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Quantifying The Value of Faster

22 Sep 2014 / Frank Wiener

One of the practical rebuttals against carrier SDN is that most customers will not pay materially more for dynamically provisioned services or dynamically increased service capacity. This is true if there’s no perceived difference in cost or value. But the cloud services market has already proven and established that dynamic, pay-as-you-go infrastructure can be very valuable and lucrative as a business model when it replaces a model that was less efficient and cost effective.

Fortunately carrier SDN proves its value far beyond just dynamically provisioned services. One of the first use cases of carrier SDN and NFV orchestration is actually about doing things faster (and ultimately with lower cost). Specifically, we’re referring to the rapid configuration and provisioning of WAN services across a multi-vendor infrastructure. Today, provisioning services is a hop-by-hop affair utilizing multiple vendor specific element management systems with manual processes along the way that can slow service delivery to a staggering 90 day process in some cases, or longer.

Everyone intuitively knows that faster is better. Enterprises want their services delivered more quickly and decreasing time to revenue has to have a positive effect on the bottom line. But the question is specifically—how does faster provisioning translate into top line (revenue) and ultimately the bottom line (profit) growth?

After exploring this topic with numerous service providers, Cyan developed a simple model-driven calculator to help quantify this value. We started by simply looking at the financial upside of provisioning existing services faster and the results may shock you.

For example, let’s say your present mode of operations (PMO) results in a standard lead-time of 90 days (between a customer request for a new service and the committed activation of that new service). If we can leverage the power of carrier SDN with multi-vendor, multi-layer abstraction (and possibly NFV orchestration) to reduce that standard lead-time to 60 days, how much incremental revenue can you expect?

Incremental Revenue From Earlier Activation

One immediate benefit is that some percentage of customers, arguably most, requesting a service would really prefer to have it in 60 days (or even sooner) rather than 90. If so, those customers will take the earlier activation date and pay you for 30 additional days of service (or at least the difference in price between a current service and the new service for existing customers).

If you’re charging an average of $850 per service per month, you normally activate 150 services per month, and two-thirds of your new customers accept the early start date, you could generate as much or more than $1M of incremental revenue annually from new customers. This is purely a function of activating the service and billing sooner.

Incremental Revenue From Winning More Customers

The incremental revenue from earlier billing activation can be material, but it’s just the tip of the incremental revenue iceberg. The reason is that being able to deliver new service orders in 60 days instead of 90 days should allow you to win more new customers than your PMO. If you can achieve even faster cycle times the incremental share implications should be even larger, particularly if the competition is still operating in the 90+ day mode.

The great thing about new customers is that they’ll pay that incremental revenue in month one, again in month two, and so on – hopefully forever. The cumulative incremental revenue from these new customers is orders of magnitude greater than the earlier billing activation component. What’s even better is it continues to increase every year because each month you’ll presumably add more new customers and the prior new customers won will continue to pay each month.

Rolling It All Up!

The value of SDN and NFV orchestration to conduct existing operations faster is potentially dramatic. Results from preliminary modeling exercises suggest an incremental revenue increase of 3-8% in year one, and a cumulative increase each successive year by another 5-10% per year is feasible. If competitors are unwilling or unable to adopt similar technologies to achieve similar operational speed and the modeling assumptions sustain, early providers of SDN enabled services could experience annual incremental revenues of 20% to >50% more per year than PMO, within 5 years of implementation.

In some cases the projected incremental revenues are so compelling they’re nearly incredulous. After all, if the results of SDN and NFV orchestration are indeed this dramatic, every service provider will follow and soon faster will become the new norm – resulting in little room for incremental share/revenue – right?

Only time will tell. The question once again is; what is the value of faster? I’m betting it’s huge for those that can leverage it against their competitors that are slow to implement!

For a deeper look, download the white paper Quantifying the Value of Accelerated Service Provisioning.

In addition, we’ve created a calculator where you can run several scenarios quantifying the value that faster can bring to you and your organization. We’ll share this with you upon request.

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