1.2 Companies on the Move:

CLICK HERE FOR COMPANIES ON THE MOVE

For the past 4 years, we've published information about companies on the move in our monthly report.  No more.  Now you can publish and view that information instantly on our web log (blog)!  To view, click on http://netsudsannounce.blogspot.com/.

Why email only to your small email list of associates when you can post this information on the blog and have 5100+ NetSudsers view it.  To publish to the blog send me an email requesting permission.  You may have to create your blog account at www.blogger.com.  After you have an account, you can post to the blog as much as you want.  You need only follow some common sense guidelines, e.g. don't post every press release, don't post sales information, don't post defamatory statements, etc.  If you "spam" the blog, you will be removed.

If you'd rather have me to post your information to the blog, just email me at cotm@netsuds.com.  You can report (1) the formation of a new start-up, (2) momentum change at an existing company, (3) addition of key hires, or (4) a funding event.  We do not accept press release changes from third parties.  We must hear directly from an executive at the company which is 'on the move'.

4.1 NetSuds on Tour

NetSuds loves on-site tours!  Email me if you want to show off your company.  I can be reached at matt@netsuds.com. 

4.1.1  No Tours This Month

4.2  Email Advertising

The NetSuds and MedicalSuds email lists reach 7600+.  The NetSuds email lists are double-opt-in and concentrated on professionals in the communications, IT and Internet markets.  The MedicalSuds email lists are double-opt-in and concentrated on professionals in the medtech, biotech and life sciences markets.  So, rather than spend your advertising dollars on any other email lists in the Twin Cities, consider the NetSuds and MedicalSuds lists.  Contact matt@netsuds.com or 612.605.5252.  For current ad rates, visit www.netsuds.com/adrates.htm.

6.0  Sistina Software:  A Linux Success Story, Right In Our Backyard

Sistina’s Acquisition by Red Hat Shows Locally Grown IT Startups Can Succeed With Right Team

by NetSudser Graeme Thickins(photo at left), www.graemethickins.com with contributions from Matt Noah

But the road to that acquisition was not easy – and the story wasn’t just about getting the product or technology right. Equally important, say the key players, was getting the company to the next level. And that part of the story happened in less than a year.

“We began looking at them in early 2002,” said Jeff Hinck, a partner with Crescendo Ventures of Minneapolis and Palo Alto, “but we didn’t feel the product was ready for the enterprise customer.”  Later that year, however, key software improvements had been completed, and Linux in general was gaining more traction as a solution for big data centers – where Sistina’s unique storage infrastructure software was especially needed. As a firm that continues to invest in promising Minnesota firms, Crescendo liked what it saw and, by January 2003, had teamed up in a new financing round with St. Paul Venture Capital, which had also made a smaller infusion in early 2000.

7.0  The Empowered Store: Revolutionizing the Retail Ecosystem

by NetSudsers Chris Turnquist, Christopher.P.Turnquist@syntegra.com, 651.415.4490, and Stan Elbaum, stan.elbaum@aberdeen.com, 617.854.5236

Chris Turnquist, VP Value Chain Services, Syntegra

Stan Elbuam, VP, Strategic Solutions, Aberdeen

The retail industry is under operating pressure from three key market drivers which make it difficult to serve consistently; increasingly educated customers demanding more product information, eroding retailer brand loyalty and customer fragmentation.  

These market drivers hit retail in every part of the business but the pain is ultimately felt in the stores.  That can mean increased out of stocks, employee turnover, increased markdowns, increased labor costs, increased inventory, lower margins, higher cost to serve and lost customers. 

Empowered consumers are increasingly directing the energy of the retail ecosystem, leveraging the Internet to demand customized, comprehensive and multi-channel solutions. Today the customer drives the sale. They drive the supply chain, they control the inventory and they can make or break a retail operation.

Retailers need to leverage technology and store system processes to create an environment where the customer keeps coming back. The empowered store is designed to gain more loyal customers and ultimately lower the cost to serve them. 

The Empowered Store 

Most organizations selling to consumers have adopted the limiting strategy of setting up multiple competing channels, with little or no ability to cross-sell or cross service customers. And the traditional supply chain centric retail business model does not pay sufficient attention to the root source of consumer satisfaction – the physical or virtual store. 

The empowered store however, is a unique model that leverages business and technology strategies for retailers selling direct to consumers.  Progressive retailers are already successfully putting elements of this winning approach into effect with an ecosystem of partners and are gaining significant improvement in marketplace penetration. 

Market Forces are Shredding the Sustainability of Retail Status Quo  

A set of pervasive and irreversible market forces is dramatically changing the core dynamics of successfully serving consumers and, with it, reshaping the very definition of retail market competitiveness and effectiveness.  The change of most impact is the emergence and growing dominance of the empowered consumer, who is increasingly shifting real power from both brand manufacturers and traditional distribution channels to the end consumer. 

The pervasiveness of the Internet has accelerated and amplified the growth of the empowered consumer who can now explore and value product alternatives, and become better informed than virtually all of the employees attempting to service them. 

The Internet has also fueled the emergence of alternate buying channels, both for those who traditionally sell to consumers, as well as a growing array of non-traditional and competing direct-to-consumer distributors and manufacturers. 

In addition to the Internet, customer fragmentation and diminishing brand loyalty are market forces that are dramatically affecting today’s retail environment.  To meet customer demand, you need a better-trained staff, attractively priced product and well-managed inventory. To address a fragmented customer base you need targeted marketing programs, localized store layouts, product mixes and pricing.  Finally, to strengthen brand loyalty it is imperative that your retail environment deliver a unique experience.  To successfully deal with these challenges, empowering the customer is crucial and the answer must start at the stores.

Together, these market forces represent a fundamental, pervasive and irreversible change in the criteria that retailers use to keep consumers coming back to the stores. 

Inside the Empowered Store 

Successful retailers are embracing an approach that empowers the customer in the store. 

The empowered store is a combination of technology and process, which enables the retailer to leverage all of your resources to empower customers, sales associates and suppliers to collaborate and maximize store performance. 

Four Key Components of the Empowered Store 

There are four key elements that make up the heart of the empowered store.  They include customer empowerment, sales associate empowerment, supplier empowerment and business collaboration. 

Customer Empowerment is about extending the value from the retailer to the customer by providing additional access, content, education and commerce to wherever the customer is located.   Self-service and wireless capabilities allow the customer to get the information they need to make a buying decision in their shopping path. 

Sales Associate Empowerment links store associates to resources to increase their effectiveness and help them more diligently serve the customer. The focus is to provide store associates with services and capabilities to better serve the customer at the point of service and proactively adapt to emerging customer demand patterns.

Supplier Empowerment is about shifting access, content, inventory and responsibility from the retailer to the supplier.  This allows the supplier to more effectively manage their demand chain and increase insight into product lifecycles. While retailers should continue to improve supply chain execution, the store also needs to incorporate empowering processes and technology to serve the consumer in real time. 

Business Collaboration enables retailers to effectively align, balance and leverage resources across all dimensions of their retail networks. 

Progressive Retailers are Successfully Implementing Components of the Empowered Store Today  

·        Pilots are being conducted at leading retailers, which are producing significant results.  As with most operational changes, the more direct the benefit to the consumer, the greater universal acceptance.  New in-store communication options and mobile points-of-service are moving the necessary intelligence to the point and time it is required by the consumer.  Associates are confidently assisting in the sales process because they are provided the necessary tools to deliver product intelligence and service. 

·        British Telecommunications (BT) has invested in RFID as a stand-alone venture.  RFID promises to dramatically increase the visibility and manageability of the overall supply chain.  Manufacturers and Distributors will be empowered with these capabilities and able to accept additional accountability and improve overall supply chain performance. 

·        Retailers continue to deploy Wi-Fi infrastructure at break-neck speeds.  The layout of the store is the first beneficiary in terms of flexibility and configurability.  POS terminals can be relocated and temporary ‘sale’ stations can be deployed anywhere in the store to facilitate faster and more effective checkout.  While handheld POS still presents challenges for some retailers, innovation in this area remains strong and will continue to gravitate toward consumer preferences. 

·        Microsoft, Fujitsu and other in-store system providers are building solutions on a web services framework, which allows in-store components to be deployed to remote and mobile platforms for execution.  This flexibility allows the retailer to tailor their systems to meet the needs of their associates, consumers and suppliers.  In addition, it leaves room for the stakeholders of the store to innovate in the areas of service, configurability and intelligence. 

“Based on in-depth industry and consumer research, Microsoft has come to the conclusion that the demands of the digitally-enabled consumer will change the dynamics of retailing,” said Brian Scott, general manager of Microsoft’s Retail & Hospitality Industry Solutions Group.  “The empowered store concept is consistent with our views and properly acknowledges that one of the retailer’s keys to success is to leverage the familiar technologies—such as cellular phones, personal digital assistants and other wireless devices—already in the consumer’s hands in order to create a compelling and fulfilling shopping experience.” 

The Empowered Store will restructure the Entire Retail Ecosystem 

The Empowered Store business model will cause a profound and disruptive ripple throughout the entire retail ecosystem and will create a new paradigm for long-term success for all participants. 

All retail ecosystem players including manufacturers, service providers, logistics providers, component and material providers will be driven to align their strategies and capabilities to meet new retailers’ requirements to enable the empowered store.

Winners and losers in the retail market will be defined less by the lowest delivered cost and more by the ability to support empowerment, agility and compliance based risk management for themselves, their ecosystem partners and their customers.

Successful strategies are based on embracing and leveraging, rather than resisting, the force of the empowered consumer.  Aggressively leveraging all ecosystem business partners provides target customers with a customized experience including specialized storefronts, categories, and total solutions. 

The Empowered Store.  Ultimately it’s the power to bring them back.

The world of retail has a stark metric – your customers come back or they don’t.  The bottom line to the empowered store is to keep a growing stream of customers coming back to the stores. 

8.0   The ROI Of Audio Conferencing

By NetSudser Craig W. Morse, 763-694-0809, adtec-com@qwest.net  

Today, “let’s have a meeting” means Instant Messages, Emails and I will call you from the road on my cell phone.   Which makes audio conferencing an important communications tool that allows people to participate in all those meetings more efficiently.  So, beyond the obvious need for audio conferencing what is the most cost effective way for a company to implement it as part of their overall communications strategy? 

Companies that provide audio conferencing on per-minute bases are called Conferencing Service Providers (CSP’s).  Their ranks include the big three long-distance providers (AT&T, Sprint, MCI) and 100’s of independents such as Gensys, ACT, Intercall, and on n’ on. The CSP’s in the last couple of years have made significant changes to their product offerings to meet the growing demands of their clients.  The biggest change has been the addition of a product that the industry calls “Reservation-less” or “Unattended” conferencing. 

Reservation-less conferencing, is where conference participants are given a permanent phone number and a PIN code to access their conference.  This allows the participants to conduct an audio conference anytime without having to call the CSP to schedule a conference each time they need one. The conference access phone number is either toll or toll-free and the PIN code will allow a fixed number of participants to access a single conference.  The CSP totals up the minutes used by the participants PIN code and bills them at a flat per-minute rate. 

The current industry average for a Reservation-less conference is 14 cents per-minute for toll-free and 10 cents per-minute for a toll dial-in number.  The per-minute price varies a great deal, due primarily to the total amount of minutes you are willing to commit to each month and market competition.  Price variations in this industry segment are especially widespread because the CSP’s operating cost for Reservation-less conferencing is very low.  Once a client’s information has been entered into a conferencing systems database there’s nothing left to do but send a bill each month. In fact, on average the CSP industry reported that Reservation-less conferencing represented over 65% of the total industry revenue and 85% of the total conferencing minutes for 2003. 

In its latest quarterly results, Paris-based conferencing giant Genesys reported that while overall audio conferencing call volumes rose by 43% in the year, those generate by Reservation-less service increased by 165% of call volumes.  ACT Teleconferencing, which saw quarterly gross profits jump from 46% to 54% of net revenue attributed this improvement to increased demand for Reservation-less service. The company said that 70% of its conferences were Reservation-less as compared to 40% the year before. 

Well, we all wish the Conferencing Service Providers to live long and prosperous.  However, here are some facts that you may want to consider next time you’re evaluating your telco bill. That is if you can find the portion detailing conferencing services costs, especially if your CSP is the same company as your long distance provider. 

First of all, the hardware required to provide audio conferencing is no longer hundreds of thousands of dollars.  A 24 port Conferencing Bridge (which will accommodate 24 conference participants) today average between $15,000 and $30,000 depending on the feature set required. As a reference, the national average for an audio conference is 6 participants.  This means that a 24 port Conferencing Bridge can accommodate 4 simultaneous conferences at the same time.  So a 24 port Conferencing Bridge is more than adequate for a large number of Enterprise user and expansion to the next size up (48 port) is reasonable inexpensive. 

These systems provide Reservation-less conferencing that do not require any company personnel to manage or maintain the bridge hardware.  These bridges also have operator connection for those companies that want the extra dial-out service to accommodate their executive staff. As well as from a security standpoint, web scheduling package that generates a new dial-in number and PIN code for each conference. The scheduling software resides on a companies Intranet, interface to the bridge hardware and provides email notification to conference participants.  Most bridge manufacture’s web scheduling software are very simple point n’ click, multiple browser compatible, and are a minimum priced options. 

From an ROI standpoint, an in-house conferencing system can reduce a companies audio conferencing per-minute rate to below that of their long distance rate.  Hold-On-Now! What kind of magic is that?  From a standpoint of the day to day operation of in-house conferencing system, cost reduction to below the companies LD rate is possible.  This is primarily because most bridges are installed as an interlaced part of a company’s telecommunications architecture.  This mean, all conference participants calling the bridge internally or locally do not incur any per-minute charges.  Also, participants that call through the companies VPN are at the low contract LD rate.  In the future, when the company’s telecommunications system migrates to VoIP most audio conferencing hardware will migrate along with the PBX.  This will make the audio conferencing per-minute rate zero for all calls. There are other costs involved in deploying an in-house audio conferencing system such as, monthly network cost, capital expenditure for the hardware, maintenance, and staff soft-costs. 

Monthly Network Costs

There are two options for supplying network to a conferencing system.  Option one, add a T1 span to the PBX and loop it to the conferencing system. This will increase your available lines to user traffic ratio during times when conferencing traffic is low and not incur LD charges for local calls.  However, the monthly charge for this option is usually higher than the other option.  Option two, order a T1 span from your long distance provider and connect it directly to the conferencing system.  With this option the monthly loop charge is usually very low and the per-minute rate is the same as your overall long distance contract.  The ideal for larger conferencing users is to do both because the Conferencing Bridge combines the calls no matter which span they came in on. 

Capital Expenditure

As I stated above, Conferencing Bridge hardware has come down considerable in price within the last 5 years.  Entry level audio conferencing systems start at around $15,000 with installation around $1,500.  Most Conferencing Bridge manufactures will provide a lease-to-own option and competition is driving this option to be interest free.  That means, in a lot of cases there is no Capital Expenditure, you are temporally paying for an in-house system instead of the monthly CSP charges. 

Staff Soft Cost

With a Reservation-less in-house conferencing system there is really very little to no internal staff costs.  Yes, you are adding another piece of hardware to your telecommunications system.  However lets face it, unless the tech is doing an add, move, change or upgrade to the PBX there is really very little that needs to be done from a day-to-day standpoint except monitoring.  Audio Conferencing Bridge are built on the same technology as today’s digital PBX’s and bridge installer does all of the setup and configuration of the system. So the only thing left for an internal support tech is to monitor for telco failures which most of the time are corrected automatically. 

The following is an example of a medium size company of 600 employees using 50,000 conferencing minutes per month.  The ROI for this size company with an in-house conferencing system is 3 months.

                 Total In-house Cost after 3 Month ROI                  $ 880.00 per month or $ 0.017 per minute

 When considering an in-house conferencing system, not all of the above costs come into play.  For example if the majority of the company’s conferencing participants are outside the VPN network.  An LD/POP could be provided by their LD carrier to support the conferencing systems network requirement.  In this case the monthly T1 telco cost is normally waved or under $100 per month and the per minute rate can be negotiated down for the whole companies LD since they are adding 50,000 minutes per month of new traffic.  In this case, let’s say the new LD rate is $0.02 per minute.  The conferencing systems ROI versus the CSP would still be 3 months. 

In-house system $ 17,500 / CSP’s $7,000 – LD cost $1,100 = $5,900   =   2.97 Months ROI    

As expected this same formula gets better the larger the company because of larger amount minutes that are added to the monthly conferencing budget.  I have also found that a company will not consider an in-house conferencing system unless the ROI is 12 months or less and with the low competitive pricing from the bridge manufactures, even small monthly user can see a quick return from an in-house conferencing system. 

Another example I ran across recently was a large financial institution that was doing 10 million minutes per month of audio conferencing with a CSP at $0.05 per minute, 80% of those minutes being conducted using Reservation-less conferencing.  In this case, after recouping the million dollar investment on the in-house conferencing system their first year’s savings will be over 3 million dollars.  

9.0  Guest Writers for This Report

I have opened up the Monthly NetSuds Report to guest writers. If you have a passion for a topic, and you can write (at least no worse than me), send an email to me matt@netsuds.com.  You can even send copies of your work.  It needs to be on "com and .com" topics and can include entrepreneur/investor activities.  Good information from our    service providers and vendors is also welcome so long as it is not a "commercial" for any one company or individual.

We will consider both sponsored and unsponsored columnists and guest writers.

If you are aware of others who would like to receive the NetSuds Report, ask them to visit http://www.netsuds.net/mail.htm to subscribe or unsubscribe.

Please send your comments and feedback regarding this issue of the NetSuds Report to matt@netsuds.com.

Matt Noah

980 Lake Susan Hills Drive
Chanhassen, MN  55317

612.605.5252
fax:  612.677.3934
matt@netsuds.com

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