Information Technology to Transform a Term Paper

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And this money is required to be raised from the market as the company does not generate this amount of revenue either from profits or from internal accruals. (DeHayes, 2003)

5. What should Tim do now?

After taking into account all the known and understood pros and cons, there are some points on which Tim has to take action. These are (i) the manner in which to raise capital needed either through fresh issue of shares or depend on Venture Capital -- VC funding. In case his project is a runaway success, he will definitely get more doses of VC funding, however any failure will ruin him. He has to use a number of channel partners like sales forces, territory wise, and websites to sell the software to various customers. (DeHayes, 2003)

6. Prepare the presentation Tim should make to the board.

A i) Ladies and Gentlemen, I take this opportunity to present before you our breakthrough product the Virtual Analyzer that consists of six major modules-each serving a unique area of problem faced by customer in realm of TEM. Slides containing the brief features of the modules are shown. As you are aware, the market size is huge. According to Gartner-Dataquest estimates, the addressable telecom cost management is poised to rise from a little under $2 billion presently to more than $5 billion by the year 2005 which translates to a CAGR of 26%. The market is fragmented with virtually no dominant player and hence there is tremendous scope for growth. In case our company is able to corner just 5% of that market, it will translate into a massive sales opportunity. We can grow to the revenue target of $100 million which I have fixed to reach in a timeframe of 7 years. Besides, cost management is just one aspect of the functions which Virtual Analyzer -- VA will provide our clients. (DeHayes, 2003) ii) a continuous income stream as an Application Service Provider -- ASP is assured because of the annuity value. While we wish the client to use the VA modules as a single package, customers can pick and choose among various services but he must at least subscribe to the Client Information Management and Vendor Invoice Processing and Vendor Invoice Payment modules so that he is able to enjoy the important benefits of the VA system.

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To be more specific, Ladies and Gentlemen, the price will be based on the size of the company and the quantity of modules they select to use. Bigger companies making use of modules would be billed about 2% of their monthly telecom cost whereas smaller companies using all the modules would be levied close to 6% of their monthly telecom cost. (DeHayes, 2003)

Hence it is my expectation that our average customer revenue to be nearly $25.000 monthly which approximately 4% of their average monthly telecom bill. At this juncture, it will be realistic to disclose that our project will take the remaining part of this year, the entire next year and will be ready for alpha and beta testing by initial part of the year 2001. Therefore we will be able to earn any revenue from VA after 2002 onwards. Therefore any revenue till that period will come from maintaining our old business model. It is my anticipation that the net investment to achieve this change is going to cost us more than $9 million spread out over 1999 through 2001. Moreover, we have to take into account extra costs for improvements between $1 million and $3 million every year onwards. But I consider that we will be able to record revenue target coming from this new business model. It is my hunch that generating $100 million revenue with almost $50 million in EBITDA is practicable achievable. Looking at the size of the market, we require a miniscule proportion of the $5 billion market to hit the 2006 target revenue. It will really be demanding for a $7 million company to spend more than million. Hence we will have to raise that much of money as we at Teletron do not generate that amount of money. Thank you all. (DeHayes, 2003)

Reference

Auditel Inc. (2003) "Telecom Expense Management Training -Phase III" Retrieved 4 May, 2007 at http://www.auditelinc.com/Telecommunications_Training_Phase_III.aspx

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