Where is Your Company Among the Life Cycle’s?
(How Long will the PBX Life Cycle Be?)
Recently we did a detailed life cycle evaluation not only on some companies but the system or product used. This example, the PBX system or private branch exchange, would be considered “buried in overhead” by some, but we broke down into detailed areas evaluating specifics that effect ever-changing technology factors. As PBX technology becomes more advanced, the life expectancy of PBX systems is shrinking. Enterprises must plan for shorter life cycles for newer, server-based PBX systems. I will show different criteria for several types of enterprises using the system yielding limited life expectancies or cycles.
My example here is different than the traditional product life cycle, but you can identify the events and actions taken in order to compensate for the unquantifiable metrics often found when trying to make a sound business decision. I understand the Stage of Production, Product/Service Life Cycle, and the Nolan Norton Technology Cost Life Cycle. You will read how I have immersed my discussion even deeper in the technology cost life cycle. Knowingly aware of this, a company most often will know where they are in the other cycles.
How will enterprises keep their voice- and call-processing equipment up to date through 2002 without facing major migrations?
Through 2002, enterprises purchasing PBX systems should expect an average system life cycle of four to five years (0.8 probability).
The PCX will become the preferred technology for enterprise-wide voice switching in Type A (leading-edge) enterprises by 2001, while Type B (mainstream) and Type C (conservative) enterprises will delay adoption of PBX technology by up to five years (0.7 probability).
Enterprises planning to purchase PBX systems within the next five years face tactical decisions that will affect their business both operationally and financially. PBX systems are migrating from a purely proprietary software and hardware architecture to an open-server platform that will be differentiated by the software, service and support each vendor provides. In the transition to an open-server platform (see Figure 1), one certain change will be that manufacturers will be unable to offer life cycles as long as those offered by their proprietary predecessors. Enterprises planning PBX purchases through 2002 should expect an average PBX system life cycle of four to five years (0.8 probability).
Enterprises planning to purchase a PBX system within the next five years should expect an average system life cycle of four to five years. PBX life cycles have typically averaged eight to 10 years; however, changes in PBX architecture will significantly impact PBX longevity.
We classify PBX life cycles by Type A, Type B and Type C enterprises:
Type A enterprises should plan for PBX life cycles of three to four years.
Type B enterprises should plan for PBX life cycles of four to five years.
Type C enterprises should plan for maximum PBX life cycles of seven years.
In the past, the completely proprietary structure of PBX systems gave their manufacturers the ability to control product life cycles. If new features or technologies were needed, the manufacturer would evaluate the current platform, and implement a combination of hardware, software and “firmware” solutions to offer that feature or technology on the existing system architecture at an additional cost. This approach provided the enterprise with a reasonably reliable product with an average life cycle of eight to ten years. Product platforms did change, but only when the necessary technology or feature required drastic changes to the existing platform. Even then, manufacturers sought to integrate adjunct peripherals as an interim solution supporting their installed base while a new solution was being developed.
Now, as the PBX migrates toward a more data-centric LAN platform, PBX manufacturers will become more reliant on and tied to life expectancies of their server and hardware providers – resulting in the “Trojan horse principle.” According to this principle, PBX manufacturers will increasingly develop and offer new applications and features that are only available on their server-based products – eventually forcing the transition to an entirely LAN-based architecture. In doing so, vendors may claim that they are only responding to the market request for open standards in telecommunication products.
A good example of where PBX systems are headed can be gleaned from an application that has already seen the impact of PC dependency: the voice mail system. The present-day voice mail system has transitioned its feature and functionality sets across the 286, 386, 486 and Pentium processors, while continuing in many cases to interface with the same PBX system platforms. The voice mail system offers more “proof positive” that platform tenure decreases as processor technology advances. Further evidence of the impact of the transition to an open-interface architecture on PBX product life can be obtained by examining the change that took place when telephone systems migrated from an analog platform to a digital one. That transition brought new phones, new interface cards, new software, and requirements for additional memory and processor speed. The fate of today’s digital investment will be similar to that of yesterday’s analog investment.
Definition of Type A, B and C Enterprises
Type A enterprises are technology-driven, often willing to risk using immature technology to gain a competitive edge.
Type B enterprises adopt technology when it has been proven.
Type C enterprises are risk-averse and usually price-sensitive.
Type A enterprises will enter the open-architecture arena, replacing proprietary PBX systems with newer, server-based ones. These enterprises should expect to pay more for “platform churn” (PBX life cycles of three to four years), and should expect to experience support issues
due to their acquisition of a new product that crosses the boundaries and requires support channels with both voice and data expertise.
Type B enterprises will wait for signs of market acceptance – and for trained and experienced support channels – before installing open architecture. During the transition to open architecture, these enterprises should plan for PBX life cycles of four to five years.
Type C enterprises will wait before installing open architecture and will try to obtain maximum PBX life cycles of seven years. The trade-off for this delay will be a shortage of parts, fading service for aging technology and increased time frames for “bug fixes.”
Enterprises planning PBX purchases must consider the impact that architectural changes will have on PBX longevity and purchasing cycles. PBX architectures are evolving from totally proprietary systems to open, server-based ones. As this transition occurs, PBX manufacturers will lose the advantage conferred by their ability to modify proprietary hardware, software and firmware to keep existing platforms compatible with surrounding technology advancements. PBX manufacturers will become dependent on, and reactive to, the fast-paced and ever-changing PC and server marketplace. As a result, today’s eight- to ten-year PBX system life expectancy will shrink to a four- to five-year one, requiring enterprises to significantly modify their PBX planning and purchasing schedules.
How Would You Classify the U.S. Mutual Fund Industry?
Looking at one or more of the forms of competition from both the investor or consumer and offeror or producer perspectives:
(Few sellers)Roughly 12 large producers control 52% of the Mutual Fund Industry Market Share. Economics Explained & Cassette Tape
Slope of Marginal Revenue Curve at Equilibrium has a steeper slope.
Slope of Marginal Cost Curve at Equilibrium is Increasing.
Overall Industry Classification = Differentiated Oligopoly
Impact of Porters Five Forces of Competition
– Among the largest, the competition is tremendous; their objective is to be at the top of the Mutual Fund Industry in overall market share.
– Occurs mainly in the open-end MF market which comprises 75% of overall market
– Heavily regulated industry forces competition to concentrate on developing and
sustaining outstanding fund performance.
– Many are available, but switching costs may be high
— MFs may have fees and/or loads which aid in retaining the investor and to discourage switching
— Switching between funds can also create a taxable event which also discourages switching
3. The Potential Entry or New Competitor/Barriers to Entry
– Can be viewed as an easy market to enter given the explosive rise in MFs available today when
compared their number in previous years
4. The Market Power of the Input Suppliers
– Suppliers (the behemoths) have a strong competitive force
– Their MFs lead the industry in performance which allows them to command higher price
– Buyers form a weak competitive force over the top performing MFs because the top MFs have
what the buyers want: Performance!