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File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 1 Rates
Strategic Funding Models for The Network Services
Department of DoIT
UW-Madison
November 15, 2002Presented by Phillip Beidelman
pbeidelman@wtc-inc.net
Western Telecommunication Consulting, Inc.
Consulting in telecommunications and networks
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 2 Rates
Agenda
Purpose of the work The goal for today’s meeting The current situation Where you want to go What you can expect Next steps
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 3 Rates
The Purpose of the Work
To create a strategic funding model for Network Services Network WAN Voice
Identify cost basis Allow for on-going service and technology
upgrades 5 year view
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 4 Rates
The Goal for Today’s Meeting
Today’s Goal = to alert you to issues and choices
Format Review the approach Review key concepts Alternatives Trends
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 5 Rates
The Current Situation
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 6 Rates
The Current Situation
The current rate structure does not deal with network trends on campus Increasing internet use Increased cost of the new campus network
The time is right to revisit rates
The rate structure is inadequate
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 7 Rates
How We Got Here
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 8 Rates
Industry Trends that Got Us Here
Higher Education Trends1) Rate determination changed2) Radically increased use of the internet3) Radically improved campus networks4) The LD squeeze took hold5) Organizations merged6) New technology choices emerged7) Expectations increased
UW-Madison is not alone
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 9 Rates
Where Do We Want to Go
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 10 Rates
Where Do We Want to Go
Develop a predictable funding sourceNot just for operating costRational basis for planned capital spending
driven by forecasted need Continue to meet service requirements Discourage abuse of resources
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 11 Rates
Approach to Rate Development
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 12 Rates
Approach to Rate Development
Five PhasesI. Line of Business analysis
II. Unit cost analysis
III. Market analysis
IV. Preliminary rate development
V. Implementation: 5 year rate plan development
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 13 Rates
Phase I - Line of Business Analysis
Step 1: Establish the team
Annie Stunden Jack Duwe Joanne Jones Perry Brunelli Heidi Genthner Catie Isenberg Robert Lee Lavonne Frank
Phillip Beidelman Dean Oyama Scott Foy
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 14 Rates
Phase I - Line of Business Analysis
Key concepts & terminologyCost basedActivity based“Basic Product & Service Elements”
(BPSE)™ concept“Line of Business” concept
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 15 Rates
Phase I - Line of Business Analysis
Key concepts & terminologyBasic Product & Service Elements (BPSE)WTC working definition: A product or
service that can be obtained from another source
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 16 Rates
Phase I - Line of Business Analysis
Key concepts & terminologyLine of Business (LOB)WTC working definition: A BPSE or group
of BPSEs for which a fee is charged
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 17 Rates
Phase I - Line of Business Analysis
Step 2: Identify Basic Product & Service Elements (BPSE)UW-Madison has 91 of these so farCould go down or up
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 18 Rates
UW - Madison: 91 Basic Product and Service ElementsExamples include:
Answering Service
Billing Services
Cable TV
Calling Cards
Cellular Service
Internet Connectivity
Network Design and Engineering
Network Backbone Connection
Network Jack Connection
Network Operations Center
Streaming Video
WAN Engineering
Local Service
Long Distance (Domestic)
Long Distance (International)
Network Moves, Changes, Adds
Wireless LAN
Authentication Services
Phone Moves, Changes, Adds
Customer Service
Consulting on the Data Network
Dial Tone
Remote Access
Training Services
Voice Mail
Broadband Network Services
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 19 Rates
Phase I - Line of Business Analysis
Step 3: Allocate cost to BPSEsAll SalariesAll Supplies and ServicesAll TrainingAll DirectAll IndirectDepreciation or reserves for modernization
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 20 Rates
Phase I - Line of Business Analysis
Step 4 - Map Basic Product & Service Elements (BPSE) to Lines of Business
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 21 Rates
Map BPSE’s to LOBsExample:
CurrentLOB#1
CurrentLOB#2
CurrentLOB#3
UW-Mad LOBs
Basic Product& Service Elements
Line of BusinessAnalysis
91 BPSEsNetwork
Connection
Domain NameService
RemoteAccess
BroadbandServices
IP and SubnetAddressing
AuthenticationServices
Modem Pool
University Dial Tone
DSL
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 22 Rates
Mapping BPSEs to LOBs is Important to Allow for Peer and
Market Comparisons Later
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 23 Rates
Comparison of Rates With Peers
0
5
10
15
20
25
Cost Elements
Peer 1
Peer 2
Peer 3
Peer 4
Peer 5
Peer 6
Peer 7
Peer 8
Peer 9
Cost Element ComparisonMulti-Button Line & Telephone University Services
AdministrationSpace rentEasement right-of-way charge Switchroom environmentals 911 emergency response Maintenance: Cable RecordsMaintenance: CableMaintenance: TMISMaintenance: PBXDepreciation: TMISDepreciation: Station EquipmentDepreciation: PBXDepreciation: CableNetwork ServicesUser TrainingEmergency InfrastructureBilling ServicesRepair TechniciansOperatorsProject ManagementInter Campus CallingNOC attendants
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 24 Rates
Phase I - Line of Business Analysis
Step 5 - Sum the cost of BPSEs to the Lines of Business
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 25 Rates
Phase I - Line of Business Analysis
Step 6 - Identify revenue received by Line of Business for the basis year and conduct Over and Under Recovery Analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 26 Rates
WTC SampleOver and Under Recovery Analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 27 Rates
WTC Client Example$25 Million Budget
Over and Under Recovery Analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 28 Rates
Results: LOB With No RevenueSource: WTC Client Engagements
-700000
-600000
-500000
-400000
-300000
-200000
-100000
0
($1,256,824 Total Loss)
ATM LAN
Data Consult
Auth Svcs
DNS
Consult Vc
InterBldg Cable
Spec Ckts
Const Cons
Cust Trng
800 MHz
Wireless
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 29 Rates
Results: LOB With Large LossesSource: WTC Client Engagements
-2500000
-2000000
-1500000
-1000000
-500000
0
($4,234,369)
(Total Loss)
Internet Ac
Calling Crd
Voice MAC
Auto Att
ACD
ResDial
Directory
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 30 Rates
Results: LOB With Large RecoverySource: WTC Client Engagements
-250000
250000
750000
1250000
1750000
2250000
2750000
3250000
$8,995,089
Univ Dial
Univ Inter
Univ Intra
Univ Intl
Univ Local
ResIntra
Eq Rental
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 31 Rates
Approach to Rate Development
Phase II - Unit Cost Analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 32 Rates
Phase II - Unit Cost Analysis
Identify unit of measure to establish the “activity” level of each BPSE
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 33 Rates
Phase II - Unit Cost Analysis
Typical BPSE Unit of Measure Activity
Network connections Connections 35,000
Long Distance (Domestic) Total Minutes 816,000
Dorm networking connections Connections 1,000
Dial tone Phone lines 6,300
Network moves & changes Orders 3,000
Telephone Set Maintenance Digital Sets 1,598
Voice Mail Subscribers 1,800
Basic email Number of accounts 2,000
Enhanced email - tier 1 Number of accounts 3,000
Enhanced email - tier 2 Number of accounts 1,500
Cellular Phones Phones 200
OPX OPX Lines 30
Pagers Pagers 100
Consulting Hours 500
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 34 Rates
Phase II - Unit Cost Analysis
Identify growth factors based on a strategic business technology plan
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 35 Rates
How One WTC Client Addressed Infrastructure Planning
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 36 Rates
Phase II - Unit Cost Analysis
Strategic Forecast for Total Data & Voice Port Requirements
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vo
ice
an
d D
ata
Po
rts
Data Ports Analog Voice Ports Digital Voice Ports VoIP Ports (Voice/Data on IP)
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 37 Rates
Phase II - Unit Cost Analysis
Strategic Forecast for Desktop Data Port Requirements
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2001 2004 2006 2012
Years
Nu
mb
er o
f D
ata
Sw
itch
Po
rts
10 Shared 100 Switched 1000 Switched
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 38 Rates
How Another WTC Client Addressed Infrastructure Planning
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 39 RatesPlanned Growth
45 Buildings 250 Closets13,322 Telephones18,715 Network connections
Infrastructure is builtbased on forecastCapacities
By the Year 2011+
The Campus
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 40 Rates
Phase II - Unit Cost Analysis
Create a unit cost table
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 41 Rates
Approach to Rate Development
Phase IIIMarket Analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 42 Rates
Phase III - Market Analysis
Step 1 - Conduct local market analysis
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 43 Rates
$0.00
$21.46
$32.71
$16.15 $16.60
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
CSSUB PacBell Verizon MCI Electric Lightwave
Rat
e P
er M
onth
Exhibit VII - University Dial Tone Market Comparison
Client could charge at least $20 per month and still remain
competitive.
Market Comparisons
Client
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 44 Rates
Phase III - Market Analysis
Step 2 - Conduct peer reviewWTC historic client information
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 45 Rates
Client is not charging for this service. The Peer institutions offer between
$13.00 and $27.00.
University Comparisons
$-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
Monthly Rate
Single Line University Comparison
Single Line $- $18.90 $23.50 $13.00 $19.00 $16.23 $20.50 $27.00 $24.00 $18.50
CSUSB Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9Client
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 46 Rates
0
5
1 0
1 5
2 0
2 5
C o s t E l e m e n t s
E x h i b i t X X I I IC o s t E l e m e n t C o m p a r i s o n
S i n g l e L i n e U n i v e r s i t y S e r v i c e s
A d m i n i s t r a t i o n
S p a c e r e n t
E a s e m e n t r i g h t - o f - w a y c h a r g e
S w i t c h r o o m e n v i r o n m e n t a l s
9 1 1 e m e r g e n c y r e s p o n s e
M a i n t e n a n c e : C a b l e R e c o r d s
M a i n t e n a n c e : C a b l e
M a i n t e n a n c e : T M I S
M a i n t e n a n c e : P B X
D e p r e c i a t i o n : T M I S
D e p r e c i a t i o n : S t a t i o n E q u i p m e n t
D e p r e c i a t i o n : P B X
D e p r e c i a t i o n : C a b l e
N e t w o r k S e r v i c e s
U s e r T r a i n i n g
E m e r g e n c y I n f r a s t r u c t u r e
B i l l i n g S e r v i c e s
R e p a i r T e c h n i c i a n s
O p e r a t o r s
P r o j e c t M a n a g e m e n t
I n t e r C a m p u s C a l l i n g
N O C a t t e n d a n t s
University Comparisons
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 47 Rates
Approach to Rate Development
Phase IVPhilosophy Development and
Preliminary Rate Creation
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 48 Rates
Phase IV - Philosophy Development and Preliminary Rate Creation
Known at this pointBPSEs you provideCost by BPSE Market alternativesPeer environmentActivity levelsUnit cost
Now need a model
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 49 Rates
Phase IV - Philosophy Development and Preliminary Rate Creation
Types of models Egalitarian (some
call this “socialized”) Discriminatory Utility Library Market Tiered Policy (fiat)
Types of models Node bank Per capita Knowledge worker Econometric Combination
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 50 Rates
Phase IV - Philosophy Development and Preliminary Rate Creation
Characteristics of good rate schedulesShould not impact network designIncorporates strategic business technology
planDiscourages inappropriate behavior5-year viewCost basedCulturally congruent
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 51 Rates
Phase IV - Philosophy Development and Preliminary Rate Creation
Characteristics of good rate schedulesUpdated quarterly, re-evaluated annuallyBased on Basic Product & Service
ElementsAccount for entire budgetReflect all technology servicesScaleable
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 52 Rates
Phase IV - Philosophy Development and Preliminary Rate Creation
Characteristics of good rate schedules Recognize and recover the cost of
infrastructureA solid audit trailSet the stage for new services to be priced
both on the margin and as replacement services
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 53 Rates
Approach to Rate Development
Phase VImplementation: 5-Year Rate Plan
Development - Trends
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 54 Rates
Phase VImplementation: 5-Year Rate Plan
Development
Significant trends impacting rate settingMore end-to-end accountability
Convergence makes this more important LAN certification is a problem Departments moving away from providing their
own services -- realize it is hard and expensive Single source technology supplier on campus
moving back this way
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 55 Rates
Phase VImplementation: 5-Year Rate Plan
Development
Significant trends impacting rate setting Disproportionate cost of data networks as
they become “hardened” in preparation for more critical applications
Metered bandwidth emerges to control consumption on and off campus
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 56 Rates
Phase VImplementation: 5-Year Rate Plan
Development
Significant trends impacting rate setting Network refreshment cost accelerate and
stabilize Economic life (finance term) = 3 - 5 yrs Useful life (how long it will last) = 5 - 10 yrs Technology life = 12 - 36 months
File: WTC: H:\Marketin\presentations\ACUTA - Reno Rates\Acuta Reno Rates 03.ppt 57 Rates
Discussion
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