“Did you hear, the cops finally busted Madam Marie; for telling fortunes better than they do?” are memorable lyrics from Bruce Springteen and the E-Street’s 1973 song “4th of July,
It tuns out that the fortune-teller was a real person whose full name was Madam Marie Castello, and she told her fortunes on the Asbury Park Boardwalk in
On a posting on his Web site, Springsteen remembers Castello as a boardwalk fixture at the
This is a continuation of Saturday’s post. We just explained to a telecom consultant that we don’t have a centralized network organization. Each of our businesses manage their own network, do their own IT, run their own NOC, etc. The consultant was advising a private equity firm that is considering a Zayo investment, so he was absolutely correct to probe in this area. He understood what we were saying, and the logic behind it, but he remained a bit skeptical.
“Let’s say you centralized the right way. Wouldn’t you gain a profitabilility lift due to the synergies?”
I answered with a series of questions:
“Would Neutral Tandem be more efficient if it combined its NOC with Cogent’s?”
“Would Akamai be more profitable if it shared its engineering organization with Yipes?
“Would Cbeyond have a higher EBITDA if it’s IT department also attended to Megapath’s requirements?”
“Would Paetec gain synergies if it had the same provisioning system at Fibertech?”
You know my answer to these questions. No. Yet I will guarantee you every one of the companies above would lose its competitive edge as a result of pursuing the quest for synergy.
I was meeting with a telecom consultant a little while back. They were advising a private equity investor, who in turn is considering an investment in Zayo.
We hit the part of the discussion in which we discussed Zayo’s organizational approach. We explained what we meant by three separate business units. “Down to the balance sheet and individual bank accounts!,” emphasized Ken desGarennes, Zayo’s CFO.
I couldn’t tell whether the consultant was buying into the discussion, or not. He had a right to be skeptical, as what we were describing was counter to the path that all big telco’s take. The consultant asked a clarifying question:
“Where’s the Network?”
John Scarano began to answer: “We have a intercity fiber between NY and Chicago; metro network in Memphis and”. I jumped in, as I was quite certain the question had nothing to do with geography. The consultant was asking which of our organizations was responsible for the network functions, such as engineering, NOC, and capital spending. My answer:
“They all are. That is, they each have responsibility for a certain piece of the network–the piece that is core to their business. Some of them purchase services from their sibling business units, but only to the extent needed.”
I knew what question was coming next (tomorrow).
Zayo crowd–please do not read further.
Rest of telecom crowd. Please read on. Did you read “Allocated Cost is Bad?” Isn’t Sandi Mays naive? Cher Horowitz had more of a clue. Sandi should know better.
How can she possibly think it is efficient to have multiple NOCs? Can you imagine how de-optimized the network would be if a centralized engineering group isn’t responsible for technology decisions? The network is a factory; how could costs be assigned to business units in anything other than an arbitrary way? More than one provisioning system–are you kidding me? Distributed financial and legal–chaos is the only outcome? No IT Architecture; no CIO–can you even picture the spaghetti that the systems would become?
Correct you are, I say, for thinking this way. Centralize, centralize, centralize. Functionalize, functionalize, functionalize. Standardize, standarize, standarize. Prioritize, prioritize, prioritize. That’s the telecom way.
Zayo will take a different approach.
Though she earned her “A-Mays-ing Sandi Mays” nickname many times before, she took it to a new level with her post this past Friday on her Business Tools Blog. The topic she covered is near and dear to my heart–it is what we believe is key to unleashing value at Zayo Group.
The title of the post is bland: Allocated Cost is Bad. But don’t be fooled…if your business is telecom and your company is big and complex, this post is your blueprint to value creation.
Do you agree? I hope you don’t (that is, if you’re not part of Zayo). Why? Because Zayo will benefit from having weakened competition and future acquisition targets. Perhaps later this week, I’ll provide some ammunition for the naysayers.
Holy crap. The best, most articulate, most powerful post ever “on” bearonbusiness wasn’t written by me. I don’t know whether to be upset or proud; jealous or appreciative; jubilant or juvenile.
While I decide how to react, I’ll share it with my readers. But not until Tuesday.
I was on TiE Rockies panel this past week with Vipanj Patel (iSherpa), Mike Devery (Silicon Valley Bank), and Brad Feld (Foundry Group). The theme was “Funding Your Business in Hard Times”.
During the Q&A, a person in the audience offered the assertion that too much emphasis on preparing an extensive and polished business plan. He wanted our reaction as to whether the idea was far more important, and that it should be presented in a concise executive summary and a follow-up face to face meeting. My response was that even more important was establishing a relationship and positive impression well in advance of presenting an idea. The investors need to conclude they want to fund you. Get over this hurdle first, and then selling the idea will be far easier.
I received an email from Larry Nelson of the Internet media station w3w3 (http://www.w3w3.com/). With his permission, I am posting it:
I really enjoy the panel at the TiE event this past week. I liked the point you brought up: ‘Establish credibility with VCs before you need money.’ It reminded me of an interview we had with General Ebeharte when he said, ‘Don’t exchange your business cards for the first time during a security crisis.’
Thanks Larry for the comment and for letting me post it on the blog.
Sandi Mays’ blog–www.businesstoolsblog.com–is must reading for Zayo and Envysion employees. She had a post a few days back that made me smile while also reminding me how far we’ve come. It is worth your time to take a look.
My favorites on the list of 11 tipes are #6 and #8:
6. Give the female employee in garage or office a definite day-long schedule of duties so that she’ll keep busy without bothering the management for instructions every few minutes. Numerous properties say that women make excellent workers when they have their jobs cut out for them but that they lack initiative in finding work themselves.
8. Give every girl an adequate number of rest periods during the day. Companies that are already using large numbers of women stress the fact that you have to make some allowances for feminine psychology. A girl has more confidence and consequently is more efficient if she can keep her hair tidied, apply fresh lipstick and wash her hands several times a day.
BTW, www.managedvideoblog.com, when u gonna put www.businesstools.blog on your blogroll?
Great post on Seth Godin’s blog. No extra words by me are needed.
Yesterday, I rambled on Rob Powell’s CDN post. Today I will ramble some more. [How come I didn’t think of the blog name Telecom Rambling?]
AT&T and Level 3 are newer entrants into the CDN arena. Though Akamai, Limelight, and others have a head start, AT&T and Level 3 have fiber; lots of fiber, as a matter of fact. I mentioned that Akamai has first mover, technology, and brand advantages in the CDN space. I do want to add one more thought before moving off this topic.
Another advantage Akamai has is focus. Laser focus. Myopic focus. This is huge. In the executive suite, they will understand the CDN market better than others. In the engineering department, CDN knowledge and expertise will be superior to telecom generalists. Their finance organization will understand profitability, while their competitors will be lost in cost allocations and inter-organization resource allocations.
Bottom line, focus will be more than enough to off-set fiber for a long time. I don’t know whether this means Akamai’s stock price is a good or bad buy. But certainly I wouldn’t count them as the odd CDN out just because they don’t have fiber.