How often have you started a ‘back of envelope’ analysis of a new business opportunity, spent a fortnight getting the logic right and adding a range of essential financial outputs, only to have a colleague (or even a client) spot a trivial error?
Business-case models are commonly built the hard way, from the bottom up each time in a spreadsheet. As well as the laborious re-working of basic calculations, editing at the cell level makes subtle copy errors inevitable, which may only be detected by a time-consuming review process. Arbitrary modelling techniques and a lack of high-level structure guarantee slow handover as colleagues must comprehend the business logic cell by cell.
The internationally renowned STEM business-modelling software is a time-based revenue, capex and opex calculator which supports network roll-out and investment decisions, and a high-level communication tool which uses icons to represent the key drivers in a business plan.
Rapid model development process
STEM manages a complex structure of individually straightforward calculations to help you focus on evaluating the financial impact of strategic choices for a network business.
Established modelling process
Demand for different services is defined in terms of connections, busy-hour and overall traffic volumes, and is related to consistent market segment assumptions. A standard formalism for connection, traffic and location dimensioning rules makes models easy to understand at a glance.
The STEM resource concept is used to model all kinds of hardware, software, licensing, staff and other operating costs, and captures the essential 'lumpiness' of telecoms investment. Fixed and variable costs are usually captured as separate resources with varying capacities, with the collection construct providing automatic aggregation of all related installation and cost results.
Business-case elements
Technical and financial results
Per-resource installation profiles allow the age distribution of the installed base in year zero to be fine-tuned.
The STEM methodology includes both global and per-element cost trends to capture erosion in equipment charges, and various modelling approaches can be used to handle price capping (for example, the use of a secondary resource to capture the cost of a resource up to a vendor-defined limit). STEM has explicit support for per-resource price lists for volume discounts.
STEM automatically aggregates service and resource results in order to generate comprehensive network financials, cost-benefit and break-even analysis.
Network aggregation
Interface between STEM and Excel
The range of topics that can be covered in a STEM modelling workshop is testimony to the clarity which the iconic interface lends to the modelling process. The STEM add-in interface for Excel keeps the inputs and outputs readily accessible for colleagues and management, and can be used to generate financial outputs in a range of management formats, while retaining the integrity of the model structure in STEM
Business-case models are likely to undergo many iterations as topics are understood and propositions refined. STEM's logical separation of structure, data and generated calculations means that models are readily modified and extended, making the tool the natural choice for these vital applications.
Integrating communication with calculation
STEM's graphical interface is optimised towards the rapid development of business cases, built either from a standard toolbar of business model elements, such as services or resources, or by drag-and-drop from existing models. STEM is an immediate and intuitive presentational device.
Based on the structure developed in the Model Editor, STEM automatically expands time-series formulae and generates a demand and cost allocation framework. Service revenues, equipment installation and replacement, capex and opex are then calculated. STEM includes parameters for working capital, tax and interest, gearing, borrowing, equity and dividends, and also provides full P&L, C/F and balance sheet outputs.
Technical and financial results available 'out of the box'
Hundreds of built-in results are delivered through an integrated charting interface which can drill down into individual elements, revenues and costs. The output set can be extended with user-defined results which can support your preferred financial definitions. Thus STEM acts as a time-based revenue, capex and opex calculator which supports network roll-out and investment decisions.
A wide range of telecoms business applications
STEM models service demand and equipment installation, categorised by user, service and geotype, and enables decision-making based on quantitative results. STEM is designed to be technology neutral and has been applied to technologies including TDM, GSM, UMTS, CDMA, DSL, VoIP, WLAN and satellite.
Typical STEM modelling objectives
By design, STEM will deliver a consistent lifetime costing of all assets in order to explore the implications of business plans for the total cost of ownership, backed up by a clear architectural and financial model.
