systems discussed in the preceding pages, can they reasonably expect to realize the business benefits described? Most would if the benefits were guaranteed. But many service providers lack resources, like people to complete network buildouts. Few service providers have extensive experience with the types of network management systems described in this special supplement, especially when it comes to IP data services. Nevertheless, its possible to build a compelling business case for these management systems and estimate their return on investment. And that sort of justification will lead to the self-servicing model envisioned by leading-edge service providers. By visiting a customized portal, customers could implement new services or change existing ones, for example.
Margins & Churn
Most services eventually commoditize. Internet access, especially for consumers, is highly commoditized. Today IPbased VPNs truly stand out. With commoditization comes reduced margins and high customer churn. As evidence, look at ISPs that serve consumers, like EarthLink. In its most recent quarter, EarthLink reported revenue growth of 41 percent against a loss of $35.2 million, not taking into account its merger and acquisition activity. A solid business case can be built for anything that keeps you ahead of the commoditization curve. The first antidote is the introduction of value-added services on top of basic connectivity. Many ISPs and carriers have continually struggled with this. The second approach centers around the implementation of the network management systems described in this supplement. The improved service they deliver will attract new customers and reduce churn even in a commodity market. Just as important, it will reduce operations costs and add to profits. A recent Yankee Group study highlights how network management and OSSs can reduce costs. The study examined network provisioning and service configuration systems implement-
ed by frame relay and VPN service providers. Among its findings:
AT&Ts E-Order system gives customers a Web interface to the frame relay order entry system. In parallel, AT&Ts IT department integrated order entry with element management systems that govern frame relay transmission. In the process, the carrier has mostly eliminated sales force involvement when customers make changes to their frame relay service. A European carrier estimates that it takes an expensive engineer 27 minutes to manually provision and configure a single customer site in its MPLS VPN service. The automated system currently being installed should reduce that to about two minutes for a call center operative, the company estimates. VPNs can be complex to configure, due to the many policy options on the customer equipment. But some service providers are working with vendors so that routers get basic connectivity functions installed on the assembly line. The time savings multiply as the number of customer sites increases. Manual processes, even if they are based on scripts rather than keystrokes, are duplicated for every site. Automated systems configure everything at once and accurately based on predefined rules. Clearly, its time to fly the flag of Intelligent Provisioning as carriers and service providers embark upon the road to customer self-service. The business benefits, ranging from SLAs to MPLS network management and automated provisioning, are significant. Hours get crunched down to minutes when it comes to provisioning, and high churn can give way to stellar customer retention rates. Self-service may not hit the big time in 2000, but with Intelligent Provisioning, it will be the year when aggressive ISPs and carriers take a big step forward. \ Eric M. Hindin is a vice president at SunTrust Equitable Securities, the Boston-based investment banking subsidiary of SunTrust Banks Inc., the nations ninth-largest bank.
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