A hot spare

In the life cycle of competitive carriers' business plans, the early phase is often is marked by carefree spending and little restraint. Beyond that, however, many upstarts run into the same problem that plagues century-old carriers: how to keep the capital budget in check.

Also in the second phase, many competitive carrier executives ask themselves where all the company's money is going.

“The first two years are all about getting the network out there,” said Laddie Suk, alliance partner with Arthur Andersen. “About two and half to three years after that, they're continuing to spend money, and they're wondering why.”

In effort to curtail—or at least make more reasonable judgments on—capital spending, Arthur Andersen late last year started to offer a software package from Xelus. The software suite, which is being incorporated with legacy systems, allows carriers to bring traditional manufacturing supply chain management to the service market.

Xelus applications let service providers forecast, plan and deploy their service assets on a more intelligent basis, Suk said. Aside from working to integrate with carriers' inventory management systems, which often are lacking—particularly in newer carriers—Andersen works with telecom clients to incorporate service planning and Web-based procurement into the clients' business practices.

“Each year a typical telco will spend anywhere from 20% [of its capital budget] for spares and replacements,” Suk said. “Where Xelus excels in this is in the capability to manage the spare parts costs to a lower level.”

Xelus starts the process by actually looking at the historical purchases of a carrier, then mapping out how the company can most effectively use its existing inventory.

“They're able to reduce their inventories, but they're also able to have the right inventories in the right place,” said Gentry Politte, director of business development with for Xelus. “The last thing the solution set wants to do is buy new.”

While that may not be good news for vendors, it translates to real cost savings. In Andersen's overall experience, Suk said, the software has lead carriers to reduce capital expenditures by 5% to 7%. Though the percentage appears small, when dealing with clients that generate more than $1 billion in revenue, the savings add up quickly.

The deal with Andersen has brought Xelus into a carrier's planning process fairly early, which translates to greater sales for the software company.

“Where we play is identifying opportunities and then subsequently installing a Xelus product in this space,” Suk said.

Part of the impetus behind the alliance was a study Arthur Andersen conducted on asset management. Surveying 20 large carriers, the study broke down asset management into seven major areas, including logistics and spare parts.

“The bottom line is that nobody does all six or seven things in asset management very well,” Suk said. “Spare parts and logistics is often overlooked as a potential savings area.”

Early this year, Xelus plans to extend its management software to integrate things like such as bar codes put on spares, something most of the larger carriers already do. “There certainly is a market for [supply chain management],” said Peter Bernstein, president of Infonautics Consulting. “A lot of these guys now put infrared badges or wireless equipment just in case it grows legs and decides to walk away.”

Moving further down the supply chain also would open up smaller carriers as potential customers. Currently, every Xelus carrier customer has more than $1 billion in revenue, Politte said. The implementation, however, will vary.

“I think we're trying to look at the whole chain,” Politte said. “Several organizations also have talked to us about outsourcing. We believe we have the people resources with the knowledge base.”

Briefly

Cisco invests in Apogee

Apogee Networks, a provider of content and IP billing, rating and settlement solutions, announced an equity investment by Cisco Systems last week. The companies also will co-develop and sell bundled offerings and have created joint management teams to develop product integration plans.

JAIN SIP goes public

Sun Microsystems and dynamicsoft announced the first public release of the JAIN session initiation protocol (SIP) specification last week. Application developers can begin building sample applications from a working draft of the JAIN SIP reference implementation also released by dynamicsoft.