TNC Market Update for ECMWF - Adrian Joyce - Head of Consulting John Waterhouse - CEO - ECMWF Confluence Wiki
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TNC Market Update for ECMWF
Adrian Joyce – Head of Consulting
John Waterhouse - CEO
26/09/17
ECMWF – Market Update
Agenda
• Introductions
• Who are TNC
• ECMWF challenges
• Recommendations
• General market trends
• Next Steps
• Appendices
• Interoute Results
• Procurement vs Renewal
• Confidentiality, Copyright, Disclaimer
2
ECMWF – Market Update
Introduction
• TNC is the UK’s largest independent telecoms strategy and procurement consultancy
• ECMWF is now in or entering the latter half of their WAN contract with Interoute
• ECMWF appears to have a number of recent concerns/questions with regards to Interoute which TNC
addresses in this presentation
• TNC believe in long term planning for contract ends and whilst this is still some way off TNC has also considered
what ECMWF’s approach to deal with the end of the contract could be and in simple terms determine whether a
renewal (subject to any regulatory restrictions) or a procurement process should be considered
• TNC will also provide a brief overview of the Telecoms Market, current trends and possible implications to
ECMWF and Interoute
• TNC provided a detailed review of Interoute’s commercials last year and concluded at that time that overall it
was a relatively competitive deal and would beat much of the market but there were a few sites where their
commercials could be improved
3ECMWF – Market Update
ECMWF Issues
• ECMWF raised the following issues for our consideration/comment and comparison to any other customer
experiences
• Recent delays in Irish provisioning
• Increasing costs of quotes for Iceland
• High one off costs quoted for New Caledonia
• ECMWF wanted TNC’s opinion whether the above issues may indicate a specific issue with Interoute
4ECMWF – Market Update
Ireland - Issue
• Recent delays in Irish provisioning for the installation process for a new 100 Mbps circuit. This took from Jan
2017 (order) until final handover on 29 August
• The secondary circuit (radio link) still has not been delivered
• The upgrades were ordered at the same time
• ECMWF are not sure if it was an ordering process delay, mis-communication between Interoute and
subcontractors (Vodafone and other subsidiaries), insufficient capacity or incompetence
5ECMWF – Market Update
Ireland – TNC views
• TNC has spoken to a number of providers and there are no reports of recent issues in Ireland and certainly no
reports of generic country access capacity issues (there is always the chance of occasional local exchange
capacity issues)
• Most providers choose to back haul directly with the PTT, Eircom, rather than using a 3rd party such as Vodafone
Ireland which appears to have been the methodology chosen by Interoute
• Vodafone Ireland is a major carrier in Ireland being the largest mobile operator but in terms of fixed line assets
they still have a limited network and limited LLU so rely on wholesale backhaul from Eircom to fill out their reach
• 8-9 months for the installation of a 100Mb circuit is very long but not unprecedented. Installations of this length
usually have the following causes;
• Wayleave delays
• Local capacity issues
• Access issues (e.g. ducts)
• Supply chain delays
• Mismanagement
6ECMWF – Market Update
Ireland - Conclusion
• Without a thorough investigation and report by Interoute it is difficult to conclude or dispute their limited response
however the lack of a thorough response by Interoute could be viewed cynically. In the experience of TNC the
majority of delayed installations that don’t have a clear history of specific issues are usually caused by mis-
management and typically are the result of one or more of the following;
• orders not being placed in a timely manner
• order errors
• poor order management
• poor follow up to chase or correct issues
• These issues could have occurred within Interoute’s business, Vodafone or even Eircom (on assumption they
are involved) but as for ECMWF the buck should stop at Interoute. Interoute are responsible for delivering the
service in a timely manner and ensuring clear communication to ECMWF and any down chain issues should be
routed out and resolved without the need for ECMWF’s involvement or even awareness
• In addition there should be no reason that the radio link continues to be a problem. Radio links are often the go-
to faster option if there are local capacity or site access issues
• TNC would recommend ECMWF demand a thorough report for these delayed installations followed by a meeting
with a senior operation’s representative to ensure a full understanding of the issues and to ensure Interoute’s
management are conscious of ECMWF’s focus on change management to mitigate any future issues and
establish clear communications
7ECMWF – Market Update
Iceland - Issue
• Iceland was initially offered an upgrade to 5 Mbps within MRC (Sept 2016) but this was later retracted (June/July
2017). They could offer this and it was very difficult (took a long time) to get a pricing for the upgrade. It appears
that there is limited data communications capacity to/from Iceland and/or limited demand to/from Iceland which
keeps the prices high. This to us seems a bit strange when all we hear is Data Centre availability because of
cheap electricity
8ECMWF – Market Update
Iceland – TNC view
• Iceland is ideal in many ways for Data Centres – plentiful land, low average temperatures meaning less cooling
is needed, cheap renewable electricity however it’s low population (~320,000) and geographic position has led
to relatively poor global connectivity and as such the capacity of the few links to Iceland are limited and lack
competition
• Whilst there are four subsea cables only two are of distinct capacity and in major use
• Danice – 34Tbs – back to Denmark
• Farice-1 – 11Tbs – back to Scotland
• Greenland Connect – back to Canada (via Greenland) 1.28Tb
• Cantat-3 – old low capacity mainly used by oil platforms
• It’s low population means there is limited IT personnel capable of supporting an industrial scale of DCs whilst
secondment or migration to Iceland is not a popular option
• Iceland’s financial crisis from 2008-2011 and its ramifications beyond that date seems to have been a trigger for
many of the Tier 1 global telecoms companies to reduce or even withdraw their presence (via POPs or nodes) in
Iceland as they saw demand for services significantly reduced and future growth in doubt
• Whether this coincided with Interoute’s initial quote and final quote is perhaps doubtful but as the first quote was
budgetary it may have been based on previous (older) orders and may have assumed the same connectivity
and associated price would be available
9ECMWF – Market Update
Iceland – TNC view
• The withdrawal of some Tier 1’s directly from Iceland does lend further credence to Interoute’s supposition that
Iceland is a challenging place for telecoms services
• Interoute’s quotes are in GBP and TNC notes that GBP’s exchange rate against the Icelandic Kroner (for the
local services) has fallen by about 12% in the period between the two quotes
• TNC see’s very little pricing for Iceland reflecting again the lack of demand for services and as such ECMWF are
somewhat at the mercy of Interoute and their supply chain but certainly TNC can support the challenging nature
of services to this country
• The awareness of Iceland as a DC destination has more to do with the marketing than the reality – far easier to
promote and remember a DC in Iceland than in Slough
10ECMWF – Market Update
New Caledonia - Issue
• High one off costs quoted for New Caledonia
11ECMWF – Market Update
New Caledonia - TNC View
• New Caledonia is served by only one cable (Gondwana) at a length of more than 2000km to Sydney
• There is only one telecoms network operator (OPT)
• The population is very small at about 270,000
• Conversations with other vendors drew a blank due to lack of relevant experience to this region . Likewise TNC
has no equivalent price points for New Caledonia but similar locations (e.g. Fiji) are seen to be at a similar cost
• Given a lack of competition and distance from global points of presence it is not surprising that there is a
premium to pay for services to this location
• One offs are not usually an area that a vendor would look to profiteer preferring instead to gain from the
increments of reoccurring revenue
12ECMWF – Market Update
New Caledonia - Conclusion
• TNC would suggest ECMWF’s only options would be to consider whether satellite communications may be
cheaper (unlikely) and sufficient or whether ECMWF’s partner on the island (presuming this to be the
meteorological service) could offer any advice on the costs they incur for similar services for comparison
• Furthermore asking Interoute for a full breakdown of costs and in turn from their underlying suppliers may
uncover any erroneous items – errors or profiteering does not stand up well to the rigour of scrutiny
• ECMWF may however find that these costs are appropriate for the location and simply the cost of doing
business in this part of the globe
13ECMWF – Market Update
Interoute
• Interoute took over Easynet in 2015 for £402m
• Easynet was a large and complex organisation to swallow, itself being the product of previous mergers and
acquisitions (principally Easynet and MDNX (being the combination of Griffin, Solution 1, Viatel and CI-Net))
• Interoute’s recent analyst communications* mentions the following points of interest
• Easynet’s integration is complete (mid 2017) and now realising expected savings
• Easynet’s revenues have been falling but now stabilising
• Overall revenues are very slightly up
• Ebitda is up (back to levels seen before the acquisition)
• Interoute are looking to raise €680m in long term debt for refinancing
• Customers’ reports to TNC are mixed but there appears to be more negative noise at the moment than in the
past (of both Interoute and Easynet)
• The burden of refinancing may have put short term pressure on specific financial targets at the expense of
customer service and pricing
14 * http://www.interoute.com/about-us/investor-relations/quarterly-resultsECMWF – Market Update
General Market
• Global WAN provision for the mid-size customer is still poorly served
• Large Tier 1’s appear to be improving in service and competitiveness but still often fail to deliver for their smaller
customers and struggle to compete against locally sourced services (particularly internet)
• Rise of wholesale middle-men offering global connectivity especially internet services to Telcos e.g. Expereo,
GlobalInter.com
• SD-WAN hype becoming reality for a few – still early days for SD-WAN with the many purported benefits
including cost saving not yet truly delivering their promise whilst still bleeding edge
15ECMWF – Market Update
Next steps
• ECMWF need make no decisions today with regard to next steps for their Interoute network but should plan to
ensure that two years out from the end of the contract (2022) that a course of action is set. A procurement and
roll out of a new network, should that be the outcome, would take approximately two years whilst a renewal
could be done in about 3-4 months
• Renewal vs procurement – if there were no regulatory requirement for ECMWF to go to tender then certainly at
a commercial level there would appear to be little to be gained by running a tender based on current market
pricing. Despite this some organisations (who are outside of any regulatory frameworks like OJEU and thus free
to choose their winner) will still run a tender as it can provide more incentive for an incumbent to provide a better
commercial response
• Today there appears to be no expected demands for a change of the network but obviously the landscape may
develop over the next 2 years (certainly the 2016 review indicated increased bandwidth demands). Increasing
demand for bandwidth particularly with cloud services and a coming of age of SD-WAN technology by 2020 may
mean a procurement process will be the more suitable option to properly test the market for a refreshed ECMWF
network
16ECMWF – Market Update
Next steps
• As you approach the mid and late part of your contract and especially as you appear to have concerns with
Interoute TNC recommends upping the management of the supplier both day to day and at a strategic level
• Increase pressure – be the squeaky wheel
• Scrutinise all changes and issues
• Build relationship at all levels
• Include them in business development conversations
• TNC would be happy to come back each year to present an annual review similar in nature to this report and
presentation with focus on developments with both the market and Interoute. In late 2019 this could include a
market price review to help with the procurement vs renewal decision
17ECMWF – Market Update
Appendix – Interoute results
18ECMWF – Market Update Interoute results 19
ECMWF – Market Update
Appendix – Procurement process vs Renewal
20ECMWF – Market Update
Renegotiation vs Procurement
Renegotiation Competitive Tender
Key Criteria Pros Cons Pros Cons
If a supplier new to ECMWF
Costs would not be incurred to Multiple bids allow for direct
were selected then additional
incorporate a new supplier into Lack of competitive tender gives comparison between suppliers
costs would be incurred such as
the supplier eco-system since less leverage and therefore less and therefore significant
dual running and new install
Interoute are already an pressure can be applied on improvements can often be
costs. A competitive tender
incumbent member. Contract incumbent supplier to improve achieved during BAFO stage of
process would not necessarily
can be amended leading to an initial proposal. process as commercial targets
result in the incumbent losing
expedited process can be given to suppliers
the contract
Commercial Access to different suppliers
A procurement process takes
Renegotiation can be ineffective allows for differing commercial
time and money to run either
and burns time and resources and architectural modelling and
through use of a third party
taking away the focus from an therefore one that is the most
and/or use of internal resources
RFP process appropriate fit for ECMWF can
(procurement and IT)
be selected
Renegotiation results in a less Knowledge that multiple bids will
commercially attractive offering be reviewed drives suppliers to
the vast majority of the time submit more commercially
aggressive bids
21ECMWF – Market Update
Renegotiation vs Procurement
Renegotiation Competitive Tender
Key Criteria Pros Cons Pros Cons
Coverage of existing locations is
Coverage of existing locations is Other providers may have better initially an unknown factor and
Service / Coverage already a known factor geographic reach than Interoute may be subject to survey (too
late?)
Potential to benefit early if
Interoute are willing to
renegotiate mid-contract. Can be a long process 9 months
Timescale Existing contract can be used as to a year long
a basis for future contract if
preferred
22ECMWF – Market Update
Procurement Timeline
Phase 3
Phase 1 Phase 2
Contract Negotiation
Supplier Selection BAFO Stage
Process
Phase Key Deliverables Date
• Prepare market for RFP (importance not to be underestimated) (1 month)
• Refine Requirements, design RFP document and launch (~1 month)
Phase 1 • Feb 2020 – Jul 2020
• Supplier responses and presentations assessed (~3 months)
• Shortlist of suppliers chosen
• Shortlisted suppliers invited to provide Best and Final Offer
Phase 2 • BAFO responses assessed • Aug 2020
• Preferred supplier selected
• New base contract proposed by preferred supplier
Phase 3 • Contract improvements presented to preferred supplier • Sept - Dec 2020
• Final contract version agreed upon and signed
• Core network
Phase 4 • Pilots sites • Jan 2021 – Jan 2022
• Difficult sites may take up to 12 months
23ECMWF – Market Update
Confidentiality, Copyright, Disclaimer
24ECMWF – Market Update Confidentiality The Network Collective’s consultancy services are dependent on strict confidentiality and are provided pursuant to its Terms and Conditions and Engagement Contract with ECMWF. The information contained in any report or Deliverable (as defined in The Network Collective’s Terms and Conditions) could provide a competitive advantage to any telecommunications provider who receives it. Therefore ECMWF undertakes not to disclose (except where requested or required to do so by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body or by law or regulation) any report or Deliverable or part thereof to any third party, including without limitation any telecommunications provider whatsoever, whether such third party is named in the report or Deliverable or not. Any breach of this confidentiality obligation may result in legal action against ECMWF and ECMWF agrees to indemnify The Network Collective (TNC) on a continuing basis notwithstanding completion of the Services (as defined in TNC’s Terms and Conditions) or termination of TNC’s engagement by ECMWF in respect of any costs, claims, liabilities, losses, damages or expenses suffered by TNC as a result of any breach by ECMWF of this term including any losses associated with loss of reputation and loss of profit. Furthermore ECMWF acknowledges that damages may not afford an adequate remedy to TNC in the event of a breach of this obligation by ECMWF and that TNC shall be entitled to seek injunctions, orders for specific performance or other appropriate relief in the event of any actual or anticipated breach of this obligation. ECMWF undertakes to inform TNC as soon as reasonably practicable if it is required to disclose any Deliverable or report or part thereof provided by TNC in the course of this engagement 25
ECMWF – Market Update
Copyright
• This document contains proprietary information of The Network Collective Limited. It is protected by copyright
and is made available subject to The Network Collective Limited’s Terms and Conditions and upon the condition
that the information herein and all documents produced during The Network Collective’s engagement with
ECMWF will be held in absolute confidence
• Notwithstanding anything otherwise agreed to the contrary, and notwithstanding completion of the matters
contemplated herein, no part of this document, whether current or superseded, may be amended, copied,
distributed, transmitted, transcribed, stored in a retrieval system, or translated into any human or computer
language, in any form or by any means whether electronic, mechanical, magnetic, manual or otherwise, or
disclosed to third parties, without the express written permission of The Network Collective Limited
• The information contained in this document is for information purposes only and is current as of the date of
publication. The Network Collective Limited must respond to changing market conditions and unless signed, this
document should not be interpreted as a commitment on the part of The Network Collective Limited. The
Network Collective Limited cannot guarantee the accuracy of any information presented in this document after
the document’s date of publication
All rights reserved. © 2017 – The Network Collective Limited
26ECMWF – Market Update
Disclaimer
• With the exception of the information provided to The Network Collective by ECMWF, all information in this
report, including the sections relating to the service offerings, capabilities and commercial positions of the
service providers named in this report, is based on the opinions of The Network Collective and does not
represent actual offers from those service providers capable of acceptance
• TNC’s opinions shown in this report are based on its knowledge and experience in the market. In this report,
TNC shows its prediction of what it believes to be the likely outcomes of various procurement activities that
ECMWF might undertake. These predictions are TNC’s opinions only and it should be noted that the actual
outcomes of such procurement activities could vary from those predictions. In particular, these outcomes could
vary because the offerings available in the market are continually changing, as service providers vary their
product sets, commercial focus, market positions and their desire to secure engagements with particular
companies
27ECMWF – Market Update
Disclaimer
• TNC’s predictions are based on procurement activities with the following characteristics:
− The procurement activities are open, fair, competitive tender processes in which all service providers
bidding are given equal treatment, and sufficient information to make reasonable bids
− The service being procured is as shown in TNC’s analysis, and the whole of that service is being
tendered
− The contract awarded is only for the individual service being tendered. No commitment is given for the
placement of other services with the successful service provider, and that is the only service for which
ECMWF would have a contract with that service provider
− The contract awarded is based on a 3 year term. Were this to be changed, The Network Collective
might predict different outcomes from those shown in this report
28ECMWF – Market Update
Disclaimer
• The Network Collective does not recommend, nor does it seek to suggest, that ECMWF excludes or includes
individual service providers, whether named in this report or not, from its considerations on the basis of this
report or the advice of The Network Collective (TNC)
• Notwithstanding any views that The Network Collective may or may not express in this report, how ECMWF
uses this report and notably whether or not it enters into any contract, and the terms of any such contract are a
matter solely for EMCWF’s commercial judgement. The Network Collective’s Terms and Conditions, to which
ECMWF has agreed, contain provisions governing TNC’s relationship with ECMWF and the use of any report or
Deliverable (as defined in TNC’s Terms and Conditions). Save as set out therein, TNC shall not be responsible
for any losses ECMWF might suffer from its use of the information supplied
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