First American Business Enterprise

OPEX vs CAPEX

CapEX Pic (color)As strange as it sounds these days, there was a time that if you wanted to start, or grow a company, and you needed telecommunications services (phones, voicemail) you had to think about physical facilities (closets), network circuits, and buying your own hardware.

Today, however, none of that is necessary. It is possible to just log into your favorite hosted service provider (Amazon, 8×8, etc.) and pay for the services you use.  It doesn’t cost hundreds of thousands of upfront costs and best of all you don’t have to become an expert in all things telecom – you can focus on your business.

The -aaS market (as-a-Service) didn’t exist many years ago. You couldn’t just buy infrastructure-as-a-service you needed to invest cash up front.  This has led us to the increased discussion around OPEX vs CapEx.

Definition of OPEX

The trend in the telecom and IT industry now is to go “OPEX”.   So what exactly is OPEX?  It stands for Operational expenditure and refers to expenses incurred in the course of ordinary business, such as sales, general and administrative expenses (and excludes things like taxes, depreciation and interest).

Accounting treatment:  Operating expenses are fully deducted in the accounting period during which they were incurred.  If you pay $1,000 a month to a service provider for phone services the full amount shows up as an expense the month you pay or consume that service.   This shows up as a line item on the P&L.

Operating expenditures include maintenance and repairs, advertising, office expenses, supplies, professional fees, utilities such as telephone, insurance, property management, property taxes, travel, commissions, salary and wages, and other similar items.

Definition of CAPeX

Capital expenditures are expenditures (usually large 1 time items) creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing asset with a useful life that extends beyond the tax year.

Accounting Treatment:  CapEx expenditures cannot be fully deducted in the period when they were incurred. CapEx assets are depreciated (or amortized) over time.

Capital expenditures tend to be major investments in goods, which show up on the balance sheet and are depreciated over the life of the asset, typically 3 – 7 years.

Example:  Once you have purchased a capital good (such as a PBX), you’re stuck with it.  As anyone who has purchased a car understands, even if you’re no longer excited about owning it, the finance company still expects a monthly payment. However, if you rent a car, you are committed to it only as long as you want to use it – and once you’ve paid for that use, you have no further financial obligation.

So what should a Telecom Manger do?

As an IT or telecom manager what you deploy today may not be what you want in 3 years from now. What once required dedicated real estate, dedicated employees and lots of upfront cost can be fulfilled remotely via the cloud with a subscription fee for the service.

Organizations have more options to obtain the latest and greatest technology. They can focus on their core competencies and transition many of their CapEx investments to OPEX spending, freeing up cash for those investments and other projects that drive revenue and growth.

Organizations usually want to direct their investment toward revenue-generating activities. This is why many organizations prefer to lease rather than purchase — they don’t want to tie up important capital.

Final thought:  It’s no longer as simple as “on premise equipment” = CAPEX and “off premise cloud” = OPEX”. More flexible, OPEX funding arrangements are available for most IT architectures from on premise to hybrid to public cloud. An on premise “private cloud” infrastructure can be sold as OPEX, to provide an off balance sheet transaction. Combined with Managed Services from a quality vendor, it provides the infrastructure and administration for a predictable monthly fee, and allows you to focus on your core tasks.

Cloud 101

Cloud PictureEveryone seems to be talking about the cloud these days.   Poll after poll says companies and governments are moving a significant (or plan to move a significant) part of their IT and Telecom support to the cloud.

The definition of “the cloud” is a little bit like the definition of “being green”.   It depends on how you look at it.  Is an electric car (Tesla or Leaf) green if its batteries are charged by a coal power plant?  It depends:  It is true that the car emits zero emissions while it is moving, however it produced hundreds of pounds of CO2 while its batteries were charging from the coal plant.

The cloud is the same.   Most vendors have rushed to rebrand their products and services as a cloud offer.   Why?   Because there is a fundamental belief by large and small enterprises and governments that the cloud is good.

Why the cloud is good:

  1. First, and by far the most important, is the belief that it will save an enterprise money.  If it costs more to move your computers, storage or telephony out of your own data centers you would not do it.   The cloud must save money for it to be adopted.  A cloud solution can save an enterprise money if it has:
    1. A leveraged infrastructure – 1 server or 1 PBX supporting multiple customers.
    2. A leveraged facility – one data center with cooling, electrical supporting multiple customers
    3. A leveraged application – 1 contact center application (software) supporting multiple clients
    4. A leveraged support team supporting multiple clients.
  2. Second, is by paying for only what you use – the Electric grid is a cloud. You pay for what you use when you turn on your lights.   If you had to build your own power plant it would cost you a fortune – so you and others leverage the grid.
  3. Third, is by providing the latest and greatest – a cloud provider can keep you current on the latest release so you don’t have to manage and update your systems constantly and the new features and functions of the applications can provide value to your organization.

In the end most of the items above boil down to cost savings or added value.   If an Enterprise really wanted to they could invest and do everything a full featured cloud provider does but it is less expensive to outsource that to a cloud provider.

When is the cloud NOT the cloud?

Many vendors rebranded their products over the past few years to say they are a cloud offer.   They want to latch on to the positive cost saving attributes of a true cloud offer.  But like in the example of a green product you have to look into the cloud to see if it is real or not.  Types of clouds:

  1. Private Cloud – This is a 100% built infrastructure for a single enterprise. In prior years this was called outsourcing, dedicated hosted or managed services.   Those models have value in many cases but the key one that truly makes the cloud unique – leverage – does not exist in this model.  It is a single solution for a single user.
  2. Hybrid Cloud – This is just a funny term coined by some to mean that some of the infrastructure is leveraged “in the cloud” and some of it is dedicated to a single customer.
  3. Public Cloud – This is the true space for the cloud offer that allows the provider of the cloud service to leverage, people, process, equipment, software and facilities to prove a lower TCO to the user.

The cloud can be a great thing for your business if it is truly a cloud offer that provides the cost and services benefit that a true cloud offer brings.   Just be wary of any vendor pitching their product as green or cloud.   Because it depends.

And Then There Were 3

The big Wireline and Wireless providers continue to shrink

0 001The wireline and wireless market continues to contract.   It started in 2001 and has been a steady downward consolidation since.   Yesterday (April 15th) Nokia agreed to purchase Paris based giant Alcatel-Lucent for $16.6 billion.

The big 3 now are:

  • Nokia/Alcatel combined ($28B revenue)
  • Ericsson ($29 B revenue)
  • Huawei ($27 B revenue).

The next closest company in size in this space is less than $10 billion.   Still respectable but a long way from the days when Lucent and Nortel and others dominated the telephone equipment market.

The combined Nokia/Alcatel Company will rank a strong second in mobile equipment, with global market share of 35 percent, behind Ericsson at 40 percent and ahead of Huawei’s 20 percent, according to Bernstein Research.

Posting on the Nokia Web site:

NOKIA AND ALCATEL-LUCENT TO COMBINE TO CREATE AN INNOVATION LEADER IN NEXT GENERATION TECHNOLOGY AND SERVICES FOR AN IP CONNECTED WORLD

Nokia Corporation
Stock Exchange Release
April 15, 2015 at 08:00 (CET +1)

NOKIA AND ALCATEL-LUCENT TO COMBINE TO CREATE AN INNOVATION LEADER IN NEXT GENERATION TECHNOLOGY AND SERVICES FOR AN IP CONNECTED WORLD

Helsinki & Paris, April 15, 2015 – Nokia and Alcatel-Lucent announce today their intention to combine to create an innovation leader in next generation technology and services for an IP connected world. The two companies have entered into a memorandum of understanding under which Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the United States, on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share. The all-share transaction values Alcatel-Lucent at EUR 15.6 billion on a fully diluted basis, corresponding to a fully diluted premium of 34% (equivalent to EUR 4.48 per share), and a premium to shareholders of 28% (equivalent to EUR 4.27 per share) (see Appendix 1), on the unaffected weighted average share price of Alcatel-Lucent for the previous three months. This is based on Nokia’s unaffected closing share price of EUR 7.77 on April 13, 2015.

5 Reasons to deal with a small company

0We have all been there. Dealing with a big company can have its challenges. If you are in the IT Telecom space you have a network of suppliers that you rely on for hardware, software, installation, break-fix, operations and so forth – almost no company delivers 100% of what they sell. In order to deliver service to your end customer you need subcontractors to complete your offer. So, who do you turn to and why?

Option A: The big guys: Lots of companies like to do business with “name brand” suppliers for several reasons but mainly because:

  • Company X (any name you like here) is “known” internally within your organization. When you look to get approval for your project internally you don’t have to explain who X is.
  • In theory you won’t get fired for picking Company X… “everybody picks X”

But, if you have been around for a while you know that some big companies can be slow to respond and expensive. Requests, such as getting a quote may require forms to be filled out, submissions of those forms, and follow up with the SPOC Company X has assigned to you. They may be slow and expensive because they have lots of people, lots of fragmented groups and a lack of single ownership over any one discipline.

Option B: Certified Small Businesses: The refreshing part about a small company is they act like they want your business because in fact they do! These are not employees punching a time clock working for a boss they don’t like… the people at a small company want to be there and they want your business. That attitude comes through on all aspects of dealing with them.
The 5 reasons for dealing with a small company are:

  1. Quick. They are lightening fast. Need a quick turn on a quote? It can be done because the person quoting the work is either a decision maker or has easy access to them.
  2. Accessibility. With a small company you have access to the owner, general manager, president or Sr. VP at most any time.
  3. Low prices. Limited or no HR departments, finance departments, vendor management departments and so on. Also the margin targets are much lower with a lot less overhead.
  4. Speed to Deploy. Deployment of engineers, project managers and others once the order is received is almost immediate. A small company can handle a change any time and adapt accordingly. Just document the change and move on with limited red tape or back-office processes.
  5. Quality. Small businesses thrive on delivering quality service. Referrals are key to the success of a small business because they don’t have huge marketing departments and advertising budgets. High customer satisfaction is critical and the way to achieve that is with quality service and support.

You can be a very small fish in a very big pond with company X or you can be a very important customer and an important fish in a smaller pond with a certified small company.

Nortel SL100 / CS2100

0- 704It’s 2015 and the Nortel SL100 / CS2100 continues to be a reliable telephony system at many Hospitals, Universities and Government facilities. But where do you find support for these old systems? Many business and government entities are finding that increasingly challenging. At First American Business Solutions we have been supporting the SL100/2100 for years and as a matter of fact, over the past year our practice in this space as even expanded! Here is what’s new: 24/7 Monitoring, On-site training and OEM (Genband) maintenance coverage.

First ABS can now provide full and complete coverage on the SL100/CS2100. Here is a run-down of the full service portfolio:

  • Monitoring – With VPN, a buffer box or SEB access we can monitor Critical and Major alarms around the clock. We can email or text messages to your phone automatically immediately upon receipt of an issue. We also provide reporting statistics on a quarterly and annual basis.
  • 3rd level Tech support – We have highly trained and skilled SL100/CS2100 3rd level technical engineers available 24/7 for remote resolution.
  • Feet on Street Repair – We cover most U.S. locations with our nationwide footprint of smart-hands technical labor that can be dispatched to site. Because of the limited number of qualified SL100 engineers in the market at First ABS we pair a qualified Nortel field engineer (“smart hands”) with a SL100 remote engineer to resolve issues physically at our customer’s locations.
  • Maintenance (7×24 on-call with SLA support) – We sell annual maintenance support agreements to our SL100/CS2100 customers that bundle several components together: block of engineering hours, feet on the street, inventory management, monitoring and a health check. Our SLA is a response time driven. We will have a qualified engineer working a problem within a committed time frame.
  • Training – Most of our customers want practical hands on training. Customer telecom engineers can shadow our trainer and learn by observing and doing. We also work in formal reviews while on site. Generally we sell a 3 day hands-on training module but can work with you on custom material.
  • Full Time – Staff Augmentation (M-F 8-5) – First ABS can provide a full time on-site SL100/CS2100 engineer. These agreements are as short as 3 months but generally done on an annual basis.
  • Genband support – We are a Bronze partner of GENBAND, which affords us the opportunity to leverage the company’s product enhancements and software updates. With this core level of OEM support, First ABS can provide our customers with GenbandCare offers including:
    • Support Plan – Tech support
    • Support Plan – Tech support with NBD Advance Parts
    • Support Plan – Tech support with 10 day parts
  • Software Upgrades – Need to upgrade from SE06 to SE09? We can purchase the upgrade from the OEM and perform the software upgrade with our qualified staff.
  • Parts – We have an extensive inventory of SL100/CS2100 parts. This is custom quoted depending on the exact part, line card, etc. needed. Many times we can ship it the next day.

In a nutshell, First ABS is able to provide any and all needed support for these carrier class platforms. Please give us a call and let us know how we can support you SL100/CS2100 legacy carrier grade platform!

 

Enterprise Connect

First American Business Solutions is starting the year out with a bang. We will soon be off to our first trade show of the year – Enterprise Connect!

Enterprise connect

Conference Overview (March 16-19, 2015)

Enterprise Connect’s expert led conference program will discuss the latest systems, software, services and applications for enterprise communications and collaboration. The 4-day conference is designed with one objective in mind: To help you maximize your investments in communications and collaboration systems, software and services.

First American has a booth:

Please stop by booth #2007 and see what we have to offer!”

Our First American resource pool and capabilities continue to grow as does our reputation of delivering quality service at a very competitive price point. Currently, we provide technicians, engineers, trainers and consultants covering all 50 states with high concentrations of technical staff in California, Colorado, Florida, Georgia, Idaho, Illinois, New Mexico, New York, Texas and Virginia with many certified technicians covering the whole U.S.

We have added a large number of customers both in the private and commercial sector, including the US Department of Defense. The primary IT value-add services we provide to our customers are broken down into the following categories:

  • Rapid Dispatch
  • Staff Augmentation (Resident Engineer)
  • Installation & Training
  • Maintenance
  • Managed Services

Initially we focused on the Nortel Voice portfolio but have grown our Avaya, Cisco, NEC and other product vendor support. We provide both on-site and remote support to our customers.

Visit First American Business Solutions at Enterprise Connect at the Gaylord Palms in Orlando, FL March 16-19th in booth #2007!

Enterprise Connect is celebrating its 25th year as the industry’s premier event. Stop by booth 2007 to meet some of our valuable staff members and learn about the capabilities First American Business Solutions has to offer! To receive a FREE Expo Plus Pass click on the link below and use the code FABS!

http://www.enterpriseconnect.com/orlando/?_mc=XY_DB_OL_EC15_FABS

In the IT services world you can do it in-house, you can augment your staff with sub-contractors, or you can “outsource”.

IT project outsourcing allows a company to outsource entire projects. In some cases this can also take the form of “out tasking”, where specific tasks of a project (but not the entire project) might be outsourced to a staffing firm or an outsourcer.

Pros

  • Reduce training costs: Training and skill development is the responsibility of the outsourcer and staff augmentation firm.
  • Best practices: Taking advantage of industry best practices can be accomplished simply by using an outsourcer who follows best practices. Outsourcers shoulder the responsibility of investing in the adoption, maintenance and improvement of best practices.
  • Scalability: Just as it is easy to add/subtract staff augmentation resources, it is also easy to ramp up and down with project outsourcing.
  • Economies of scale: There is significant leverage when negotiating large contracts with outsourcers.
  • Reduce management overhead: Management is the responsibility of the outsourcer.
  • Results centric model: The responsibility for delivering results lies with the outsourcer. Companies are buying agreed upon results.
  • Keeps the focus on the core business: Because the responsibility for delivering results lies with the outsourcer, companies can stay focused on the results and their core business.
  • Employee vs. Contractor: Project outsourcing avoids navigating the legal landscape of employee vs. contractor issues.
  • Overcomes a lack of internal capabilities: Companies who lack the internal capability to complete certain projects will typically find it more cost effective to outsource their project needs as opposed to developing those capabilities internally.
  • Variable cost structure: Shifts fixed costs (employees) to variable costs (project costs) which change in proportion to the current level of project activity. This improves operating leverage.
  • Legal commitment: When a project is performed internally, any project failures or liabilities which arise are the company’s responsibility. When a project is outsourced, contracts are typically structured such that the outsourcer takes on that as a contractual risk.

Cons

  • Lack of control: Control of everything from high level processes down to individual resources rests with the outsourcer.
  • Internal resistance: Some within a company may feel threatened by a project outsourcing model. Although most project outsourcing serves the purpose of overcoming a lack of internal capabilities, some internal employees may be concerned that this model will lead to cutting back internal staff in favor of project outsourcing.
  • Finding a quality outsourcer: When a company looks to meet a need which is beyond the scope of their core competencies, it may be difficult for them to assess the quality of potential outsourcing firms.
  • Smaller projects: Smaller projects may be less cost effective under a project outsourcing model than a staff augmentation model. Some outsourcers may be reluctant to take on small projects or may charge a premium to take on such work.
  • Integration with internal processes: Integration with complex and unique internal processes may be more difficult under project outsourcing model.

Some companies opt for a Hybrid Approach. 

For most companies there is no one size fits all approach. Some needs are best met through staff augmentation, others through project outsourcing, and sometimes these needs overlap.  For example, if you have two interdependent projects: the first project is within a company’s core competencies but additional experts are required to complete the project successfully, the second project is outside of the company’s core skillsets altogether. In this case a “hybrid” approach may work best, where staff augmentation is used to acquire the required specialists for the first project and project outsourcing is used to complete the second one.

Selecting the Appropriate Delivery Model 

deciding on the right delivery model can be a tough decision. Many times it boils down to the company direction.   If the mindset of the company is to NOT hire full time workers and to sub or outsource everything then that is what they do.  Some companies actually go through an ROI but that is rarer.  Usually it is a culture thing.   While some companies feel comfortable making this decision internally, others may find it helpful to seek out the advice of an IT consulting firm.   We are seeing a trend more and more towards the staff augmentation and outsourcing.   Companies are less likely today than they were 20 years ago to assume responsibility of full time staff.

 

Cisco, Others Face Tough Competition From Microsoft

The PBX is losing its grip on the enterprise.

Infonetics Research said this week that unified communications (UC) investments are replacing typical PBX purchases, with North America losing the most PBX market share: The region is down double digits from 2013’s third quarter, Infonetics found.

That’s because businesses are holding off from buying new PBXs as they evaluate cloud alternatives and put money into UC applications, instead of PBXs.

“There is competitive pressure as well, but not as much as in the past,” said Diane Myers, principal analyst for VoIP, UC and IMS at Infonetics Research.

Worldwide, the PBX market – which includes TDM, hybrid and pure IP – dipped 7 percent year over year in the third quarter of 2014, but it has risen 5 percent sequentially, according to the research firm. Still, compared to a year ago, PBX license shipments have dropped 2 percent. Around the globe, PBX revenue leaders are, in alphabetical order, Avaya, Cisco and NEC, Infonetics said.

But those companies face tough competition from UC suppliers, where Microsoft, purveyor of the Lync platform, stands out as the frontrunner, said Infonetics. To that point, UC applications jumped 21 percent in 2014’s third quarter, compared to the year-earlier period.

November 25, 2014 – By Kelly Teal

Save Money through Staff Augmentation

Let’s say you have a typical IT department where you have a lot of good people supporting your existing business systems.   Will those systems, and the people supporting those systems, stay in place with no change in the future?  Will your environment stay constant?  Hardly!   Your business, along with everyone else’s, is changing because the market is always changing and your completion is not standing still.  Your business leaders aren’t going to let your IT department stand still either.  Your CEO, CIO and others will need new systems to drive a reduction in costs and improve operational efficiencies through technological innovation.  That’s just the way it is.

This translates into a constant number of new IT projects.  While trying to complete these projects you may have unplanned staff turnover along the way but make sure you complete these projects on time, within budget, and to specification!

When companies look for outside help in completing IT projects, they generally turn to Staff Augmentation.

What is IT staff augmentation?  A way to easily and quickly add trained IT and telecom staff (resources) as needed. Resources are employed by the staff augmentation firm. A company may easily ramp up and down to meet changing demand without shouldering the cost and liabilities of full time employees.

Business usually look at two variations of the Staff Augmentation delivery model. One,  you can bring in resources with certifications and skills in the new system or new project or two, you can bring in Staff Augmentation resources to “backfill” your existing staff to free up your existing team to work on an exciting new project.  In either case, the Staff Augmentation allows you to fill the gap.

Here are the pros and cons of Staff Augmentation.

Pros

  • Speed:  Very quickly you can bring in an expert resource from a staff augmentation firm.   It is not unheard of to put out a request on a Monday and have an expert on-site (or remote) in less than 7 days (by the following Monday).
  • Control:  This new Resource works for you – you can direct them the way you want.
  • Specialist:  A Staff Augmentation resource brings a specific skill that fills a gap in your team.
  • Alignment:  Adding and subtracting Staff Augmentation resources allows your company to directly align the costs of a project equally with the duration of the project.  If you have a 6 month project the Staff Augmentation resource is there exactly 6 months.   No more.
  • Synergy:  By adding a new skillset to the team in the form of a staff augmentation resource, a company can take advantage to new knowledge inserted into the existing IT team.
  • Cost Savings:  There are no HR hiring costs with Staff Augmentation.  Such as:  Long interview process, job postings, on-boarding, annual training, or unfortunately in the business world these days – staff layoff costs.    You simply avoid the cost of investing and caring for an internal skill set.
  • Reduced burdens:  Liabilities of full time direct employees.
  • Improved Internal Employee Acceptance:  Existing employees are less threatened by staff augmentation because if there is downsizing, the contract labor is generally the first to go.

Cons

  • Training:  While you don’t have to train the resource on the technical skill they bring to the table there may still be training involved in bringing them up to speed with company processes and tools
  • Overhead:  Even though you cut out the hiring and firing part of the HR process there is still a need to supervise the staff augmentation resource.  They are an extension of your staff.
  • Results:  Unlike the outsource model, with Staff Augmentation the responsibility of the results stays with you (the company).  You are purchasing a resource … not a specific result.   The company remains responsible for the overall project deliverables.
  • Knowledge Departure:  When the Staff Augmentation resource leaves the company, the knowledge he/she brought leaves too.

Selecting a Vendor

When selecting a vendor, consider working with one that has your same geographical reach (is in all the locations your company is) and a broad set of skills – not just one function.  This will allow you to develop a long and trusted relationship as your business needs change.   Find a vendor you can trust to take the time to understand your business and deliver the desired results.

Summary

While there are pros and cons to Staff Augmentation the net benefits can be tremendous.  In today’s world of always changing business demands there is no way for an IT/ Telecom department to keep up with all the demands for new systems.  Staff Augmentation is a great way to cut costs by easily and quickly bringing on-board the right skilled resource to align exactly with the duration of the project.

Microsoft’s Lync surging as PBX choice in North America

Orlando — Microsoft’s Lync communications platform is making big gains as the IP PBX of choice, particularly in North America and particularly among larger businesses, Enterprise Connect attendees were told.

Lync ranks 11th worldwide among IP PBX vendors, but comes in No.3 in North America among businesses with more than 100 phone extensions, according to Peter Hale, principal analyst with MZA, speaking at the conference.

“Microsoft has gone from nothing to third in two to three years,” says Jerry Caron, an analyst with Current Analysis. “It’s become a very significant player in a very short period of time.”

Cisco ranked first worldwide, edging out No.2 Avaya by just 1 percent, but in North America among large businesses, it blew away the field. Cisco sold 44 percent of the phone extensions, he says, with Avaya pulling down 20 percent. Microsoft landed 13 percent, Hale said.

The number for Lync represents phone extensions actually deployed, not those sold, he said. Because Lync comes bundled with other software and includes communications besides IP telephony, the number of licenses sold is actually higher, he said.

One problem Lync could face is the decline of the PC, Caron says. Part of its success so far may be that most corporate desktops run Microsoft software. As businesses use other devices, notably mobile devices, for their main computers, that could change, he says.

Cisco’s worldwide lead in phone extensions is slight and fragile. It holds 13 percent this year, down from 14 percent last year. Avaya is breathing down its neck at 12 percent, the same percentage it scored last year.

Cisco dropped 2 percent in its North American large-business sales from 46 percent to 44 percent from 2012 to 2013, Hale said. During the same period Avaya went from 19 percent to 20 percent. Microsoft went from 12 percent to 13 percent.

Author:  Tim Greene @ Networkworld