Last week's TM Forum conference in Nice was a coming-out party for "cloud computing as a telecom service." And I found the subject especially apropos because my journey to France was interrupted by a cloud — a dusty one from Iceland.

Some excellent cloud sessions were to be found in Nice. AT&T's Joe Weinman made a strong case that telecoms are well positioned to lead cloud services for enterprise customers. HP's Richard Arthur, in his presentation, agreed but felt telecoms can only succeed if they are equipped with a robust, end-to-end OSS.

So are clouds the next big thing?  Well, I have my doubts: Plenty of IT and Web vendors are targeting the cloud already. Let's hope that by the time telcos arrive in the cloud, the profits they pursue don't vanish in the mist.

If telecoms are serious about breaking out of their box, they need to invest in content — and spend less energy chasing the software delivery visions of Amazon and IBM. For telcos, Comcast is a better business model than the Cloud because Comcast owns television networks and other content assets that complement a telecom's distribution strengths.

In fact, content is not only key to telecoms, but is increasingly vital for B/OSS solution vendors. Netformx, the company that's the subject of this blog, is living proof of that trend.

Netformx adds value by automating the telecom-to-enterprise sales function. Its product enhances the accuracy of network designs and quotes as they flow from telecom sales to operations.

Yet interestingly, the company's software and professional services contribute less than half its revenue: Netformx is primarily a content provider. It sells subscriptions to its content – an engineering and pricing KnowledgeBase – that companies like AT&T, Verizon Business, and Cisco find highly valuable.

I think you'll enjoy reading about this 100-employee company and its innovative telco-to-enterprise sales solution in my interview with company CEO, Ittai Bareket.

Dan Baker: Ittai, ten years ago I wrote a research report that talked about the virtues of Telecom Sales Configuration software.  After a decade of investing in fancy CRM and sales automation solutions, have telecoms gotten better at quoting and delivering complex orders for enterprise customers?

Ittai Bareket:  Dan, I think much of the sales automation investments made in the past few years have been around functions such as provisioning, ordering and fulfillment.

Today's CRM and sales automation systems are good at generating high-level quotes, something that will get you in the ballpark. But our focus is a bit different. We look at the pre-deployment problem in great detail and generate network design diagrams, materials lists, and quotations that pull together data from multiple partners so orders don't fall through the cracks.

Industry estimates say that 40 percent of MPLS orders cannot be deployed as sold because there's a big disconnect between what's sold and the actual network it's being deployed on.

Some of the issues relate to poor sales system integration with the B/OSS.  In other cases the enterprise customer's special requirements cause problems. So Netformx's job is to synchronize the network design requirements from operations and make the systems understandable to the front end. Only then, when sales sits in front of an enterprise customer and generates a proposal, will it be accurate and is there an assurance that the service can be deployed profitably and on-time. Another advantage is that we execute a smooth hand off of the design from sales to provisioning.

DB: I see lots of parallels here to other solutions like product catalogs which also aim to boost service design efficiencies.

Bareket: I think there's a major distinction here around complexity. At a typical service provider, consumer services are pretty straightforward: They are highly repeatable and standardized so they lend themselves to product catalogs. However, on the enterprise side, the services are usually site-specific with many dependencies to keep track of, so offering them as a Web self-service doesn't work.

A typical CRM solution doesn't contain network-specific requirements. Those systems won't tell you, for example, whether or not one network element can actually talk to another. So the complexities of service design cannot be adequately modeled in a CRM.

In truth, there's  no customer-specific blueprint that sales, customer support, and provisioning all share. Since Netformx has access to all the service design components including pricing, rules, and dependencies, we try to build and maintain that big picture.

DB: There's an old B/OSS proverb that goes: "If you can't bill it, it's a hobby."  Sounds like your value proposition is: "If you can't accurately calculate your design costs, your sales quote is like throwing darts at the wall."

Bareket: Absolutely. In fact, we believe many telecoms are leaking revenue in their enterprise businesses because they can't estimate costs accurately. It's a big issue.

We've heard industry estimates that 40 percent of MPLS orders are rejected. The reasons are many. For example, the site that's defined in the sales sheet doesn't have the right connection type. Or maybe the product team changed the offering and sales wasn't updated.  That means sales is selling something that's no longer available in the particular region — perhaps because a suitable third-party supplier is no longer available there.

So it's critical that accurate partner data be incorporated into the KnowledgeBase so you know how much it's going to cost.

One designer I know ran his MPLS quotes off an Excel spreadsheet that was 180 Mbytes and had 50 tabs to model the different dependencies. These ad hoc solutions don't cut it: you need to bounce those dependencies across a rules engine to ensure the accuracy of the design.

Lots of designs use "rules of thumb" to calculate costs. But calculating the special requirements makes all the difference in profitability. For example, installing 12 circuits in 12 remote locations is a far greater cost than 12 circuits for a single building. That's why an accurate sales configuration system takes into account zip codes, the number of buildings, and dozens of other requirements.

Incidentally, where telecoms often make their money is in the professional services that surround the actual enterprise order. But I know that at one large service provider (before he installed our solution), only 10 percent of its sales quotes had services costs attached to them. It's a huge revenue opportunity they were throwing away.

DB: Please tell us about your business model. Why have you decided to sell subscriptions rather than a software license?

Bareket: For us, the software and KnowledgeBase are intertwined. You can't have one without the other.

But software no longer drives the sale. In this respect we're like anti-virus software: Having it installed on your PC has value, but without continuous updates, it's not going to protect you very long.

Similarly, you could design your CRM tool to continuously pull information from Cisco and Juniper, but a great deal of network knowledge and rules need to be built in and maintained. For example, to support Cisco's network equipment you need to take in 3,000 changes a week. And that includes new software versions, new pricing, and new promotions. You also need to keep track of products that are end-of-life; it's a tedious effort to keep up.

So this is why we call ourselves a "knowledge vendor."
  
DB: Can you briefly explain how your solution works?

Bareket: We basically start by doing an SNMP discovery baseline to see what the customer has and then bring in some Cisco switches, power supplies, and equipment from other manufacturers to generate one coordinated design with report outputs such as design documents, sales quotes and a bill of materials. In today's IP world, sales engineers typically need to coordinate 14 different applications or websites to generate one proposal. And that's very time-consuming. Cisco is a one-stop shop for much of what a carrier needs, but if you want a unified communications solution, you still need to visit two different Cisco sites to generate that order.

In a similar way you're coordinating the materials and specs from all the other partners in the quotation. Then, in the background, you're probably designing a network plan in something like Microsoft Visio.

So managing this highly manual process in one solution is what Netformx specializes in. And it's key if you're going to create multi-vendor designs that combine Cisco and Juniper switches that don't hiccup.

To develop that capability, we've created various engines – rules validation, configuration, and visualization engines – and these are used to produce the service diagram and generate the quotes. The beauty is you can design a complex enterprise service without leaving the Netformx tool.

DB: Cisco must love you guys because you're making it easy to flow orders to them.

Bareket: Cisco is an important customer of ours, as are a dozen other manufacturers who have committed to helping us update our catalog. Then there are another 60 or so hardware manufacturers who we have less formal relationships with.

Network integrators around the world are also customers. Cisco has several thousand global integrator partners and the largest of those subscribe to the Netformx KnowledgeBase.

But to be honest, most of our business comes from telecom service providers. In North America they include AT&T, Verizon Business, Sprint, CenturyLink, Bell Canada and others.

Telecoms  have a greater need because they have more sales engineers and more customization requirements. In particular, a telecom may want to deliver a service multiple different ways.

To support the carriers, we create a private KnowledgeBase that starts with our publicly available one and adds to it all the carrier-specific products and services they offer to enterprises.

In that way, when they sit in front of the customer, they can have a tailored offering — either a hosted, managed solution, or a straight MPLS connection.  And all those different proposals are generated for them on the fly. That's the added value that large carriers are looking for.

DB: Do you have any data on how much enterprise sales quoting is being done at the major carriers?

Bareket: It's tough to generalize here because it depends on how large the enterprise is and what types of customers the telecom serves.

We estimate that capturing the customer requirements and converting them to a deployable solution takes an average two or three man-weeks of engineering time.
A large carrier we know in Europe told us they process 250 enterprise requests per month and about 20 sales engineers work on those requests. Now my guess is that somewhere between 10 and 25 percent of the quotations issue turn into an actual sale, which means a great deal of time is being spent on quotations that don't materialize.

And this is why we think our product's value is pretty compelling — the solution usually cuts 30 percent or more off their design times.

DB: Where are you taking Netformx from here, Ittai?  What about other industry verticals?

Bareket: It's interesting, but we think complex sales configurators seem to be pretty unique to telecom, although a strong rules KnowledgeBase is pretty important if you're building a skyscraper.

No, for the foreseeable future, Netformx has its hands plenty full in telecom.  And we also see lots of untapped opportunity outside North America where telco-to-enterprise services seem to be accelerating.

Ittai Bareket joined Netformx in 2000 to redirect business development, and later maintained responsibility for sales, marketing and operations, before being appointed CEO in the summer of 2005.  Prior to Netformx, he held various positions at Mercury Interactive Corporation (now HP), including president of Mercury Interactive Japan K.K. and general manager for Japan and Korea.

Dan Baker is Technology Research Institute’s (TRI) principal market synthesizer and co-founder. He is a former market analyst at Venture Development Corporation (VDC), where he tracked the telecom and real-time computer markets. In 1992 while at VDC he authored one of the first multi-client research reports on the Advanced Intelligent Network software and systems market.