Teletron, Inc is a provider of telecommunications expense management services for corporate telecommunications users. Teletron was looking to grow their business from about 10 million dollars in sales to about 100 million in 1999. They were looking to provide this in making use of the information technology realm. Timothy Lybrook is the CEO of Teletron and is being propositioned to develop a new Virtual Analyzer software package. This proposition is being made by Robert Jonas, director of information technology at Teletron and Dennis Kirin, vice president of client services at Teletron. There are many bennifits and risks to this new system and each must be carefully reviewed before coming to a decision on what to do.
In 1999, there were around 6000 telecommunications providers in the United States. Only 45 companies accounted for approximately 95% of the dollar value of the telecommunications service provider. Surveys revealed that many companies were dissatisfied with the providers billing practices. Many errors were being found that led to lost revenue and costly charges to the company. Telecommunications spending was forecasted to grow to 175 billion in the year 2000 and continue to expand to 350 million by 2005. With this outlook of potential revenue in this workspace, Teletron sees an opportunity in the area of providing services to handle billings of telecommunications services. This is what Teletron did throughout the early 1990's. Teletron targeted customers in the United States that spent between 10,000 and 500,000 per month on telecommunications services. They made money by charging the company 50% of the saving that they were credited back. They did not charge the company money if there was no discrepancy found in the billing statement.
One of the major problems with this structure was that new clients had to be solicited continuously. Most clients lasted from 6 months to a year and just cancelled the service due to the cost savings of them just doing the validation themselves. Teletron had a large advantage in market share for they respected industry. They had companies in almost every state and totaled 5,246 clients in 1999. They were very successful from 1992-1998 where they achieved a compounded revenue growth of 200%. By 1998, things began to slow down a customers wanted to perform their own analysis and save the costs that Teletron charged to perform. This is when Lybrook started to wonder how he was going to keep customers longer and how to automate some of the internal processes.
By the end of 1998, Lybrook decided he wanted to grow the business to 100 million by 2006. His vision was that he saw Teletron acting as an intermediary between the providers of telecommunications services and the users of those services. Teletron would help it's clients solve problems. Teletron would still continue to offer it's consulting services, but now would provide a software product to it's clients on a subscription basis.