to help close the infrastructure sale.
For an industry newcomer and / or a lightly-funded startup, this may appear to be attractive. However, while the “big name” of a top vendor may add credibility to the software offered, historically, such vendors have acquired and re-branded low-end solutions. Often, this has included buying out and losing the brainpower behind the product’s development. Furthermore, when such a loss has occurred, the necessary evolution of these solutions has almost always immediately gone stagnant, and customization requests by users have often been met this high costs and long lead times.
This is where it is important to do your homework.
Special offers aside, most carriers cannot afford cost and business disruptions associated with replacing their billing & OSS software within only a few years of implementation. So, do some comparative shopping to make sure that the software you choose is best solution for both your current business model and growth plans over a period of at least five years. This should include contacting several existing users who have been operational for at least 5 years.
In addition, while OSS developers like Advantage 360 provide provisioning and mediation interfaces to over 140 switches and infrastructure elements across vendors industry-wide, It seems unlikely that infrastructure Vendor A would go out of its way to make its OSS compatible with Vendor B. So, another consideration would be what happens when system evolution requires either replacing or adding to the existing infrastructure with that of a different vendor?
If the infrastructure vendor’s solution scores high in each important area, GREAT! If not, keep in mind the rules of Price vs. Cost, because what appears to be a good deal now could have a serious impact on profits later.
Furthermore, while sale people are there to make a sale, most believe that honesty is the best policy. So, if you are considering a package deal that includes infrastructure and a billing and OSS solution, it’s fair to ask the associated sales person a question that is somewhat similar to that of the following:
“I am considering recommending that our company look favorably upon your infrastructure offer. However, once everything is launched, we have determined that our on-going cost of operations and success in the marketplace will be largely dependent upon the capabilities of the operational support software that we implement.
Since our future success could directly translate to more business for you, and given that the OSS solution proposed in your package is not the deciding factor in our infrastructure purchase, can you completely assure us that it is and will continue to be the best solution for our future growth?”
The answer might surprise you.
In the world of recurring billing and OSS, good software can make great things happen. By contrast, a solution that is mediocre or poor by comparison can easily have the opposite effect, loosing revenue, opportunities and customers. As a result, when business or financial considerations are leaning towards acquiring a less than perfect temporary solution, it is a good time to thoroughly consider the consequences. A point that is often lost in this process is that good software provides a better and faster return on investment than lesser software.
By way of comparison, you can start an earth moving company with a shovel and a bucket as a temporary way of doing business. However, a skip loader and dump truck would be a better choice. Operational support software works the same way.
Meanwhile, the process of replacing a temporary solution can be costly, time consuming and taxing on both staff and customers alike. It almost always requires data migration, replication of configuration settings and additional staff training. This can take as much as 6 – 12 months or more and tens or hundreds of thousands of dollars to complete, and can impact daily operations throughout the migration period. The real questions one of whether the presumed savings of starting with a temporary solution worth it, or are there other options that both fit the budget and eliminate the interim step of a temporary solution?
One possible option is to negotiate payment terms that allow the benefits to pay for themselves. For example, let’s assume that the monthly cost of permanent software (Software A) over 36 months is $25K, and temporary software (Software B) is $15K over that same period. The vendor of Software A may be willing to extend the payment period to 60 months, thereby reducing the monthly amount to approximately $19K and / or to take a one-time balloon payment at the end to reduce that amount even further. Alternately, the vendor may be willing to match the lower payment in the first year and escalate the amount over the remaining years.
Another possible option is to ask the vendors of potentially permanent solutions to demonstrate unique features or functionality that might immediately generate tangible revenues that can close the cost gap with a temporary solution. For example, let’s assume that the monthly cost of permanent software (Software A) is $25K, and the monthly cost of temporary software (Software B) is $15K. If Software A had just one unique feature that could generate $5 per subscriber monthly more than Software B, it would only take 2,000 subscribers to that one feature to make up the difference. The rest is money in the bank.
The point of these options is to start with solid software that encompasses current requirements and future growth now, without the waste and compromises of a throwaway temporary solution.