Network inventory management – the cost of not knowing

10 March 2020

Network inventory management – the cost of not knowing

Network inventory management is essential for the success of any telecoms operator, carrier or service provider. While it contributes directly to service rollout and success, effective network inventory management also helps protect margin and expenditure by helping operators to control costs. That’s because there’s opportunity costs for not knowing about inventory that can hamstring a business and has a negative financial impact. In this post, we explore these costs to examine another key aspect of network inventory management.

If you want to deliver a service, there are essentially three axes that matter: speed, efficiency and quality. Failure to deliver on any of these will impact revenue, profit and customer loyalty. All services are composed of a set of resources that are connected and orchestrated in some way, taking account of the physical, virtual and logical elements that are required. This is fundamental – so knowing what and where these resources are, as well as their status and availability is essential. If you don’t know this, services cannot be delivered effectively. What does this mean?

Network inventory management – the real costs

Here’s a simple example. Today, many customers of telecoms operators have DSL connections. For a growing number, fiber is available as an alternative. But, fiber deployment is a physical process that depends on work teams and so on. While some operators enable customers to request a new fiber connection (and thus trigger excavations in the street outside), most are promoting fiber once it has been deployed as an upgrade. They dig the streets first, deliver in the new area and then try to sell the new capabilities to the existing customers.

This means that the operator must know some essential information, such as:

  • The location and reach of the new fiber resources
  • The capacity and speed that it can deliver
  • Customers with DSL and existing services in the specific area
  • The modem capabilities in the existing customers
  • The billing status and contact details of the customers
  • The bundles it seeks to offer – A, B, C
  • Their prices – let’s say A = €35 per month
  • The resource status in cabinets and other infrastructure

Of course, there’s more, but this is enough for our example! Now, let’s also suppose that our telecoms operator makes an offer of service terms to its customers that covers service activation, price, average sustained speed, and so on. It does so because it’s competing with rivals that reach the same area and needs to win customers fast to recover investment costs. Even if the service activation period is a generous 48 hours from order, failure to deliver could be met with some penalty as part of the offer – e.g. “get active in 48 hours, or your first month’s free”.

The benefits of accurate network inventory management

Putting all of this together, the operator contacts a customer, which it can identify as having DSL, being in the right location and with no current fiber solution. The offer is made, accepted (bundle A, this case), and then…what?

Everything that goes into building the defined fiber package selected must be assembled and delivered – from new hardware for the home to the activation in the cabinet. The specific steps don’t really matter; what does matter is that everything that needs to happen must be understood and a workflow triggered to make it so.

What’s the problem with inaccurate network inventory management?

And that’s the problem. Many operators simply can’t deliver in an efficient way and, it transpires that, for many, the key obstacle is that they don’t have an accurate record of all the necessary resources – that is, they don’t have adequate network inventory management systems.

As a result, our operator has now lost money. It’s made a claim, made an offer and failed to deliver – triggering the penalty clause, so our customer is now, let’s say, €35 better off, at least notionally. But, our operator is now €35 worse off – a real cost, because they still have to carry it. That doesn’t sound too bad though, does it?

But let’s extend this. If the target is to activate 1000 new fiber connections within the area concerned (not unrealistic in a densely populated urban area) and the delivery effectiveness is only 90% (not that bad, really), then the operator will have lost €3500. Extend this across a real subscriber base of, say 18 million and the numbers are huge.

Failure to deliver on time to 10% of the customer base, with a penalty of €35 equates to €63,000,000.00. And that, in a nutshell is the cost of not knowing or delivering effective network inventory management.

Failure to have access to a single source of data regarding key network resources can lead to catastrophic levels of missed opportunities, with harsh costs. For telecoms operators to act with the agility they seek (48 hour service activation!), they simply must have accurate, efficient network inventory management systems in place, which can be accessed by other business processes (does this customer have the right physical connection to access fiber package A? Which customers can?).

But, there’s more. After an unsatisfactory delay (but, €35 richer), the customer gets the desired service. However, after 3 months, there’s a problem. Oops. The support agreement kicks in – the operator knows there’s a problem but can’t trace or fix it. However, the customer’s payments are suspended, pending resolution (no service for 24 hours leads to an automatic penalty). Now, the operator is losing money again. If they can’t isolate a fault to a specific terminal in a fiber control unit, or if they can’t track down the issue quickly, these losses mount up. Let’s say that, at any one time 5% of the customer base has a service affecting issue. Well, we don’t need to do the math again – the costs will rapidly escalate.

Why network inventory management is essential for operational agility

Telecoms operators seek to deliver services with the agility of their online peers, providing better service, better compensation, and so on. They can’t ignore this – if Amazon doesn’t deliver a parcel, all you need to do is get in touch (via a chat bot) and a replacement is sent immediately. Operators are striving to emulate this – both to achieve competitive advantage and to retain customers, but also to respond to events.

Vodafone Italy, for example, has just given all business customers one month of unlimited data to promote home working during the current Coronavirus crisis. To do that, it needs to balance customer demands with network resources and the relevant service terms. Network inventory management is critical.

It’s clear that opportunity costs have a significant negative impact on any business. If you can’t get things right, costs mount up. The inability to deliver a service, delays to service activation, delays to fault finding, issues with unlocking new services, issues with performance, and so on, all have real costs. These can rapidly escalate – and in a market in which margins are perpetually squeezed while new investments (think 5G) are constantly in demand – these can seriously damage a business. Network inventory management may not be the most glamorous part of running a business – but it’s essential.