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The Man Who Knows Too Much

Posted: 07/2000

The Man Who Knows Too Much
By Khali Henderson

Editor’s Note: PHONE+ is pleased to debut a new monthly feature aptly named, “Intellectual Capital.” In it we will profile the innovators, the mavericks, the change agents in the competitive telecommunications industry. Our first subject embodies the intention of this ongoing project. He is a problem solver and influencer, his counsel has been sought and followed by carriers worldwide, and his company’s process models are being adopted in such numbers as to be considered a benchmark. We hope you will enjoy meeting him.

If he were to write a tell-all book, Richard Nespola would make some telecom carriers pretty nervous. You see, he knows their closely held secrets–what works and what doesn’t work behind the glitz and gloss of their high-priced logos and prime-time
commercials.

He and his team have been beyond the marketing veils and into the back-office bowels of carriers the likes of the Bells, the Big Three long-distance
carriers, PTTs, startup CLECs and IP telephony providers.

What he has seen during the past decade could fetch a handsome price. But Nespola doesn’t trade in gossip; he trades in knowledge. He’s paid neither to uncover secrets nor to keep them, but to turn them into bragging rights.

Nespola is the founder, president and CEO of The Management Network Group Inc.
(www.tmng.com), the largest strategy, management and operational consulting firm exclusive to service providers, vendors and investors in the telecommunications space.

He and the TMNG team–now 350 strong–are the frequent and invited guests of the world’s carriers, who rely on them to rifle through their cabinets and closets to find what’s standing in the way of optimal performance.

“There are three things that can impact an optimization model–people, systems and process,” says Nespola. “We focus on process.”

Since TMNG was formed in 1990, the call for its services has grown in lockstep with the level of change in the telecommunications marketplace. Its clients–once primarily competitive long-distance carriers and resellers–are now competitors in local, long distance, data and wireless services. At the same time they are entering new markets, they are attempting to harness changing network technology–from voice to data to IP to optics.

“The complexity is mind-boggling,” says
Nespola, explaining that the challenge of the business systems is to handle input from multiple and transitional networks. “It just can’t. It’s like fixing an engine of a fighter jet when it’s moving at Mach 3.”

Frankly, some carriers handle the transition well, while others struggle and even fail, Nespola told PHONE+. He reminds: Back-office process problems have been the death of many a long-distance company and are rumored to be behind recent bankruptcies among CLECs.

In fact, it was a back-office problem that was among one of Nespola’s first challenges in his telephony career. In 1986, he was recruited away from then-emerging long-distance carrier MCI to help Sprint Corp., the new GTE-United Telecom long-distance provider, fix an overloaded billing and accounts receivable system. He did the job and fended off the FCC and Better Business Bureau.

Ron LeMay, Sprint’s current president and COO, told the Kansas City Business Journal that Nespola was instrumental in laying “a very sound foundation” for the carrier’s back office.

Nespola took this knowledge–along with the battle scars won in service to now-defunct operator services provider Telesphere Inc.–in forming TMNG in 1990.

What 10 years ago was Nespola in a home office is now a $50 million public company with 160 employees and nearly 200 additional independent contractors working throughout the world. It has served nearly every Fortune 500 company in the telecom industry and boasts industry pioneer Roy A. Wilkens and telecom attorney extraordinaire Andrew D. Lipman on its board of directors.

The company’s core business helps carriers improve their billing systems. Hundreds of carriers have adopted TMNG’s Quality Billing Center
(QBC) revenue-assurance model, which the Global Billing Association (www.billing.org)
has endorsed.

Billing vendors such as Info Directions Inc. (www.infodirections.com) and Daleen Technologies Inc.
(www.daleen.com) incorporate QBC into their product to alert customers of compliance a la a Good Housekeeping Seal of Approval.

“The real value in QBC is that it shows carriers world-class metrics and best practices,” says Nespola. “Carriers sometimes get myopia; they don’t know what’s better. They may be satisfied with 96 or 97 percent, but we can show them how to get 99 or 100 percent.”

As the telecom industry’s needs have changed and grown, so have TMNG’s competencies. Today, the consulting company is knee-deep in helping companies move to next-generation process architecture–in other words, turning from a traditional business model to an e-business model. Last summer, TMNG launched a subsidiary, TMNG.com, for this express purpose.

TMNG continues to expand its capabilities beyond billing and
OSS. In March, it began a marketing and CRM practice taking care to stay within its vertical.

Company Snapshot

  • Name: The Management Network Group Inc.
  • Ticker: Nasdaq: TMNG
  • HQ: Overland Park, Kansas
  • Subsidiaries: TMNG Europe Ltd., TMNG Canada, TMNG.com
  • Mission: Strategy, management, operational consulting to telecommunications providers
  • Established: 1990
  • IPO: Nov. 23, 1999
  • Employees: 160
  • Contractors: 190
  • Sales: $55.3 million (TTM ending March 2000)
  • Market Capitalization: $771.8 million (TTM ending March 2000)

It also is expanding geographically to newly deregulated global markets. Europe and Canada were its first conquests; it opened subsidiaries there in 1997 and 1998, respectively. And in April it began a practice in Latin America. Forty percent of TMNG’s revenue will come from international business this year, up from 1 percent in 1997, says Nespola.

“We’ve changed, but that’s because the global markets have changed dramatically,” Nespola says. “That has fueled our growth. We are fortunate to play in a $1 trillion market.”

This growth finds Nespola serving yet another set of customers–institutional investors. TMNG went public in November

1999. On the first day, shares traded at $17–several dollars higher than expected. At press time in June, the stock was trading at 28 1/2. It had a 52-week high of 41 7/8 and a low of 9.

While being a public company has changed his personal focus, he is pleased that it “creates an opportunity for the people who built the business to get something out of it.”

It’s employees own 10 percent of the company. All employees are awarded stock options that are exercisable after a four-year vesting period.

“Employees have the same desires, wants and needs as management,” says Nespola, explaining the employee stock program. “We have aligned interests.”

In fact, employees and investors cite Nespola’s concern for the human factors in building his business as key to TMNG’s success.

“If I had a wish, it would be for my employees to have a healthy year,” he says.

While that may sound contrived, it makes sense coming from Nespola the man and Nespola the businessman. “The human dimension is critical,” he says. “What’s our product? It’s people.”

Nespola’s philosophy has engendered loyalty among his partners and employees, many of whom have followed him from company to company through the years. The company’s attrition rate is less than 5 percent. It also has made it possible for TMNG to thrive as a virtual company; most employees and all contractors work remotely with access to the company’s intranet for training and client collaboration.

“I follow a trust model that says people are good and want to work and want to succeed. I give them the freedom to achieve.”

The model attracts a high caliber of consultant–experts in their chosen field. Contractor-turned-employee Jim Marsh, TMNG’s risk management practice leader, says, “There is a wealth and breadth of experience among the consultants to support and question each other. They are among the
best ones, which is a tremendous plus for TMNG."

While Marsh never had down time as a contractor, he was attracted to employment by money and stock options. He has great faith in Nespola’s ability to grow the company.

“Rich is always out there, pushing the company. He has endless energy,” Marsh says. “His clock doesn’t stop. He’s always on the go, always working.”

Khali Henderson is editor-in-chief of PHONE+ magazine.


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