Monday, June 15. 2009Krudds Next Election Winner Dooms Australian Telecommunications For EverJohn Linton ......yet another ill considered total fiasco in concept proposed by intellectual pygmies whose pig ignorance of the topic they are addressing is of mind blowing minimality and is simply impossible to execute....and that's the kindest view you can hold. I read some of the various commentaries on the submissions on how Australian telecommunications should be structured in the future and the most rational of the public domain information is summarised here: http://www.theaustralian.news.com.au/business/story/0,28124,25627958-643,00.html Not that it provides any detail but it does touch on the crux of the situation which is how commercially sensibly can access to the exchange network be obtained in any "new iteration" of The PMG/Telcom Australia/Telstra/?. I cannot possibly have any sensible opinion because I have absolutely no detailed knowledge of any of the aspects of the incredibly complex details - a lack of detail I share with 99% of the people who do pontificate on this issue including the cretins who dreamed it up to rescue their "political credibility". So, when no detail is available any comment can, and probably should, be dismissed on that basis. However, and if it served any purpose, it is possible to simply go back to before the previous coalition government completed the legislation to privatise Telecom Australia/Telstra first proposed by the Hawke/Keating Labor governments some years before. It was done simply as a part of the initial 'Thatcherite' political stance that Govenment should get out of commerce (I know it's not that simple but it'll do for a 1,000 word musing that doesn't pretend to be 'serious'). The Coalition government wanted to maximise the financial return from the sale (frequently mentioning how Hawke/Keating sold off the Commonwealth bank and Qantas "far too cheaply") and between that ambition and a poor selection of commercial advisors the current mess was created (ignoring the advice that there had to be a separation of the "network" from the "retail" parts of Telecom Australia). So the base problem was created deliberately - maximising the money paid by the investors who would then, not unreasonably want a maximum return from their investment perpetuating the rationale that Telstra should charge every customer as much as 'the market would bear' because the Telstra decision makers first duty was to maximise the return for their shareholders. Of course when you have an effective monopoly (such as Telstra Australia) you can charge what you like because there is no competition and if ever see some competition arising then you use your monopoly position to make that competitive erosion to your monopoly as slow, painful and expensive as possible. As Krudd - fair shake (he presumably meat "suck" but his 'posiness' blew it) of the sauce bottle might say - "Blind Freddie could see that"....and indeed, anyone including the apochryphal Blind Freddie could indeed see exactly that. So the completely understandable and predictable result ensued - prices went up to pay the Telstra drones fatter salaries than previously and prices kept rising to pay for those salaries in the 'sheltered workshop' that all monopolies are - as an inevitability. The ACCC was meant to prevent the worse excesses of monopoly power but unscrupulous monopolists are almost impossible to defeat which has proven to be the case and will always prove to be the case moving forward....I doubt there is any 'commentator' that sees it any differently. So Krudd, to cover up the total fiasco that was his $A4.9 billion national broadband network by Christmas 2008 has bus ticketed out his multiple tens of billions of NBN2 and has re-engaged with Telstra to see what can now be done. Obviously the best thing for Australians (other than the shareholders in the Telstra monopoly) is not to have two or three or a dozen infrastructure builders but one (monopoly) that has no retail operation and a sensible structured pricing policy together with a sensible engineering interface policy that provides some form of competitive environment that is 'real' and sustainable. But, even "Blind Freddie" can see the problem with this scenario.....it's just creating two monopolies to replace the one that currently exists....and even worse it is creating an even more incompetent monopoly than already exists - and I realise how hard that is to believe but you have read that the Kruddster states that the government will own a fair chunk of the new monopoly....yes you didn't miss the irony....the Telecommunications Act was meant to get the government out of telecommunications. Not only is it doubling the monopolies but it is ensuring that Telstra retains the same level of domination that it has now. How does it do that? Well just how do you think the new monopoly is going to price any service it supplies? Personally I couldn't care less what happens - it will just swap one monopoly for two monopolies (one of which will have the dead hand of government interference to ensure prices remain sky high - the reason for privatising Telstra in the first place). I do fail to understand why the whole mess isn't left alone and the ACCC simply ensures that the current monopolist is forced to sell any 'declared' service at a realistic wholesale price that can be determined as the cost of delivering any service to any agreed point before one cent of retail cost is added. Too simple? Seems to work in every other industry in every other country around the world for the past 4,000 years. Sunday, June 14. 2009What Is A "No Frills" ISP?John Linton ....or, if it's easier, what is "frills".....when stupid people use such a phrase(s) when describing an ISP? I have seen it applied to Exetel over the years and I still have no idea what it means but at a meeting earlier last week it was casually used by one of Exetel's larger suppliers and I was so surprised at hearing it I asked them why they used that appellation? They couldn't tell me - although I pressed for a reason(s) so I got mildly annoyed (actuality I got really p***ed off) because, as far as I can see the phrase itself is pretty silly and applying it to something and then not being able to say why you have 'randomly' selected some meaningless and inapposite words makes the user even sillier - and I think I may have made that point. I don't know what it means or why its employed in the communications industry generally or in the ISP sector particularly. I assume it's intended pejoratively but, again, I can't see how it is 'justified'. However to hear an Exetel supplier use it caused me to re-assess why he was using it about Exetel (even though he said he didn't know). Over the five plus years of Exetel's existence we have continually changed almost every aspect of what and how we provide services and, as far as I can see, when I look at the offering of other ISPs, Exetel provides more of everything than ANY other Australian ISP and provides all of the "more" at a lower cost than any other ISP. So maybe that's the issue - we don't charge the ludicrously inflated prices of "frills" ISPs so by their definition we must offer less than they do? But we don't charge less because we have "stripped any "frills" out of the offering" (as far as I can see, and I look fairly regularly, we offer much more than anyone else) but because our five year dedication to providing services via inbuilt efficiencies doesn't burden us with the ludicrous overheads of the "frills included" ISPs (what ever a "frill" is but presumably there must be something otherwise their couldn't be a "no frills" description). So the lowest price (Exetel's) is not achieved by reducing anything but actually by adding a lot of things with the money saved by painstaking attention to AIMING at efficiency in every tiny aspect of running a service business and then STILL being able to continue to offer the lowest prices AND more value than any other provider. However that has always been the case - except for the "why don't we spend hours with you on the phone teaching you how to put your user name into your modem or configure your email for the millionth time" "frill" - so is that what is meant by being a "no frills ISP"? I really can't think of anything else it might mean. So.....it's easy enough to do....offer "support" that is prepared to "help" customers with anything that can be even mildly ascribed to providing an internet service. We can put such a help function in place if we ever decide it would be useful - which for five years we haven't. I doubt that the many, many tens of thousands of current customers who have used Exetel services for more than a year either want such a "frill" or want to pay for it . But for some new demographic customer it would be simple enough to do. I did some costings on what it would cost to provide 24 x 7 x 365 to the sort of customer whose attitude is: "let's have a chat for as long as it takes because my sheer laziness and total incompetence mean that it's much easier for me to sit on my fat backside and call you to fix something a mentally retarded guppy would be able to do in their sleep" as being their definition of "customer support". The cost to us would be around $7.00 an hour to provide "support" to people who have a service that works at the rated speed but want to waste someone's time untangling aspects of their use that they should really be able to do for themselves but choose not to. So a consideration in 'releasing' new plans in July will be to include either a separately charged function or build it in to the price of the plans themselves. If it was separately charged then we would create a 'buy in advance amount of support' with the ability to top it up if the customer ever wanted it - perhaps include an hour "free" in the initial sign up and provide a top up facility in the user facilities at say - $10.00 an hour. If it was built in - meaning that the reasonable customers paid for hand holding of nonessential issues for the unreasonable customers - it would add around $2.00 a month to every new plan. Either way - it can be done. I guess the other issue is not to assume that not all customers are reasonably sensible and understand that P2P downloads should be set for an incredibly generous off peak where they cost nothing against download allowances and don't place strains on various sectors of the network. It always seemed to me that anyone who had used the internet for a few nanoseconds would grasp that pretty basic situation but I have been consistently wrong. So this means we need to remove the NetEnforcer from the current network and replace the 'controls' that provides with raw bandwidth. I haven't worked out the cost of doing this yet but will complete the calculations, and get them double checked, over the next 72 hours. If my initial calculations are remotely correct then it would cost, at today's IP and back haul prices, approximately $A1.80 per customer per month to provide P2P users in peak times with no P2P restraints. Of course the issue is that 80% of our current customers (a very conservative figure as I think it's closer to 95%) don't use P2P at all or not in peak times so, once again, there is a $A2.00 per month cost for all customers so that a very small minority can indulge themselves unnecessarily - though they certainly wouldn't see it that way. If you follow this probably poorly set out 'logic' it seems that to eliminate the pejorative misuse of the meaningless words "no frills" all that is required is to increase broad band plan prices by $A5.00 and remove: 60 gb of peak for free 12 hours each day 100 free VoIp calls 30 free SMS 10 free Faxes 30% to 50% more peak quota than most other ISPs Free fixed IP Free DID and ......whatever else we were thinking of providing in the future......but then what the f*** would be the point of being in business? Saturday, June 13. 2009"Impossible" Tasks Are The Bane Of The Pedestrian Minded.....John Linton ....maybe it makes their brain hurt thinking about things that have no direct bearing on their personal enrichment or perhaps they are just ethically challenged and morality is a concept they were never introduced to during their upbringing? We met with two people (with two more teleconferenced in) from the Department Of Broadband etc yesterday as a part of their discussions with ISPs so they can brief the minister on, possibly, how to introduce a P2P illegal downloading policy for those ISPs who are prepared to 'voluntarily' agree with some yet to be decided (hence the purposes of this 'meet and greet' initial process) "guidelines". They were pleasant people with an apparently sound understanding of the issues and appeared to be genuinely interested in exploring our views as I am sure they had done with the one other ISP they had met with previously and the others they plan to meet with. I assumed they were looking to find some way of addressing copyright infringement along the same lines that the UK government has done but perhaps they were considering something tougher such as the laws passed by the Irish and the French governments. They were aware of the IIAA's positioning based on a meeting they had held with them late last year which appears to be that any response to copyright infringement notices involves: 1) Intolerable burdens on the ISPs to do anything 2) Huge costs involved in developing the processes 3) Huge costs of the operating the processes 4) No legal basis for doing anything etc, etc They had a set of points that the IIAA, and presumably others, had drawn up as to why it was impossible for an ISP to participate in any way with the control of the theft of other people's copyright. I had read them prior to the meeting (like all efficient people they had sent an agenda some three days before the meeting) and told them that everything they had asked about doing could easily be done at a trivial or zero cost by any ISP that wanted to do it....provided they used static IPs and at a very, very small cost if they used dynamic IPs. I also said that to implement 100% of their wish list would impose no operating cost on any ISP in any way and if anyone from any ISP continued to tell them anything to the contrary they were either simply lying or were so technically and managerially incompetent that they shouldn't hold any position in a commercial enterprise because they clearly lack the mental abilities to even tie their shoe laces. (maybe that's why they wear 'slip ons'?) So we answered their follow up questions and showed them how Exetel dealt with the emailed copyright infringement notices we receive via email to 'abuse@exetel.com.au' every day along with the trivial amount of code that is needed to do that completely automatically with 'no human intervention'. They were impressed that we actually dealt with copyright infringement notices at all (it was their understanding that due to the enormous burden and cost it was impossible for an ISP to actually do anything) and appeared to be very surprised that it could be done so easily, at no cost and with no human being involved by us for almost five years- again totally contrary to everything they had been previously told. They asked us if we had ever cut off anyone for receiving a copyright infringement notice and seemed intrigued with our answer that though we had never cut anyone off, a few customers each month elected to cut themselves off (by churning away at no contract cancellation fee). We explained that, as under the current laws we had no 100% certain way of knowing whether the copyright infringement notice was correct we simply passed the notice through to the alleged offenders email contact address and if we received a second notice we temporarily blocked the user's access via a 'block page until they took one of the simple actions available to them. The block page had a brief explanation as to why the service was blocked and how to unblock it (by simply clicking on a statement that the customer had either not infringed or had infringed but had complied with the copyright notice by removing the offending material. The page gives the, optional, opportunity for the alleged infringer to reply to the copyright notice issuer via an anonymous (Exetel) email address should they wish to do so. The third option is to not state that they deny the infringement and remain blocked which allows Exetel to completely absolve itself from any wrongdoing by: a) If the customer denies (by clicking on the "I deny infringing" option or by clicking on the "Sorry but I've now removed the offending material option) any infringement/continuing infringement then Exetel has complied with the issuer's requirements and needs take no further action as, legally as we understand the law to stand right now, we are faced with an accusation of uncertain legal validity on the one hand and a categorical denial on the other hand. We, clearly, have no basis for adjudication and so we are legally advised that we are 100% absolved of any further responsibility. b) If the end user we have blocked doesn't click on either of the denial/apology options then that user has, effectively, admitted breaching copyright and they remain blocked until they churn away - problem solved for Exetel (the customer made the decision on his/her own 'guilt' - not Exetel) and no 'blame' can be ascribed to us because the user has 'admitted' they did breach copyright and have no intention of complying with the breach notice's requests, nor with Exetel's terms and conditions of service supply. It complies completely, and ethically and, I think probably morally, with the situation and, under the present legislation allows us to operate our business with a clear conscience and with zero additional cost. Our visitors seemed to be impressed with both the legal elegance and the zero cost implementation of the solution that addresses every aspect of the "problem" completely and seemed more impressed that we had put it in place as a preventative measure many years ago (that everyone they talk to say is far too hard/impossible to address would seem to indicate that they are morally bankrupt and/or technically incompetent - well what other explanation can there be?). We made the final point that the code required to do it was available to anyone who wanted to download it under our open source policy if they truly believed it would take immense efforts and costs to write themselves. However the fact remains that until Australian legislation clarifies the situation the impasse must remain as far as any ISP is concerned - an ISP can pass on an alleged infringement but if the person whose IP is cited then denies the allegation that is the end of it - the ISP has no ability to determine which party is correct and is obliged by no Australian law to involve itself further - it certainly is in no position to "cut off the internet service". Our visitors left in, apparently, good spirits and I was equally pleased with what we may have accomplished. Friday, June 12. 2009New 'Research' Emphasises The Need For New PlansJohn Linton The end of the latest financial year is less than three weeks away and I have no recollection of where it's gone. I think that's partly because I have spent most the the past 11 plus months worrying about how the threatening financial situation around the world and especially in Australia would affect Exetel's ability to survive and if we were able to ensure it survived then what needed to be done to ensure it was able to grow and make the most of whatever opportunities came our way. As it turns out I seem to have wasted a whole year worrying about scenarios that never materialised and the twelve month period has turned out (given nothing changes in the next 19 days) pretty much like every other year of Exetel's existence. There is one major difference though. That is that the average data usage by residential customers has increased more rapidly over the past 12 months than in any 12 month period I have records for which is the past seven years. I was talking to a nice industry analyst today and I remembered that I have been heavily involved in the provision of internet services since the mid 1990s when 14.4kbps dial up was the only widely available residential service with 28.8 kbps still many months away. No need to concern yourself with data usage by customer in those days. I do understand that Exetel's 'average customer' is very different from Bigpond's 'average customer' and also different to almost every other ISP's 'average customer'. So what their average download by customer might be will be different because of the huge differences in the demographics of each company's user bases. My involvement with broad band goes back to 2002 and my records show the 'average usage over the years increasing rapidly but not anything like as rapidly as over the past year or so. The average monthly download per customer for the last few years looks something like this: 2002 - 1.1 gb 2003 - 1.6 gb 2004 - 2.0 gb 2005 - 2.7 gb 2006 - 2.9 gb 2007 - 3.3 gb 2008 - 3.6 gb 2009 - 4.5 gb A 25% increase over a 12 month period is a very, very large growth and if it holds true for the coming 12 months it will pose an interesting problem. Pricing of 'pure' IP bandwidth has fallen by about 30% in 2008 and by a further 2% or so in 2009 so pricing to the end user can be accommodated by Exetel in IP terms but it is the bandwidth between the customer and the Exetel switches that will present the problem in cost terms because it hasn't fallen at all so far in FY2009 though there were some significant reductions in FY2008 for ADSL2 connections. You also have to remember that Pipe peering, Akamai and PeerApp caching all combine to reduce the 'pure' IP pricing component but there is no such amelioration on the 'other side' of the network. As far as I can see, at the moment at least, the 'pure' IP cost reductions will reduce the overall cost of the data supply cost of the service based on today's significantly increased 'average' per user usage. However if the average downloads per customer keep increasing at the same rate as over the previous 12 months they won't continue to do that. It's an interesting 'problem' because it can be solved in only one realistic way (I am discounting raising the plan costs as inappropriate and quite hard to do) - by adding new customers whose average usage is much less than the average usage of current customers. Problem solved....or it would be if I knew how to do it - which I don't. At the moment our monthly ADSL order intake is continuing to slowly increase each month and I really don't want to play around with that scenario. If the advertising we do to promote the HSPA service is 'successful' it will be of assistance in reducing the average download per customer but it's unlikely to have much effect over the next few months. So, basically, the only option is to change/move the target demographic for the ADSL plans in to 'unknown' territory. While I'm not really a timorous person (we opened a company in Sri Lanka and bought our own floor space in what were meant to be difficult financial times this year) I really have been dithering over what to do about 'finding a new broad band market' for Exetel. I have prepared a new set of plans for both ADSL1 and ADSL2 which make financial sense but they don't appeal to me 'aesthetically' as they move away from the direction we have been heading in for the past 5 plus years which appeared, at least to me, to be finally 'paying off'. It's almost always dangerous moving target demographics especially when you have spent many years understanding one marketplace and have paid little attention to any other. I was surprised to be told today that 'general industry sources' put the annual churn rate of ADSL users at something like 25% and that the reason for churn was people were looking for a better service experience (as in help desk type service). While I can understand that concept I don't see it in the figures from our data base which puts our annual 'churn away' rate as something less than 7% with 'churn ins' at around 22% - so that information has further confused me. In our, absolutely not meaningful, small numbers it appears to me that people choose Exetel because of a lower plan/speed price and larger than 'average' download allowances. While far more people churn to Exetel rather than away from Exetel that is, mainly, simply a function of Exetel's tiny market share of users available to churn away versus the 50 times larger base of users available to churn to us. Yes. I know, statistics say that shouldn't be true but it is in this case. So if we throw away the base premises we have been refining for over five years what size of risk are we taking? I guess there's still a couple of weeks in which to make a 'final' decision. Thursday, June 11. 2009How Grateful Must We Be For A White Knight......John Linton .......and we must all be very grateful to Telstra who, seemingly, spend an awful lot of their own money to ensure that as little misleading as possible takes place. It is very reassuring to know that SOMEONE (or properly speaking - some organisation) truly cares about the great Australian public to the extent that they spend what appears to be a great deal of real money vigilantly scrutinising, what I can only assume is, every written word and every spoken or televised word relating to communications services on every web page, pamphlet, brochure, TV and radio ad, newspaper and magazine ad and press article that exists in Australia on every day of every week. I will be the very first to admit that I'm right up there contending for the title of "very worst proof reader in Australia". I therefore find it comforting to think that Telstra employs people (I assume it isn't one person given the amount of material that has to be scrutinised each day) to diligently read Exetel's web site because I have written every word of the many tens of thousands of words that appear on those pages and am always grateful for being advised of errors. While I am absolutely 'no angel' when it comes to writing generally (this blog for example) I am old enough and wise enough to understand that telling 'porkies' via words written on a public web site, especially words written to describe aspects of services you are offering that require being paid for is an absolute 'no no'. Therefore I have always thought that in doing such writing I have always been especially careful about making any claims that are not strictly true and, I had previously thought, I always erred on the conservative side in making such statements. So you can imagine my absolute amazement, if I was given to hyperbole I might almost say "absolute horror", to be advised by Telstra that I had made a statement on the Exetel web site that was: "patently false and untrue" Good grief, I said to myself, (or words to that effect) whatever have I done! What horrendous illegal acts of gross deception have I perpetrated that has caused so much damage to the Australian buying public???? I was so shaken up by this catastrophic offence that I had committed that, search as I might, I couldn't find the offending words (I was so shaken by the charge of gross written impropriety that I failed to notice the url reference at the bottom of the first page of the two page letter) so after a few minutes I called for help to find the criminally worded allurement. So a much calmer person pointed out the url to me.... ....but to my complete mystification I still couldn't see the offending words after scanning the page several times. So the kind, calm person came to my screen and pointed them out to me. Wow, I thought (or words to that effect).....that wording is a problem? The wording was on this url: http://www.exetel.com.au/business_hspa.php What was the wording that Telstra was demanding be removed (and, of course, was immediately removed) from the third section of this page?: "is usable pretty much anywhere in Australia" which has now been replaced with: "is usable throughout the Optus HSPA coverage areas. Telstra’s General Counsel – Telstra Consumer, insists that to avoid mis-leading any reader that it must also be pointed out that within any Optus coverage area there will be black spots which she says includes, but presumably are not limited to, those caused by elevators (lifts for Australian readers), high rise buildings, the device used and (although we don’t understand what this means) the use of an external antenna)." It took a few seconds to change the wording and doubtless it makes it clear that the coverage is limited to the areas noted on the Optus coverage maps. Of course an intelligent person (scanning the Exetel web site for information) would have, presumably, noted that Exetel had already, very conservatively made reference to the coverage being circumscribed by the referenced coverage maps and all other references including on the HSPA order form should someone actually proceed to order a service.....and this is on a business page that presumably is read (if in fact anyone has ever read it) by business people. Now, and I could be completely wrong, I would, personally, have thought that a business person would understand "pretty much everywhere" written on that particular page after the very specific previous disclaimers wouldn't apply to the 'empty' areas of Australia that, apart from being almost largely unreachable by 'business people', a possible business reader would understand that no mobile service was being claimed to exist either there or anywhere outside the specifically referenced coverage maps and the very specific order form cautions. However Telstra seemed to think "pretty much everywhere" implied the totality of the Australian continent. Perhaps it does/did? I, personally, cant see how any rational reader could possibly make such an assumption. So it took a few seconds to replace the offending words so, thank goodness, there will now never be an instance of some businessman dying in the middle of the Simpson Desert because he was unable to call for help on his Exetel HSPA service - as Forrest would say - "that's one thing less to worry about". I wonder whether Telstra will now insist that we contact the 3,000 or so customers who have bought the Exetel version of the Optus HSPA service to specifically remind them that they shouldn't attempt to try and make use of their HSPA service while trekking through the Bungle Bungles? I sometimes wonder if the writer of such letters as the one we received yesterday visualised themselves wasting their own and everyone else's time writing such dross when they were slogging through their law degree? I would have hoped that, apart from thinking about the money they planned to earn, they would have had some expectation ("dream" perhaps shouldn't be used in this context) of doing something useful for themselves and for their country and their fellow countrymen? Nevertheless we should all be grateful that Telstra is so diligently mindful of the ongoing need to protect the Australian public from the predatory behaviour of unscrupulous communicaton companies.....(there's something wrong with that sentence but I'm not sure what it is). Wednesday, June 10. 2009Are 'Off Shore' Back Offices A Real Benefit?John Linton Exetel has spent the past 12 months building up a 'back office' processing operation in Sri Lanka having started that process some 18 months before that in February/March 2006. We currently have some 25 employees in our Colombo office who handle all residential provisioning, sales and support and some programming. All going to plan we will transfer all residential accounts query handling and resolution and some network monitoring and we will continue to add programming personnel. We are very happy with what has been achieved to date and while we understand it is 'very early days' and that there is a very long way to go we see no problems with the plans we put in place some three years ago working out pretty much the way we had hoped in the immediate future just as they have done to date. I was therefore interested to read this article from the WSJ: http://online.wsj.com/article/SB124441864336692573.html and particularly these three statements: "In October, Citigroup sold its Indian information-technology operations to outsourcing firm Tata Consultancy Services Ltd. for $505 million, and awarded TCS a nine-year, $2.5 billion deal to provide the services back to it." An interesting reversal of position but maybe it makes sense financially to get an up front payment against an increased future cost. "Two months later, Citigroup also sold its business-process outsourcing operations to outsourcer Wipro Ltd. for $127 million, giving Wipro a six-year deal worth at least $500 million in exchange." Same scenario and presumably the same logic; but the following rationale seems a bit odd: "A Citigroup spokesman says the deals cut costs and allowed it to focus on its core business."
When Exetel looked at "out sourcing" it didn't take very long to reach Citigroup's first conclusion that the costs of having another company run your back office processes was barely less than the costs you could do that for yourself. On top of that you had lost all control of what would actually happen in the future in terms of operative training and supervision and, just as importantly, cost control. We received three indicative quotes from Indian call centres and each one of them was line ball with our then costs in Australia per person when the management and training fees were included and before the 'other costs' which were never made clear in terms of how they would be calculated or applied. We found the same problem with two Philippine call centre quotes and the quote from a Malaysian call centre turned out to be almost 25% more than we were then paying. When we decided that 'out sourcing' was a non-starter we looked at starting up our own operation in the Philippines, Singapore, Malaysia, India, Bulgaria and Sri Lanka and, for reasons previously given in an earlier musing quickly decided on Sri Lanka (despite the warnings of our own Trade Commission and other well meaning people about "the civil war", personnel safety and other negative issues). Like Citigroup and those other US companies in the article, we quickly determined that running your own 'back office' was considerably lower cost than buying an 'out sourced' service - not the 15/20% cited in the article but more like 40/50% if our then arithmetic was correct. So we went ahead and while it took longer than we first thought we have transferred several of our operations very successfully and we have certainly saved money and been able to deliver a much better service (in terms of hours and days available) than we could possibly have done in Australia. So, the article jolted me a little as I can't see what would change in the medium term future that would transform some indelibly obvious financial benefits into a negative (I certainly can't see how back office functions could ever become "non-core activities"). I have seen, and can see in the future, that transferring knowledge and then keeping it up to date with the many changes that occur in our businesses is a major problem that will never cease to be an issue. However that would be the case irrespective where the personnel were located. I can see that having personnel under the control of and therefore accommodating the ethos of, another company would be a major problem (ignoring the greater cost factors) and that makes me wonder what happened to make those US companies change their minds on the benefit of employing their own back office personnel. Maybe I'm just too inexperienced and too naive and I'm still in the "oohing and the ahhing" phase and still am unaware of the "running and screaming" phase that quickly follows let alone the "bleeding and the dying" finale (apologies to Michael Crichton). I am fully aware that 'managing' an operation in another country has many difficulties and many 'hidden' costs but the financial benefits are, as far as I have seen so far and can see over the coming twelve months, are so overwhelming that it isn't possible for me to see a putative "running and the screaming" scenario - and I genuinely don't believe Though, perhaps having passed the '5 year mark' the Australian company is no longer a start up? Tuesday, June 9. 2009Have The Late 1980s Made A Comeback?......John Linton .....in business communications sales processes? Perhaps the 'inducting' and subsequent training of sales people by communications companies has omitted a few basic facts or perhaps ethics are no longer either a word or a state of mind known to some communications companies sales personnel? I, completely inadvertently, 'came across' some correspondence between a major Australian carrier's business sales "business solution specialist" (it must be hard to have such a grandiloquent sounding title and be unable to write commercial grade English language sentences) and one of the carrier's smaller customers. Now I understood from the individual's name that English was quite possibly not his/her first language but it was so far from what would be expected from even today's semi illiterate English NSW high school HSC standards as to truly surprise me that such people, almost certainly highly intelligent and skilled in other ways, should have been deemed to be suitable to write business communications to current and possible future customers. I was particularly interested in a long, rambling and atrociously ungrammatical, badly misspelled and appallingly constructed rubbishing of Exetel in which the rep was providing information to the carrier's customer to replace the astronomically high priced service that the customer was already using and the even higher price service the carrier was suggesting the customer should replace it with. Interestingly the carrier's "business consultant" included a statement to the effect that the more expensive replacement service "would be much more reliable than the [current service provided by the carrier] - I don't think I've ever seen something like that before in a selling cycle. The carrier's "business consultant" left nothing to the customer's imagination in giving his opinions on how inadequate Exetel was as a company and how inadequate the infrastructure it used was "their services run across the public internet" was one of the lesser denigrations). Apart from totally vilifying Exetel in the most obviously false ways he didn't stop there. He included his personal experiences of working for two of Exetel's infrastructure providers in the most derogatory of terms effectively claiming they had nothing to offer to business customers and often lied to customers about their capabilities. It isn't any sort of a problem (the fact that I "came across" the documentation is a fairly clear indication of what the carrier's customer thought of its veracity) but it was helpful in understanding that in 2009 such terribly written cr** can be written by the sales employee of a major Australian carrier. I think I would terminate the employment of an Exetel sales person who would be stupid enough to write anti-competitor rubbish like that - but that could never happen because we don't hire sales people who can't use written English correctly in the first place and none of them would ever be stupid enough to write stupid lies that can be refuted, categorically by the customer themselves. I have only given it more consideration than getting mild amusement at the thought that a large Australian carrier can employ such people because I did wonder whether this was an aberration or whether it represented the wider hiring policies of communication companies in 2009. Personally, I have to think it's an aberration or, more likely, some highly skilled engineer who is a recent migrant to Australia temporarily filling a semi-sales role while the sales person responsible for the account is on holidays/sick/being educated/whatever and completely misunderstanding what he/she would be allowed to say/write and why silly outright lies are a bit of a problem in most Australian business environments. As we are embarking on a program to build a 'corporate' sales force from 'scratch it was a timely reminder of just how careful you have to be in what you 'teach' your sales people about presenting solutions and how not to 'trash' possible competitors other than to provide public record 'facts and figures' should they be relevant to any particular situation. It isn't a difficult thing to do and if it is 'taught' early in a sales person's career it should never be a problem for the individual or for the company who employs them. I thought the "knocking the opposition" school of sales sleaze died out some time in the later years of the last century but perhaps I'm wrong. As someone who has been involved in sales operations for practically the whole of my working life I can't think of a situation over the past four decades of 'knocking the opposition' ever worked but I can recall dozens where it completely 'backfired'. Being an 'old fashioned' type of company we don't think sales people should speak or write anything that will lessen their chances of making a 'sale' - and number one on that 'list' is NOT making any comment about any competitor. To support that view we are trying desperately hard to provide our new sales trainees with as much documentation as possible to base their written and verbal approaches to prospective customers on - something that we are currently not as successful as we should be at this stage but something that will continue to get more attention. Fortunately we don't have to spend the time and money on teaching them to speak and write acceptable English. One day we will find the 'perfect' method of teaching new employees how to sell communications services more quickly than we have been able to do to date. One very positive sign is that the first intake of Exetel sales trainees have exceeded the results of any intake program I have been associated with in the past and I have always thought I had been associated with two or three of the best business sales forces in Australia. We are about to embark upon the second phase of that program and I will ensure that there is a more prominent re-inforcement of how not to speak about competitors. PS: ...and so it came to the obvious conclusion earlier today (10/6/09) - the customer dumped their current provider and ordered from Exetel and recommended to several of his friends in other companies buying the same carrier's same service that they should do the same. It never pays to 'knock' a competitor. Monday, June 8. 2009Is This 20 Something Year Old Exetel's Next CEO?John Linton Small companies, of which Exetel may be on the brink of becoming one, have many difficult problems to deal with from the first day of their creation and few survive very long before one of those problems forces the company to cease operating and either sell up to a competitor ar simply go out of business. That almost always happens to 99% or so of all start up companies in their first five years unless they have an enormous amount of good fortune or they have such a good idea it is an inevitability that they should succeed (Microsoft, Google, Apple, Cisco etc in the modern era are a few of the more obvious examples of ideas whose 'time had come'). Exetel never had an overwhelmingly good idea to base its business on and certainly not anything even vaguely unique so it has had to rely on its share of good luck and some semblances of sound management and tough mindedness to overcome the business life ending threats it has been confronted with over the years. That's allowed us, at least so far, to survive and grow for almost five and a half years and, hopefully will allow us to continue to grow over the coming new financial year and then - all things being dealt with beyond that. One thing that is concomitant to time passing is that, as they get older, some individuals gain more knowledge and more competencies while some simply conform to that old saying that they don't have ten years of experience they just have one year's experience repeated for ten successive years. There is no real way for any particular individual to determine which category they fall into (if either) and little way for a colleague or employer to assess - let alone the individual themselves. Obviously some people just get older, and if they start a company up when they are as old as I was when I was a part of starting Exetel then time passing wreaks much greater and more obvious 'havoc' on your mind and body than if you are in your 20s, 30s or even 40s. Which leads to the greatest challenge for a business that manages to grow from tiny to small. What do you do about "succession planning" or, in less grandiose terms, how do you put in place the people who will effectively manage both the current processes and develop the new processes that need to be put in pace continually to ensure that the company continues to 'stay alive' and, if that is the overall company plan, to continue to grow when its founders want to do other things? Tiny companies, by definition, can have no 'succession plan' as they are almost always started up by one or more talented individuals who do an enormous amount of work themselves and their early recruitment (unless they are very forward looking) is based on adding 'operatives' to allow the founders to pass over the less 'intellectual' or knowledge based work involved in developing the business or people with alents different to those required in the 'core' business - there is seldom the ability of hiring people who are good at the 'lower level' work involved in being part of developing a start up business as well as having the potential for seamlessly moving to progressively more complex assignments including the most complex of all business capabilities - hiring, managing and developing other people. Exetel has dealt with this issue, so far, by being insightful, and lucky, in its hiring and recently splitting the company in to two separate operations of roughly equal sizes (in terms of numbers of personnel) to make the structural diversity narrower in each of the two 'halves'. By paying for an MBA course for one person (to give external views of various aspects of management theory) and by carefully 'orchestrating' the year by year activities of some other people we have managed to provide the company with reasonably competent 'management' capabilities. So far so good - or pretty much so. With, possibly, more rapid growth over the coming five years (assuming Exetel continues to survive) we will need a different type of person to manage both various aspects of the company and the company as a whole in Australia. Doing this, if in fact it can be done at all, is going to be extremely difficult for all of the conventional reasons and, in Exetel's case, for a couple of unconventional reasons - those being why we are in business in the first place - and the fact that we aren't too far away from our tiny start up date and therefore have, in general Australian business terms, a personnel base of very, very young and very, very inexperienced people. I don't know what we will eventually do in terms of managing our business by the end of 2010, assuming we survive, but it is pretty certain that we will need to be managing a $A80 million or so business with a group of people largely under 30 all of whom have never had a 'serious' job outside the very different operating environment of Exetel. It makes the hiring process very interesting when one of the major characteristics you look for is "can you see this incredibly young and inexperienced person as the CEO of the company in a few years time"? Sunday, June 7. 2009I've Heard The Phrase "Trust Me - I'm A Doctor.....John Linton but I haven't heard "Trust Me - I'm A Business Consultant"...until I saw it written in an email late last night by one of the most petulant and self obsessed specimens of Homo advisus - though given the lateness of the hour on a long weekend Saturday, he must have either been intoxicated on his own self importance or from what comes out of bottles and cans. Never was there a more deserving recipient of the old phrase - "those that can't do, teach and those that can't teach - advise." I'm not sure what the popular of 'least respected' occupations is at the moment but I think 'business consultant' and 'financial planner' would be vying with the traditional permanent holders of the most disrespected occupations title (used car salesman, rental real estate salesman and, at least in the EU, double gazing salesman). I have been meeting with more 'business consultants' and 'business advisors' than usual over the past 6 - 8 weeks as Exetel is becoming increasingly involved in areas way beyond the previous business experiences of any of our, with one or two exceptions, very young and inexperienced personnel. This has meant that we have needed to get advice in several areas that are well beyond the capabilities of our long term legal and accounting consultants. The obvious areas required by our decision to advertise in rural/regional Australia have meant understanding not just the advertising aspects but how to source and import disparate hardware and deal with tariffs, customs, insurance levels and warranty issues and then all of the issues with 'fulfilment' - all of which are more than a little complex for the novice. The changes to the IR laws and the almost ad hoc "rabbit out of the hat' aproach to introduction, change, reversal, more change, canning or bill passing of different aspects of IR and general personnel regulation are not just a little bewildering. Then there was the R and D grant legislation and the list goes on. So, by my count over a cup of coffee this morning I have been to 5 'seminars' (sales pitches disguised as information sessions) and have met with nine other organisations to try and get my head around just what we are becoming exposed to if we proceed along the current planned paths over the coming months. So in the past eight weeks I have had the opportunity of observing, in their natural environment, over 30 specimens of Homo advisus. For those of you unfamiliar with this species the following entry from the wikilintonea may be helpful: "Homo advisus (pronounced /ˈhoʊmoʊ ˈadvəes While, of course, there are several exceptions to the above generic description it is widely applicable to my recent observatons of the 'business advisors' (as opposed to the topic specific advisors who don't fit that description at all and are obviously deeply knowledgeable and amazingly good value). We got caught up with several specimens as described in that wiki entry via several misadventures including suggestions from one of our suppliers and our bank. I'm sure the recommendations were given with the best of intentions but, dear me, what a lot of cr** 'business advisors' are capable of cramming in to one sentence and then, amazingly, go on to construct a string of sentences in the same way - none of which contains a coherent thought. Amazing though it might seem in 2009 I even saw one of the more moronic "business advisers' using a quote from Vince Lombardi which I hadn't seen since the early 1970s. (the Green Bay Packer's coach of that time was a favourite source of homilies by the mentally challenged 'marketing experts' in the 1970s - but FCS that was almost 40 years ago!). Why do we need 'advice'? Basically because we have grown from a tiny company to a small company and we, apparently, have a major weakness as viewed by at least one supplier and our long term bank which is that we have a dearth of 'management' and are too reliant on 3 or 4 people to continue growing at the rate we have and the rate we are planning to do. I can't disagree with that simplistic view and I kept my mouth shut when I was tempted to say "but that's the way we planned it to be at this stage of Exetel's existence". So I have listened to several specimens of Homo advisus and I can only conclude that if they ever did have a genuine insight or a genuinely novel idea it has long been buried under a verbal and written deluge of total nonsense and simplistic gibberish - both couched in the most verbose terms. We have addressed the issues of growth in the only way possible for a small company that never has enough money to afford 'experienced' managers (even if we wanted them) - we have removed as many of the 'traditional' management positions that exist in 'conventional' companies as we could from our first day to today and when we could see that we were going to grow past 50 personnel we split the company in to two companies - one in Australia and one in Sri Lanka so that we could continue to grow for another 18 months or so without changing anything we did in terms of management structure. (that was something none of the homo advisus people came up with in their "addressing the problems of managing growth" sessions - they actually have no ideas on how to manage growth because they have never been involved in doing that). So I've learned nothing from the 'general business advisors' and 'company coaches' I've wasted time with over the past eight weeks other than that people who choose such occupations may as well be a completely different species for all the ability they have to relate to the realities I perceive in today's business. I'm sure they would defend that accusation by saying that I must have a totally closed mind that is incapable of accepting thinking different to my own - that could well be the case. The only saving grace that I can see for being a business consultant/coach is that they earn a lot more money than used car salesmen and in the 'circle of life' they act as minor predators (the jackal of the African grasslands springs to mind) that kill off less robust small businesses stupid enough to take their advice leaving more room to grow for small companies that actually believe they know what they are doing. Saturday, June 6. 2009
If God Had Wanted Cost Efficiency In ... Posted by John Linton
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Comments (10) Trackbacks (0) If God Had Wanted Cost Efficiency In Business.......John Linton .......he wouldn't have invented Telstra. For those of you who read my earlier peroration on Exetel being too cheap for some financial controllers (whose knowledge of IT and communications is on a par with their ability to decipher one of the earlier Sumer valley cuneiform variations) I thought you may have been interested in 'what happened next' as it would probably come as a surprise to you, as it did to me, that there was a next. To cut a long story short I was sufficiently 'miffed' by the statements about low pricing = low quality that I did something I haven't done for a very long time - I decided I would stir the pot, or perhaps the mind of the person who had 'miffed' me by providing some trouble making information that would at least screw up the cosy incumbency if I could do that simply.....and, quite surprisingly, it had a greater impact than I had expected. I sent this email: "Dear 'rrrrrrrr', Thank you for taking the time to explain the reasons why you will not be asking Exetel to bid for your upcoming network tender although you and 40 other members of your company have a long and trouble free experience in using several different Exetel broadband services in your homes for both your families personal use and, more importantly, as VPN connections to your company's intranet. I fully understand that small companies are, by your definition, less able to provide the level of reliability and support that larger businesses require in their key infrastructures and that you believe that there are substantial differences between Exetel's demonstrated abilities, for over three years, to provide your personnel with 'residential' connections in their 40 different locations around Australia than providing connections to 22 business locations around Australia. As we have known each other for a very long time I thought you would be interested in knowing, should you be seeking a bid from your current VPN provider (or in your case the third party systems integrator you prefer to use to provide the services as you believe they provide a higher level of service than the carrier itself), that the basic costs of providing internet services over high speed 'business grade' links has fallen quite considerably over the past year or so and even more considerably since you, for reasons best known to you at the time, locked your company in to a fixed price contract for 48 months. The costs of the IP content you are currently paying in your contract are over $750.00 per gigabyte for (as advised by you during our telephone conversation) have fallen over 80% over that time and, as you will see from this press release, they have actually fallen at least 44% (from prices much lower than you are paying) quite recently: http://www.southerncrosscables.com/public/home/whatsnewdetail.cfm?WhatsNewID=69 I could provide you with other recent announcements of a similar nature but I'm sure that both you and 'aaaaaaa' are quite familiar with these and other price movements in the IP and transit fibre/cable aspects of delivering data communications services around Australia. Should the communications companies who bid for your business bid similar or even slightly lower prices than you are currently paying it might be sensible for you to get someone in your company to spend a few minutes doing some 'google' research to arm yourslef with some incontovertible facts and figures on just how business communications pricing has fallen over the years since you last made a decision on who you should use. Any way it was good to talk with you again and I wish you every success with your future network provider which you would have to pay far less for than you are currently paying. Kind Regards John" First thing the next morning I got a call on my mobile from my business acquaintance apologising for how he had come across during our phone conversation and saying that he would welcome a bid from Exetel for the VPN and would we also separately bid to replace their telephone systems with the VoIP systems I had talked about and demonstrated at the recent 'seminar' he had attended. We had an amiable disussion during which I, again, said that I completely understood his company's views and didn't disagree with them at all. I thanked him for his re-consideration and said I would think about what Exetel could perhaps do for him in terms of assisting his company use similar VoIP services to the systems Exetel had developed over the past three years. I hung up the phone with a guilty feeling of satisfaction that human beings are so simple to manipulate if you can find a way of pressing the "you're being ripped off" 'button'. Later today I'll send him a "after considerable thought we have decided not to..." email together with three more references on price falls and two other issues which, in the unlikely event he attends to work issues during a long weekend, will really annoy him and make his 'grievance' with his current provider even more irksome....I'm pretty sure the current provider will not retain the business. Petty? Quite possibly. But also very satisfying.
Friday, June 5. 2009When Is A Lot Of Information Too Much?John Linton When we started Exetel we simultaneously started a process of systems development aimed at building a web based business that would automate practically everything associated with finding customers and then accepting their orders, provisioning their services, allowing them to log problems and resolving problems, billing, collecting payment, resolving billing issues and.....in fact everything associated with any aspect of providing a service. Something practically no start up company would ever consider wasting scarce resources and money doing because the 'pay off' is so far in the future. At the same time, and as a necessary 'support' to the automation of those processes we decided to provide total 'transparency' in terms of providing customers with information and 'visibility' of the 'mechanics' of the services we were providing to them and access to the views, reasoning and decision making of the people running the company and a true ability to take any concerns they had to the 'top' and have them instantly responded to. Together with those aspects we also decided to provide an ongoing capability for any customer who chose to do so to continually participate in Exetel's future decision making in terms of the services and 'plans' it offered and all other aspects of operating a start up and then constantly growing small business. Sounds like a whole heap of meaningless BS? It certainly would be if it hadn't actually been meticulously carried out every day of Exetel's existence since January 4th 2004. What has happened over the past 5 plus years is that we have done, and continue to do, all of those things and have stayed with those policies through the many, many difficult times we have gone through over the years. Some of those difficult times have been of our own making - many more have not. Throughout those years the directors of the company, and what constitutes 'senior' operational management in a start up company, have spent much of their time directly communicating with our customers either by reponding directly to emails or posting on our two fora and providing an unparalleled array of tools for customers to see exactly what is happening within Exetel's network and operating procedures. We have never stopped automating our operational procedures and processes and have built a totally integrated management system that, according to a very large UK company that has looked at it in detail over twelve months, is superior to anything they have ever looked at (including their own in house developed systems that have cost them over 8 million euros so far) by the proverbial 'country mile'. Our view is that we have a long way to go in developing our systems but we know that, as long as we remain in business, that will aways be the case. As part of the 'operating transparency' we have always provided our customers with full access to our Network Operation Centre in terms of minute by minute views of our MRTG reports on every key link that could affect a data customer (broadband, wireless) anywhere in Australia to assist them know whether any problem in speed they might encounter is actually being caused by network congestion/downs under Exetel's control. As far as I know, no other network service provider in Australia provides such 'confidential' information to their customers. Yesterday, as a result of recently transferring our telephone facilities to our own developed software VoIP PABX, we have added the first of several new 'tools' to provide customers with total visibility of possible call wait times should they contact sales, support or provisioning. They now have the same view of call queues as our call centre and other management: http://www.exetel.com.au/contact.php This live report now supplements the 'historical' report that has been available for some time that shows average call wait times by day going back several months that is published on the Exetel User Forum here: http://forum.exetel.com.au/viewtopic.php?f=324&t=27043 Over the next few weeks we will add to these tools to give more information on ticket answering times and status as well as some new customer 'self help' tools that will allow the end user to 'look into' and resolve some issues that may be affecting their service due to temporary issues with some common aspects of carrier line issues. These new tools, together with some re-working of the current Exetel User Facilities (themselves almost 100% designed to provide information based on customer suggestions over more than five years) will give Exetel customers more useful information, tools and controls than any other communications service provider of which I am aware and I base that statement on first hand knowledge of using the "user facilities" of ten of the larger, including the largest, ISPs in Australia. I find it interesting to check the facilities of other ISPs and check their marketing hype against reality - perhaps I have a jaundiced viewbut I find the user facilities of many ISPs downright primitive in many respects. However, while it is just a step along the way, we are 5 years closer to developing a 'full service' communications company that has the lowest possible cost of operating of any competitor which is and was the over riding reason for putting in so much time, effort and money - and living with the down side that operating 'naked' sometimes entails. Thursday, June 4. 2009Exetel - Too "Cheap" To Be Considered......John Linton ....at least by some business users. I talked to the Financial Controller of a prospective business customer earlier this evening who was considering asking Exetel to bid for their busness in the new financial year as we had been suggested by their MIS manager who uses Exetel at home and who has recommended Exetel to over 40 current personnel within the prospective customer's company (including by the financial controller who said the Exetel ADSL1 service hadn't "missed a beat" in the three years he has had it). The company has a largish branch office network with over 20 locations and they do some high volume file transfers between the offices - often more the a gigabyte per file and sometimes up to 50 gigabytes as well as the usual secure email and intranet uses. They currently use one of the very large carrier's infrastructures resold to them by a highly regarded 'systems integrator'. The purpose of the call from the company's FC (with whom I've been acquainted on and off for a very long time) was to seek clarification of his MIS manager's estimate of the possible savings the company could make by replacing their current network links with links from Exetel which his MIS manager had priced from our web site as a rough guide to what savings might be achieved if they were to change providers. If the rough estimate was correct the possible savings had been calculated as being around 80% per month - reducing their current monthy spend from a little under $A50,000 a month to something around $A8,000 a month. I couldn't really make any sensible comment other than to confirm the monthly cost of several different 'sized' links as being correctly read from our business web site which was all that was being sought. We had a pleasant conversation with a negative outcome in that we agreed that Exetel was not the sort of provider that his company should seriously consider and that it would be a waste of both companies time if we were to be asked to tender for the business - because we were "just too cheap". We also weren't "professional" in publishing our pricing on a web site ("none of the major companies do") because "business networking is much too complex to be able to be costed simplistically unlike residential services"..... and, for the record, I'm sure those comments were not made with any intention of being offensive and I certainly didn't regard them as offensive in any way. I ended the conversation as soon as I politely could and wished him every success with his forthcoming tender. I think we would have liked to bid for the business (and truthfully a 22 or so link star network is hardly rocket science in 2009 even for a "cheap provider") but perception in many decision makers is everything and it was absolutely the correct thing to do not to waste the time asking a supplier to bid for your business when you know you will not seriously consider them. I have heard the comment made several times that by pricing our services so inexpensively we give the impression that there must be key elements missing that "the larger professional network providers" deliver which accounts for the price differences. Perhaps these 'larger' network providers do incorporate other elements in their pricing that Exetel don't - though I have no idea what such elements might be other than massive mark ups and their fat and unnecessary sales and management structures. Then again I am obviously too inexperienced in selling, managing and supporting network services to really understand what I'm talking about. I never know whether the people talking to me in these terms realise the irony in what they say. After all, I am a key decision maker in selecting the suppliers of a network infrastructure that supports around 100,000 users and I play some part in selecting the personnel who manage the ongoing supply of those services 24 x 7 x 365 and have a very, very key interest in those services being delivered at the highest possible levels of up time and at the lowest possible costs consistent with delivering the reliability and consistency. In my capacity as a buyer of the 'components' that are needed to operate an Australia wide network I am probably better qualified in terms of understanding the real cost vs reliability trade offs and the day by day changes in the pricing of all network components than any buyer below the $A3,000,000 per month that Exetel spends on network services every month. But apparently not in the eyes of the people who tell me about their need for "safety" and their need for "reliabiity". Do they really think I don't have to take those factors in to consideration in deploying Exetel's network infrastructures? It does pose a significant challege for us though as we attempt to quadruple our business user base over the coming 12 months - the simplest of all challenges - how high do we mark up our sales prices so we aren't perceived as "cheap" and therefore somehow "deficient" in the "content" of the services we offer but low enough to retain a competitive advantage and to continue to meet the objectives we set for Exetel back in December 2003. I have been thinking about this issue (admittedly not particularly hard) for some three or four months and as I slowly and very reluctantly turn my mind to "marketing" and "promotion" and away from simplicity, clarity and common sense. My current view is to cheat the customer the same way so many other communications providers do and play games with the pricing by raising the price from our current levels to something like the same as one of the most expensive providers but then offer every second month "free" or the first 6 months "free" on a 24 month contract. Alternatively I suppose I am going to have to become a "professional" and work out what all the expensive elements I have left out of the current services that makes them so "cheap". (though after so many decades of selling IT services I think it's almost certainly too late to aspire to the "professional standards" of our competitors). PS: and on the subject of irony - the last 'request' from the company before the conversation ended was a request to lower the prices of our employee plans as "in these difficult times" every employee of this particular company had just had their salaries frozen for the coming financial year and it would be a help!. Wednesday, June 3. 2009Czechoslovakia Jan - Aug 1968? UK Sep 1939 - May 1940?......John Linton .......Australia November 2007 - June 2009? I read this morning's financial and technical on line media this morning with a little more care than usual as I have some concerns about what may happen in Australia later this year if, as the most obvious current example, General Motor's disposes of its Holden subsidiary in Australia. This wasn't very encouraging: http://online.wsj.com/article/SB124390025302374483.html#mod=article-outset-box but the problems that GM has in the US are so overwhelming that it adds nothing to the information regarding the Australian Holden's future. While I personally wouldn't buy a Holden I understand that many other people do and that Holden, and just as importantly the many hundreds of suppliers to Holden, provide employment for up to 10,000 Australians. While the Australian management at Holden are very positive about the company's future (as are the Labor government who have ponied up over $A6 billion in actual and promised subsidies) you only have to look at GM's OPEL and Vauxhall subsidiaries in the UK to see what has happened there - and that situation benefits from the deeply vested interests of a giant Canadian GM parts maker and a Russian oligarch with a huge vested interest in picking up a modern manufacturing plant at fire sale prices. Neither of those fortuitous circumstances seem to apply to Holden. However, irrespective of what happens in the particular case of Holden (and I certainly know as little about that as any other casual observer) my concerns are simply based on the fact that if 10,000 Australians lost their jobs via one large event (such as the closure of Holden either totally or a significant part of it - which seems inevitable) then will that be the 'trigger' for a domino effect as suppliers and creditors to Holden also have to close up and the banks and the Labor government lose their loans and subsidies? As the Australian media constantly points out - Australians generally and Australian businesses generally haven't been affected by the GFC yet and that view seems to be turning to the even more optimistic view that "the worst has passed" and Australia may not be any more badly affected than it has already experienced. It would be nice to believe that is true or even partially true and I, personally, haven't seen any negative affect on our tiny business or in our personal lives. Which begs the question as to why there is a just announced massive government deficit and why tax revenues from business are said to have dropped like a stone - and of course the share market has almost halved and.....please add the details you are aware of. In the cited article the main reference is to continuing denial in the face of irrefutable evidence of massive systemic financial problems that were so obvious it is impossible to understand why the CEO and board continued to deny their existence right up to the point where the company ran out of money. Is what is being said in Australia the same/similar denials that are so obvious to see in the GM statements for the past year? Krudd keeps talking about how his plans are firmly in place to "recover from the recession"....but there is no sign that there is a recession if you ignore aren't a BHP, PBG etc recently ex employee who has lost their job or a Holden employee who is on one half or one third of normal hours. To the contrary, the Australian media point out that retail sales are booming, housing starts are booming and that, somehow, even the terms of overseas trade are moving favourably. But if retail sales are booming what is to be made of this: http://www.smh.com.au/national/sales-fail-to-excite-sydney-shoppers-20090603-buqx.html .....another example of why I find it hard to discern a pattern when so much information provided conflicts with information from other sources. Perhaps the PRC, Korea and Japan will continue to place orders so that BHP and Rio can continue to dig up Western Australia and Queensland and ship it off to Asia and that will keep everyone (except the merchant bankers) employed and restore the government's tax take and will allow everyone else to keep buying large screen TVs and Holden and Ford and Toyota cars? Perhaps it's as simple as that. Whatever the situation actually is, I can't get even a glimpse of an indication of what might happen over the coming months and I have done my absolute best over the past eighteen months to try and get some sort of 'layman's' idea. Our payment defaults on the June recurrent bill run were slightly up on the first pass but after a day have been paid down to below what they average for the third day of the month so there is no sign there though there were two businesses that defaulted on their monthly payment which may be some sort of sign. Perhaps it will all become clearer soon? Then again: http://business.theage.com.au/business/australia-dodges-recession-20090603-buyq.html perhaps not. Maybe I'm just losing my nerve after so many years of starting up a small business and then trying to keep it 'alive' at an age when all sensible people should be doing anything but that. Tuesday, June 2. 2009Dog Days In The Mid Year Doldrums A Little Earlier This Year?John Linton The pre-end of financial year blues seem to have come earlier than usual this year judging by the lack of activity in the CBD when I was there yesterday for a lunch with our lawyers. We went to a newly opened 'smart' restaurant (in itself an unusual occurrence in an 'economic downturn') and, being a creature of habit, I arrived early and had time for a chat with the nice lady who showed me to the table and then the person who offered me something to drink. Their views were that although they had done very well since their recent opening 'business lunches' were completely 'dead' around the restaurants favoured by the denizens of the area bounded by Macquarie, Market, Sussex Streets and the quay. Both of them had come from other notable Sydney eating holes and both said that they had been 'let go' and were lucky they found their jobs at the new restaurant so quickly. The new restaurant is very, very large, at least by CBD standards and seemed to employ a larger number of staf than I am accustomed to seeing in such places. Looking round the parts of the restaurant I could see (and it's a large place) I picked out several people I recognised from either a very brief acquaintance or from the media as being some of the more 'stellar' heights of the Sydney business community and the local riff raff that are domiciled just up the road in what passes for the NSW parliament. By the time we left (and although we were by no means the first to arrive we were probably the first to leave) the wine and 'digestifs' were flowing very freely and the noise had reached an uncomfortable level even though the table distribution was more than reasonable. Clearly, although only the first 'working day of the week' there were more than a few high profile business leaders and money men with little to occupy their time in their own offices which given their likely alcohol consumption was probably for the best. I can't complain of course having taken time away from the office after the exhausting events of last week to have a decent lunch on the pretense of reviewing Exetel's current legal issues. While we did briefly talk about a couple of legal matters I actually don't remember what they were - we too had a superfluity of stuff that comes in bottles. Over the past 10 days or so I have talked to a number of business acquaintances about business 'trends' based on what's happening in their range of different businesses and there is an evident trend downwards in terms of general business activity for most if not all of them. Usually you can 'plan' on business activities becoming quiet from around mid June to the end of July each year in many industries and particularly in those industries that have a significant part of their activities involved with Local, State or Federal government but this year, from what I can tell, business seems to have slowed down in May for most of the people I talk with and they are now wondering whether the 'phoney recession' is maybe moving towards something more 'real'? I can't tell as our business is too small generally and we have no governemnt business of any magnitude and, touch wood, we have only seen a continual increase in our month on month business. June revenues over our various product/service offerings will be a good guide as to what is happening because, even in non-government related business, it tends to slow down as the bean counters put 'holds' on new orders and new projects to make it easier to complete the year end accounts and then get the fiduciary reporting done by the October dead lines. Our first June day was a little slower than the usual first order day of the month but still a good result - in as much as any single day can be regarded as any sort of guide. Two of our larger suppliers called to say they thought our May orders were very strong (which they were) and asked for a June estimate which I gave them and they seemed quite happy with the estimates which indicated to me that perhaps some of their other wholesale customers weren't being very optimistic. We have to absorb the costs of the new fit out and the costs of moving in the current month so our cash flow will take a hit but because of the various federal government 'incentives' we will actually improve our next quarter cash flows because of the big drop those incentives will give to the pay as you go/running balance payments due to the ATO (as well as the positive tax result for the FY2009 financial year. We had always planned to be very cautious in terms of spending in June and July because of the inevitable cost over runs of a move. So a time, even for us, of accounting, legal and organisational, administrative and personnel detail rather than sales and promotion and technical tasks and processes which are pre-eminent for the other ten and a half months of the year. I have looked at my personal calendar for June and found that I have nothing interesting in the schedule day after day for the next four weeks and the days are even more crammed than in the average month - so even tiny companies and their managers get caught up in the dog days even if only by assimilation and/or default. There are some bright spots and we need to find time for an end of financial year 'party' to celebrate a very significant year in our short history - finding time to do that and the 'planning' might be difficult though.
Monday, June 1. 2009May Was, In Many Ways, A Watershed Month For ExetelJohn Linton May has come to an end which leaves just one month to complete this financial year. May was another record month in terms of revenues and increased customers for every one of our services (just like every month from February 2004 has been) - very nice to see. I have no 'benchmark against which to judge Exetel's growth other than the 'average growth for the communications industry reported by the ABS from time to time so I never know whether Exetel is doing as well, better or worse than the people we compete with. I make the assumption that if we grow each month then our customers are happy enough with us to both continue to use our services and to recommend them to other people which is a positive indication of how the company is performing. I remain fascinated that ADSL1 sales remain so high but obviously there are many places where ADSL2 can't be obtained or perhaps can't be obtained at a reasonable price as it's only available from Telstra or a Telstra reseller. Our HSPA revenue continues to grow at a slightly faster rate which is encouraging given the preponderance of advertising and promotion being used by the carriers and their retail outlets. Our business connections are growing much faster because we have begun to put in place a business outbound sales force so that is to be expected. Our plans for FY2010 now contain a modest HSPA promotion budget and money to support our agents plus a big increase in money for the corporate sales force so hopefully we will see slightly stronger growth over the next few months than we have seen in the past. I always get a kick from looking at our monthly recurrent billing reports on the first of every month and get a lot of satisfaction from seeing the visible progress that is always made but, on top of the very full workload running a tiny communications company usually imposes, May has been a somewhat frantic month in many other, largely very positive, respects. Courtesy of an apparently ethics-bereft land lord/estate agent - an insight into the landlord's interesting views and practices can be gauged from this article about another of their properties: http://www.smh.com.au/national/residents-savage-basement-zoo-plan-as-hideous-20090530-br16.html we will operate from our newly fitted out premises from today. That has meant that, a little earlier than we had expected, we have moved to using a telephone PABX and other telephone capabilities supporting 100,000 customers via connecting them to two offices in two different countries and individuals in six different geographic locations that we have fully developed and written ourselves based on the Asterisk code. I, personally, think this is a, possibly the, major achievement for our small company to have fully developed our own highly functional and complex telephone hardware and software that is tightly and seamlessly integrated in to our very comprehensive and quite complex data base services. A major step in our continual process of more and more fully automating all aspects of our company by writing our own code and developing systems that are better and more useful than any we could buy 'off the shelf'. It's a great compliment to the abilities of our very small software development team that they developed and tested the systems in record time and that they 'survived' the 'test' of being cut over on no notice and working almost faultlessly. The other step forward that we will begin to make from this month is the planned move to save almost 50% of our NSW co-locaton costs (an eventual saving of over $A100,000 a year) by moving facilities from one of our two Sydney CBD rental facilities to our new 'in house' data centre facilities. We will do this over a 12 month period commencing in August and take our time but we will end up making considerable savings which will help keep the costs of providing our services at the lowest possible levels. While, in the overall costings associated with delivering communications services, $100,000 a year isn't a significant sum of money it can be looked at that it would be necessary to increase the costs of individual services if costs aren't continually reduced by every means possible. Our decision to use advertising and other promotional activities in rural and regional Australia was a pretty radical change for us and will take up a fair amount of our very limited resources while also changing the way we take our services to non-metropolitan markets. As well as the expenditure on TV ads we will significantly change the ways we support our agents in rural areas and have 'earmarked' more money to be spent on those programs than we have on the actual advertising. These promotions will include free wifi for vrious places and an increasing amount of 'subsidised' hardware. These moves have also required us to enter the fields of hardware sourcing and importing to support the HSPA promotions which in turn require us to provide warehousing and fulfillment processes of which we have absolutely no experience or knowledge. In late May we also finalised the Sri Lankan company plan for FY2010 and formally approved the increased short term head counts that will shortly mean we will employ more people in Sri Lanka than in Australia. It seems a very short time ago that Steve, Annette and I sat round a table at a board meeting in Sydney and agreed that we should try to employ one engineer in Colombo to work from home to see whether or not we could make a work from home support function in a foreign country we had never been to, and see if such a move would provide some value.....it was more than three and a half years ago now - time flys by. It will be interesting to see how the Sri Lankan operation develops over the coming year as we gradually pull back the 'controls' in Australia. We also finalised the operating plan for the Australian company for the coming twelve months and began some of the preparations for making that happen over the past few days. In most conservatively run businesses, of which I think Exetel is one, things develop/evolve rather than 'leap ahead' but there appears to be a definite quickening in many aspects of our development as evidenced by the 'happenings' last month. A principal focus will be to continue to grow our 'corporate' business at a faster rate and provide a continually more integrated service 'suite'. It was a very interesting month in which many things have changed for Exetel.....probably more things changed last month than in any other month we have been in business. |
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