Sunday, May 23. 2010I'll Pay More For The Same Service.......John Linton .....because by paying more you always get the best........a statement only usually made by someone spending someone else's money. As part of our planning for the almost upon us new financial year we are looking at selling IP services to the 'TOP 1,000' Australian companies. Doubtless this will prove to be a difficult thing to do but, at the end of the day, it's no more difficult than selling simple services to the medium/medium large companies we already do. In fact we already have a few 'TOP 1,000' companies as customers who found us rather than us finding them. So, perhaps, it sounds, certainly on 'first hearing' that such buyers would not consider a company of Exetel's size as being a 'suitable' provider for large corporate entities I have personally been involved in making such a strategy very successful on two previous occasions for companies that were far smaller at the time than Exetel is now. IP, irrespective of what contrary views may be held, is a very simple product and takes less 'skills' to provide than, say, a regular office cleaning service and is far easier than an office cleaning service to provide at the highest level of performance and at the highest level of 'up time'. So, if you continue that analogy for a moment, do you think that BHP or CBA has a policy of only buying office cleaning services from 'Tier One' office cleaners' (should there be such a grouping?). Or 'Tier One' window cleaners? Or 'Tier One' couriers? Almost certainly not. How much more complex a 'service' is IP than those three services I referenced above? My view is that it is a far, far simpler 'service' to provide cleaning windows, cleaning floors or delivering 'parcels'. It depends on none of those services major problems (human beings with the correct level of training and daily diligence and performance or even the requirement to turn up for work. It only depends on inert fibre from 'point A' to point B'. As a company like Exetel delivers the service to the 'TOP 1,000' company using the same fibre the 'Tier One' providers and then uses the fibre to connect to the 'world' also used by the 'Tier One' providers the only difference in 'quality of service' is.......well there isn't one......all such services are EXACTLY the same....they have to be....they all run on the same fibre from end to end. So why buy IP from Telstra, Optus, AAPT or XXXX if you are a large IT Department provider of services to your company's 1,000 to 50,000 or 100,000 employees? Because you always have? Because it takes a company of a certain size to be able to deliver it? Because only a 'Tier One' provider has the purchasing power to provide you with a suitable price? Any other reason? I don't know of any other than the truly pathetic "we buy all services from the one provider because of the whole of business discounts" which any adult should be ashamed of uttering they are so demonstrably stupidly untrue.......but of course they are uttered more often than I can believe possible. I only know the buyer responsible within two large organisations that use 1 gbps or more IP who are not ISPs. Both those organisations (after multiple years of multiple negotiations) have managed to buy IP on 3 and 5 year contracts at prices more than 5 times that Exetel currently buys at - and are locked in to those contracts for 2 or more years from now. How stupid are such decisions? Pretty stupid by any measure of commercial knowledge or competence. If I ever do another job it would be to work as an agent for one of the overseas cable owners and make myself very wealthy by selling IP services "for a tier one carrier" to the top 1,000 commercial and government buyers of IT services in Australia. It is a target rich environment as Mav once said to Goose. As I am not about to get another job I wont be able to do that but I can participate in it. Exetel would only need 100 of such organisations, around 10% to buy IP services from us for us to double the size of today's Exetel - that's a very motivating opportunity. I haven't tried yet but I think I could develop the words, proofs and methodologies of making such a target achievable with not much time or effort. Almost better than working directly for a 'tier one carrier' I have a lot more freedom (and now the resources), and a lot more experience in the Australian marketplace to have a better chance of success than any company I currently know. It will be interesting to see just what price 'premium' large Australian companies are prepared to pay for the identical service. Copyright © Exetel Pty Ltd 2010
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I have a few colleagues who are involved in bandwidth provisioning for their organisations, and a few points that seem to come up whenever I discuss their choice of IP provides seem to be (in no particular order):
The carrier owning the fibre they use is somehow important. The carrier being on-net in their colocation facility is somehow important. Additional services on top of transit such as DDoS protection or content distribution are a plus, even if they're not being used. The "tier 1" monkier that gets thrown around by the GoF holds resonance for some, even though they're actually less well connected than an ISP with peering links and connectivity to multiple transit providers. All of these points have one thing in common - they're myths which can be dispelled in a straightforward fashion for those who are willing to listen. For example, compare Exetel's corporate offerings to TPG's. TPG only have 2 domestic upstreams, they both terminate in Sydney (and seemingly at the same PoP) and their international routing is hideous for latency-sensitive purposes to almost everywhere. Exetel's network (going by the current network diagram) has none of these problems and is a better product. Comments (2)
Thank you for that list of important considerations.
Comments (4)
You're welcome JL.
Verizon approached me a few months ago insisting they had an excellent transit offering for me, priced in a similar fashion to the Vocus aggregated, burstable bandwidth offering. I asked for further pricing and was, to put it kindly, appalled. When I replied to the Verizon BDM regarding his pricing and the fact there was no way I could take it to my MD, he made a remark about Verizon running an uncontested network. I've not heard back on my request that he actually prove this - something that Exetel could easily do by adding AAPT POI and Optus POI MRTG graphs to your site should you choose. A piece of information I thought you might find interesting or in some way useful. Comments (2)
There used to be a saying: no one ever got fired for buying IBM!
Perhaps the same applies to Telstra Comment (1)
There are always lazy minded people at every management level - it is not going to change.
However it been more than 30 years since many people have lost their jobs as IT managers for "buying from IBM" when there were many better options. Also it has been more than 30 years since IBM began to have the best mainframe solution (to which the remark applied in the 1960s and 1970s. Today few people buy from Telstra on such a basis - Telstra often have easily the best solution in many instances and when they do - people buy from them. However, equally, many people don't buy from eTelstra when they don't have the best solution. Comments (4)
It's interesting you talk about whole-of-business (WOB) discounts.
I know of a Tier 1 bank in Australia that has a WOB contract with Telstra covering fixed lines, mobiles, data, security, and other IT services. It's worth somewhere in the vicinity of AUD150-180M, of which around AUD70-90M is spend on "professional services" (PS). This PS is mainly cost associated with doing proposals/designs that most other companies would deem as a pre-sales exercise. I work for an international Tier 1 carrier (not T1 in Australia). Looking at this work, we would conservatively estimate it being worth AUD110M. Now this is assuming that we can do all of it (not that we could, or wanted to). Also, this is putting a reasonable amount of margin into it, making it profitable business (even considering we would be leveraging local Tier 1 carrier infrastructure for a lot of it). Just a real life example that WOB contracts do not necessarily benefit any business, let alone "Tier 1" companies. Comment (1)
Working for today's Telstra may be very different to working for tomorrow's Telstra.
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