Fred Pope comes from an economics background and says he entered the satellite sector “by accident.” But as CEO of Satcom Resources, a business that relies in large part on an interactive Web site launched in 2000, he helps customers understand and acquire the solutions they need to set up communications networks.
“Looking at the industry from an economics perspective, the industry itself lacked a online superstore and distribution channel, and while most other mature industries have this, we thought that as the industry continued to grow, this distributor-like niche would be a natural result stemming from the evolution of the market. … Satcom Resources was launched to make the technology more accessible. We used to get calls from clients with the question “Can I do this over Satellite?” Hence we launched Satcom Resources with a Web-centric focus in an attempt show the breadth of the industry and the myriad of solutions possible from a hardware perspective. With our Web site we introduced a new way to research, design, integrate and purchase Satcom equipment, or just kick the tires on a potential solution.”
We act as an extension of our customers business, part of their network in many cases, providing them a cost-effective outsourced procurement, logistics and support arm. You might call us a next-generation company catered to next-generation networks.
Pope discusses the development of the business and Web site with Via Satellite Editor Jason Bates.
Via Satellite: Was this service not being provided before you launched Satcom Resources?
Pope: I would say definitely not in the way that we were, or are, currently approaching it. When we debuted in 2000 with our Web site, there was nothing that came close, and I think today, we can still say that. Furthermore, what we have done with the business model in a refinement of the original concept is not matched anywhere in the industry.
Via Satellite: How hard was it to get customers to accept this model? Has anyone else tried to replicate it?
Pope: We are different in that we sell hardware, and only hardware, but we are also different in the way that we deliver it. We’ve chosen to focus on that one thing and have since continued to innovate on how we can create value in this small niche. We were a bunch of field technicians that were mired in the details of the equipment. We’d been that guy in the field who got to stay a long weekend where we did not want to be waiting for one connector that was missed on the shipment. Integration details were paramount to us, and we could measure the expense associated with the additional field time that came from an improperly delivered terminal.
Via Satellite: How has the business model evolved?
Pope: The business model has evolved into more of a systems and customer service business. Most of the equipment that we sell goes out as part of a system, and we are focused on providing the entire solution to the destination of installation. While we can process the smaller order faster and more cost effectively, most of our equipment is sold as part of an integrated package that goes into one of our customer’s networks.
We act as an extension of our customers business, part of their network in many cases, providing them a cost-effective outsourced procurement, logistics and support arm. You might call us a next-generation company catered to next-generation networks. A large established company with massive internal resources might not look to use someone like us, whereas a small operation starting up will look at us and realize quickly that we can act as an extension of their company eliminating the need for an employee, or perhaps an entire department. We run a transaction intensive logistics business, while they operate a network. As our business has grown, the size of the company that we can effectively serve has grown with it, but we have been careful to make sure we never leave a customer behind in our quest for growth.
Via Satellite: How did you acquire access to the product lines?
Pope: We gained access to the product lines from industry relationships and a new idea. We were young, hungry, aggressive, and we knew the technology inside and out. We told a few war stories, demonstrated our technical knowledge of the gear and painted utopia, with not only the promise of new customers but also a free marketing offering that today has one of the largest reaches in the industry and continues to grow. Early adopters signed on with us, and now we are some of their largest customers, and we remain loyal to those early adopters that rooted for us early on and gave us the opportunity to represent their products. What is very interesting is the market position of these companies that were early adopters to our model. They are all at the forefront of their market. Whereas we have always offered to list products at no charge in return for the opportunity to resell the products, now we have suppliers asking us how much it costs to get their products on the page.
Via Satellite: Are you competing with your suppliers for business?
Pope: We used to compete with our suppliers for business, but it is becoming less of a trend. The competition was simply caused due to lack of information sharing. We now work more closely than ever with our suppliers and share as much information as possible with them. They know us and trust us and recognize that we have their best interest in mind. Like the customer side of the business, there is and older style approach that wants to do everything in house and then there is a more forward thinking approach that will see us as an extension of their sales force, and more “feet on the street” promoting and positioning their products. While some are worried about competition from other products that we sell, others are confident in their product and know that it will sell.
Via Satellite: What has been the biggest change to your business model?
Pope: A critical tipping point in our business was when we begun to outsource much of our operations that were not core to our business. There used to be almost nothing that we did not do ourselves from building software and servers to building and running phone systems and operating a warehouse. Now all we do is serve customers. The cost savings we have achieved through this approach are substantial but it took scale to begin to take advantage of these.
We don’t offer a lot of things. Services, bandwidth, and installations are the things that come to mind, but we can recommend someone who can help you in any of these areas since we work with a lot of customers who do offer these things. All of these are attractive from a horizontal growth perspective, however, at this point and for near foreseeable future, we are purely focused on what we do now, and improving the services that we deliver to customers based on what we do now.
Via Satellite: Are you dealing with companies traditionally not associated with the satellite industry.
Pope: Yes, we really have a diverse customer base that in many cases are first time subscribers to satellite. Over the last few years it seems as the veil over commercial satellite services has been dropped. Businesses of almost any size are more willing to evaluate and budget satellite into their communication and networking plan. Online and print access to technology, company and product information have really bridged the gap to understanding how all this stuff works. Overall, I think satellite connectivity is now within easy reach for almost any size company and I credit that to the amazing job the operators and providers have done re-engaging the market on every level.
Via Satellite: Do most of your customers just seek hardware? How many are looking for services?
Pope: Most of our customers seek guidance and information first. We maintain an objective unbiased position when recommending products. For us, it is about fitting the right solution for each customers specific requirement. The formula to determine the right fit is constantly changing but the following must be taken into account: capex, opex, interoperability, future-proofing, installation target dates and budget.
Roughly 25 percent of the leads that we receive are for services. This is where our sales staff assesses the customers requirements, and pre-qualifies the lead and based on the customers specific requirements that ultimately determines what the hardware solution needs to do. We then can make a recommendation on different equipment and hardware profiles and potential service providers that they can contract with. One of our internal initiatives is to help use our marketing channel to create leads for our customers that buy from us. It is in our best interest to help everyone that we work with grow their business. This is a part of the business that we really enjoy and a part of the business where we are very unique.
Via Satellite: What trends are you seeing in the equipment that is being offered by your suppliers?
Pope: More bits per hertz, advanced forward error corrections schemes, the trend towards IP management capabilities, higher data rates and tighter integration with the connecting device. Manufacturers are, in a nutshell, continuing to develop ways to make the links more efficient, simultaneously more reliable and, at the same time, more future proof. A great example of this is in some of the satellite modems that are currently available, for a small upfront fee, you can enable the modem out-of-the-box to have the hardware built in to support carrier canceling, thereby allowing you at a later date to enable that functionality with a software code that effectively doubles your throughput, without doubling you monthly expense. Furthermore, we continue to see the costs of the terminals themselves decline with advancement of the technology. I can remember deploying some of the very first Internet-over-satellite systems where the cost of the terminal itself was upwards of $60,000 and would take at least 45 days to get. I can deliver a far superior solution to you today for under $5,000, and if you get your order into by 3 p.m., I can have it to you the next day.
In general, manufacturers are offering a wider range of standard, configurable and upgrade options that allow us and the product to integrate to a wider range of customer requirements. The option to buy into a product that meets your immediate requirements that also offers a upgrade path to high-end, advanced, more efficient features offers allot of convenience to the operator or end-user. This concept of future-proof technology is being very well received
Via Satellite: What do buying trends tell you about the state of the market?
Pope: Buying trends were a bit slow at the first part of this year, however, they seem to have picked back up, and I think that the viral growth pattern inherent in networks and the increasing demand for data will keep our business growing at an above average rate for quite some time. End users are starting to recognize the benefit increasing of capex expenditures to reduce long term opex expenditures. I think a lot of operators have gotten burned with the long-term contract, whereas the capex expenditure is a one time investment versus a long-term liability. Furthermore, the increased scarcity of bandwidth globally is forcing companies to upgrade their equipment rather than extending their long-term contracts. Using this model, and looking at this we can typically demonstrate how hardware related investments can pay for themselves in as little as six-to-nine months and sometimes in as little as three.
Via Satellite: What does your business tell us about the direction of the market and trends in the coming years?
Pope: We are bullish on the satellite market and see the market only going straight up for the foreseeable future. With the increased availability of low-cost, high-performance terminals, the seamless integration of those terminals into existing IP-based networks and the improved efficiencies and reliabilities of these terminals makes them more attractive as an option. When you combine that with the forecasted growth of broadband Internet service usage over the coming years and the decline in price that we are seeing on the equipment, the basic underlying economics of the industry point us to continued growth.
