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Industry Overview

Industry Overview

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Industry Overview

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  1. Industry Overview Guido M. SchusterSenior Director SIP Solutions 3Com, USA

  2. Overview • Market and Utility • IP Centrex Opportunity • Fundamental Value Proposition • Small Business Market Research • Economics • Replacement Cycle • Adoption Criteria • ISP Market Research • Economics • Distribution Model • Cash Flow Model • Summary

  3. IP Centrex Services LAN PBX Long Distance Toll Bypass Industry Perspective - O(3 years) Market Consumer SO Enterprise LE LAN Utility Last Mile Long Distance New Services Wireless

  4. IP Centrex Opportunities US Market Example 5,000,000 small broadband offices • Business set phone and features • Terminal Adapter based services 4000 ISPs Customer Reach 2,000,000 broadband homes

  5. Fundamental Value Proposition Small Business Spending per Month per User Small Business Spending W/ IP Centrex Local $40 Long Distance $30 $60 (lets get back to this) Enhanced Services $25 ISP $5 $8 Tel. Equip (5 years) $10 $7 (no on premise PBX) ------------ ---------------- -------------- Total $110 $75 Savings = 32%

  6. SIP Solutions provides small businesses a cost savings over traditional telephone systems Estimated Annual Cost Savings vs. PBX 35% ($12,474) Estimated Annual Cost Savings vs. Multiline 41% ($7,726) Estimated Annual Cost Savings vs Multiline – 6% ($491) (1) Note: (1) Other includes installation, support, software upgrades, bandwidth cost for voice and maintenance (including moves, adds and changes) (2) Costs represent 5 year spending discounted back

  7. 20-25% of Small Offices Plan to change phone systems every year Current and Planned Phone Systems • Only half indicate full satisfaction with current phone systems • Key Dissatisfactions: • lack of expandability • limited feature set • 1 in 4 Very Small Companies and 1 in 5 Small Companies are planning to install new phone systems within the next 12 months. • About 1 in 5 Very Small Companies appear to shift from Key Systems to PBX as they grow into Small Companies.

  8. Decision Criteria for Adoption for Small Business • Unaided Criteria of Adoption • Cost Savings required and number 1 criteria • Ease of Use and Simplicity • Time Savings and Productivity • Expandability • Simple set up and maintenance • Aided Criteria • One Bill • One place to check messages (UMS) • Call filtering based on personal information

  9. Service Provider Financial Model Months before positive ROIC Variables of Model N = number of steady state customers m = phones per customer (4) s =service fee ($60) c = customer aquisiton cost ($150) f = fixed operational costs/month ($50000) I = one time investment ($800,000) p = client equip cost ($395)

  10. Financial Model for Distribution Channel (ISP) in Wholesale Case 4000 ISPs Customer Reach - sell CPE - sell Service US Market Example Equipment sold via SP Channel small broadband offices Equipment Vendor $ $$ Wholesale Network Provider Wholesale Service including Billing and Customer Service

  11. Service Provider can achieve Positive Cash Flow Year 1 Conservative Business Case Ramp up from 500 subscribers in Q1 to 10,000 in Q8 Channel Partner Complete Service

  12. Summary • Market and Utility • IP Centrex Opportunity • Fundamental Value Proposition • Small Business Market Research • Economics • Replacement Cycle • Adoption Criteria • ISP Market Research • Economics • Distribution Model • Cash Flow Model

  13. Industry Overview Guido M. SchusterSenior Director SIP Solutions 3Com, USA