ARN: What does MCT focus on?
Tudehope: Macquarie focuses on the entire corporate, long-distance telecommunications market. Over eight years we've gone from voice to honing in on the data networking market. We also realised that big gains could be achieved via voice because most talk rates are up. Our outsourcing model is such that we're not just focused on unit cost. For corporates, the focus is far more than that, for example, managing a company's telco invoices as well as strategic relationships. Where we're more competitive is with the full range - the entire market cost. Our view is we've been growing steeply in the marketplace since starting eight years ago, with just under $300 million in annual revenue.
What is Macquarie's role in the channel, and how important are resellers to the business?
We're not about providing a total package. We're not about application or systems integration, so we'll team up with someone else. It's a different skill set from the telco market. We focus on the services side. We have a channel partnership program. The focus is not so much to "replace" Macquarie and rebadge the Macquarie product, but realise that in all areas we're not the best.
In the data space, while a number of large ISPs are our clients, we buy Internet capability from them purely to get redundancy. For example, IT equipment, CPE server or LAN equipment. If any of the players along that equipment supply chain, like an ASP, asks us what kind of service levels we can guarantee them, we'll give cash rebates if our network fails.
How we can add value to a reseller is shown by one example that comes to mind, North Shore Systems, a Sydney supplier of PABX systems. We teamed with them to create Conduit. The hole in the market we filled is with the PABX. You can lease it or purchase it outright. With Conduit we've created "PABX by the month" which is charged by unit price per extension. We will also bill that one telco bill, so if you're a large company who grows, we'll bill that cost. That's worked quite well. While these products aren't for all, they've been very positive. So in many respects, we're reselling or partnering on other parts.
But because we're focusing on the top 1000 companies in Australia, which average $4-$5 million per annum, quite a sizeable slab of the market, we haven't found a wholesale or reseller player yet to partner with long term. Our channel relationships have generally been good, but some carriers in the service provider space do focus on price, not service. For Macquarie, it's about the total cost of ownership, not the unit cost. Service is really important. It's an area a lot of resellers often neglect. We'll use resellers when we need to because we don't have every product our competitors offer. No longer is business about "getting service", but how quickly the carrier or service provider responds. Across the board, things are improving. Generally in the IT reseller market, there's an understanding that you need to focus on service. But if you ship or move a box and leave it at that, I question whether you know how to create a value-added service.
What are the typical things MCT customers ask for?
Particularly with voice communications, our customers come to us and say: "We can get voice from any one of your competitors, but we're not looking for a systems integrator." We pull ourselves out of the customer account, and by not just focusing on dollars, Macquarie is becoming more and more of a one-stop shop to fulfil large business' needs. We'll often get together with CIOs, from call centres and transport businesses to financial service companies. We'll ask them: "What do you want? Tell us." It's commercially attractive for their personnel to understand our technology.
What's happened in the telco marketplace over the last two or three years is the role of IT has almost done a 180. It's gone from a back office focus, to a situation where throughout the company, from CEO right down, there's an awareness of the strategic importance of IT to the company's success. In the online world, it's a 24 x 7 scene. The critical components of the IT&T space have grown more to the underlying infrastructure. Our customers are seeing this trend. Our CEO is seeing this trend and asking: "How can we do something about this?"
By focusing on just 1000 clients, we feel we know what we're doing. It means we're on their wavelength. We've got buy-in early. We think we'll do well with our market. We've had churn rates of 6 per cent for the last three years compared with an industry average of 25-30 per cent when you include mobile phones. It's a reflection we've become close to the customer. We're doing something right.
What are your plans for the business over the next 12 months?
We've certainly got lots of plans. Between now and Christmas we'll build on our data networks, ISDN frame relay and ATM. We've extended our Inview Internet monitoring tool which observes the telco cloud. Inview has by far the highest take-up rate of all our products. It is a major contributor of customers joining us. The next development target is a product that can measure which applications or protocols our customers are asking for. The telco network is very important now for any WAN application. At the moment, it's a black box situation for all our competitors. You really need to start putting equipment in the black box or telco cloud. To give you a flavour of what to expect from us, it's all about providing the infrastructure and network tools to assist our clients to move into the online world.
What challenges must you overcome to see these plans come to fruition?
There's no question that bringing a product to market is a major issue. Clients are expecting it to be ready and not still going through beta or alpha testing. We tend to deliver in a slower manner. The business plan is that there is an Australian quirk involved. What makes it harder for us as a company, and for Australia as a country, is we're a bit behind the US. I don't like saying that. So we spend every January of every year in the US. We pick bits and pieces from [US companies] and develop our products from that.
What developments do you believe we'll see in the telco arena in a year's time?
The telco outsourcing trend is growing tremendously, but nothing has really changed in the last six months. If your business is good at call centre management and call minutes, then why change that? But it's the same situation every year - you're either in the corporate market or you're not. The corporate market is so switched-on, they know what they want.
The telco market has gone through big changes in the last 10 years, from Telstra up to 400 or so providers. Now providers are focused on different things so the major players are down to 12 or so. I think that's a sustainable number now, with a few more popping up - people who actually provide the interface - but I don't think more than six though.