Connections and results

STEM enables you to quickly build a detailed business case from the ground up. You can choose between:

• the manual approach of a fixed resource base, milked for all it is worth, and
• a more agile, driver-based approach where STEM helps to forecast the resource quantities required, as well as the timing of the associated investment, either instead of or as a sanity check for fixed planning assumptions.

Each service generates its own outputs, from customers and recurring revenue to peak business load, volume in period and usage-based revenues.

The deployment of individual resources can be planned directly, so that the inventory is really an assumption and the results start with utilisation and periodic replacement of the installed assets, and then the essentials of capex, depreciation and opex. Options are included for the early write-down of equipment in accelerated migration scenarios.

More persuasively, you can establish drivers so that the resource base scales with projected growth in customers. At its simplest, you set out a ‘shopping list’ of which key resources are required by each service, and in what proportion per customer or per unit volume. In this case, the incremental units per period and installed total become critical outputs which in turn drive the associated capex and opex results.

When you establish a driver by sketching a link from a service or transformation to a resource, STEM then manages the ongoing interaction where one unit of demand requires one unit of capacity of the resource. STEM calculates incremental demand each period, by comparing the demand now with existing mapped capacity, and then acquires fresh resource if there is insufficient slack capacity to accommodate the new demand.

STEM automatically tracks every revenue and cost so that nothing is ever overlooked in the aggregate network results for the business as a whole. Operating cashflow and profitability are available, out-of-the box, plus pre-tax and retained profit if you calibrate a model with interest rates and a target gearing assumption. The free cashflow result and discount rate assumption enable the net present value of the enterprise (NPV) to be calculated as standard, together with several standard valuations, the internal rate of return (IRR) and other financial performance metrics (including payback period).

STEM automatically allocates the full and incremental costs of all resources between the various services which demand their capacity and this allows for customer-oriented results such as the cost and profitability per customer. This provides vital insights when considering how to price a service and how to approach individual contract negotiations.

Business-transformation projects often explore scenarios for equipment migration, and STEM includes simple controls that allow you to compare accelerated or just-in-time migration with a business-as-usual scenario (no change). You can sketch more or less any profile for the intended migration as an intermediate scenario and STEM will just keep working on the detail as you explore the big picture.

Essential STEM outputs and availability by element type

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