LIST OF FIGURES

      

LIST OF TABLES

      

1.0  EXECUTIVE SUMMARY

      

The need for collaboration and cooperation of the CALS ICC and CALS interested organizations and individuals has extended beyond the capabilities provided by conferences, telephone, and facsimile. The capability to provide such collaboration and cooperation through electronic digital technologies is available over the Internet. This capability may be achieved through the integration of collaborative tools, information repositories, and agent technologies tailored to focus on CALS specific interest areas including acquisition, engineering, manufacturing, test, operations, and support of common systems. The electronic collaboration and cooperation will be implemented as a DoD Continuous Acquisition and Life-Cycle Support(CALS) Network/International CALS Network (DCN/ICN) through the integration of information repositories, electronic mail and collaboration, and CALS specific search services and other technologies.

The DCN/ICN is a collection of cooperating organizations that includes the International CALS Congress as an advisory board, the DoD CALS Network, the International CALS Network, and other national, regional, or alliance networks that exchange CALS information and provides services to their customers. Figure 1.0-1 provides a top level view of the DCN/ICN relationships and the supporting organizations.

This initial DCN/ICN Business Plan only addresses the structure, services, management, marketing, and financial requirement to support the DCN, the ICN, and the MOCC.

The development and integration of these services shall be performed by a staff of highly skilled Internet, collaboration, and information service engineers and led by a management team with recognized experience and contributions to the CALS initiative, and by the Industry Steering Group.

This business plan outlines the management team, marketing environment, management objectives, and financial plans for developing and implementing a DCN/ICN with its CALS focused information and collaboration services.

The DCN/ICN will not provide access to the Internet. Access to the Internet shall be through internal corporate or organization arrangement or through a separate contract to one of the thousands of Internet Access Providers. Subscribers to the DCN/ICN will be given user identifications, passwords, and initial training for access to DCN/ICN services. Optionally, users and organizations may elect to subcontract software and hardware acquisition, integration, and installation services to obtain selected levels of collaboration and service.

1.1  Management Team

Mr. Robert S. Kidwell, the proposed DCN/ICN General Manager, has been a key member of the U.S. CALS/ISG since its founding. He currently serves as Chairman of the Information and Process Integration Divisions of the CALS/ISG. He is a Senior Member of the CALS/ISG Policy Board. He has served as the Chair, CALS/DoD Directory/Data Dictionary Special Task Force, and Co­Chair of the NCAT/DoD Enterprise Integration Task Force. He currently serves as the CALS/IDE Project Technical Director.

The DCN/ICN Board of Advisors (BOA) shall provide advice and council to the Management Team concerning services, initiatives, and other policy matters. The BOA shall be appointed by an Executive Committee composed of three members: the Chair of the CALS ISG; the Director of the DoD CALS Office and the Chair of the International CALS Congress. Candidate members of the Board of Advisors include Mr. James Crawford, Mr. Gary Ellis, Dr. Hervé LeBoeuf, Mr. Frank Brake, a CALS Pacific representative, and a CALS Europe representative.

Supporting Mr. Kidwell is a management team consisting of information technology professionals with extensive experience in CALS, networking, and leading technologies. Mr. Martin Hughes has over 25 years of management experience in Computer Systems Operations with the U.S. House Information Systems. Mr. Joseph Brazy has over 18 years of information technology experience in information technology management and integration. Mr. David T. Cannon has over 18 years of experience in information technology and business management. Mr. Lou Hoffman has over 20 years experience in information technology and military logistics involved with national and international programs.

1.2  Market Environment

While these providers provide electronic mail, Web browsing, and other specialized services oriented to the consumer (e.g., stock quotes, other financial services, travel reservations, homework helper, sports news), none of these services provides CALS specific information or services. A companion document, the Draft DCN/ICN Concept of Operations (ManTech, 95), provides a detailed comparison of the DCN/ICN services and services available from the big three Internet access providers.

The CALS market includes government, private industry, individual, and associations in the United States and internally who wish to collaborate with geographically separated correspondents, pursue common objectives as parts of a virtual enterprise, or build common systems for commercial or defense applications. Organizations and individuals who have attended past CALS Expo, CALS-Europe, or CALS Pacific expositions are the potential customers for the DCN/ICN.

1.3  Management Objectives

1.3.1  Near-Term Objectives

• Develop and implement an Initial Operating Capability (IOC) to include:
  1. Common User Interface for both graphical and text environments.
  2. Initial collections of CALS organizations and individuals (specialists).
  3. Directories to internal and external CALS related repositories.
  4. CALS Special Interest Newsgroups (via electronic mail and hypertext linked threads).
  5. Initial Computer Supported Collaborative Workgroup Capabilities including video-conferencing, chat, and collaborative Web navigation.
  6. Initial Information Service capability to include agents.
• Market and subscribe DoD, selected military service, and private industry customers.

1.3.2  Long-Term Objectives

• Develop and implement a Full Operational Capability (FOC) to include:
  1. The IOC
  2. Other DCN/ICN services including advertising and Web publishing.
• Become self-sufficient within two years of IOC.
• Market and subscribe government, association, and private industry customers in the United States and World-Wide.

1.4  Financial Forecasts

1.5  Conclusions

1.6  Document Structure

1.7 Related Documents

2.0  DCN/ICN BUSINESS PLAN

      

2.1  Mission Statement

• International Collaboration on Common CALS Issues,
• Access to CALS related Information Repositories, and
• International Implementation of CALS for organizations and individuals.

2.2  Products and Services

2.3  Strategic Objectives

• Self-sufficient within two years of initial operational capability.
• Capitalize on information technology advances including collaboration, digital libraries, and agent technology for information access, sifting, and sharing.
• Develop and implement selected CALS information repositories and provide directories and links to other CALS related information repositories.

2.4  Customers

• CALS Industry Steering Groups in the United States and 14 other countries.
• Components of Federal Governments with an Interest in CALS.
• Department of Commerce in each participating country.
• Industries and Associations with an interest in CALS.

2.5  Marketing Plan

2.5.1  Marketing Strategies:  Target Market(s)

• Tiered Subscription Services for Customers.
• Advertising/Electronic Yellow Pages for Advertisers.
• Target Industries.
  1. CALS Expo95 Attendance List.
  2. CALS Newsletter Membership List.
  3. National Security Industrial Association Members.
  4. CALS Expo95 International Roundtable Attendees.
  5. ARPA Manufacturing Technology Center Affiliates (approx. 50,000 SMEs).

2.5.2  Market Areas

• Industries
  1. Aerospace.
  2. Automotive.
  3. Electronics.
  4. Information Technology.
  5. Telecommunications.

• Associations
  1. Armed Forces Communications and Electronics Association (AFCEA).
  2. Electronics Industry Association (EIA).
  3. Institute of Electronics and Electrical Engineers (IEEE).
  4. National Security Industrial Association (NSIA).
  5. PDES, Inc.
  6. Society of Logistics Engineers (SOLE).
  7. U.S. PRO.
  8. Society of Manufacturing Engineers.
  9. American Society of Mechanical Engineers.

• Government Organizations
  1. Department of Defense and Military Services.
  2. Department of Commerce.
  3. Department of Energy.
  4. Department of Transportation.
  5. General Services Administration.

2.5.3  Services

2.5.4  Pricing

2.5.4.1  Subscription Pricing

2.5.4.2  Advertising

2.5.5  Marketing Research and Market Analysis

U.S. Defense Industry and Suppliers.

2.5.5.1  Major Customers and Concentration

Small-Medium Enterprises ­ primarily suppliers to Top 1000 Companies.

Large Enterprises ­ Business Week Top 1000 Companies: primarily, defense contractors with sales over $200M/year.

Associations ­ representing the following areas:

• National Security,
• Communications,
• Electronics, and
• Transportation.

Government Organizations

• Department of Defense and the Military Departments,
• Department of Commerce,
• Department of Energy, and
• NASA.

2.5.5.2  Sales Tactics

• Pilot Collaboration Projects with U.S. CALS/ISG Special Interest Groups(SIGs), and the ICC SIGs,
• Trial Individual Subscription Periods for a specified number of hours,
• Cooperation Agreements for Forums/Revenue Stream Sharing with Specified Access Providers, and
• Presentations at CALS Expo Conferences (U.S. in year 1, Europe and Pacific in year 2).

2.5.6  Sales Management

2.6  Management Plan

2.6.1  Form of Business Organization

• Members of the West Virginia High Technology Foundation Consortium.
• Other corporate entities as needed depending on DCN requirements and the organization's capabilities, experience, management, and other factors.

2.6.2  Management Team Structure

2.6.3  Capitalization

• Short Term (1st year and 2nd year).

Joint Venture Capitalization.

• Long Term (3rd -5th years).

Debt Capitalization.

2.6.4  Staffing and Training

2.7  Financial Plan

2.7.1  Assumptions

2.7.2  Projected Income (5 years)

Near-Term:

(U.S. DoD for years 1 and 2) at $600K/year.

Long Term:

Subscribers and Advertisers for years 3-5.

The projected income for the first year of operation assumes a $600,000 contract from the DoD ($150K received in months 1, 4, 7, and 10) and an average of $100,000/month from subscription and advertising sales. A Pro Forma Income Statement for Year 1 is shown in Table 2.7.2­1. The projected income for the second year of operation assumes $600,000 contract from the DoD ($150K received in months 1, 4, 7, and 10) and an average of $194,000/month in subscription sales and advertising. A Pro Forma Income Statement for Year 2 is shown in Table 2.7.2­2. Table 2.7.2­3 shows a summary Pro Forma Income Statement for years 3 through 5. Notes for interpreting the entries in these tables are provided in the Projected Income Notes.

Projected Income Notes for Tables 2.7.2­1, 2.7.2­2, and 2.7.2­3.

1. Expected Sales - a random variable function was used to generate this row to provide a capsule view of the variability expected in subscription and advertising sales.
2. Projected Sales - an instance of expected sales used to estimate the total monthly sales.
3. Cost of Sales - the sum of warranty, labor, material, and burden (overhead). No material costs are shown since the DCN/ICN is providing services that do not require material.
4. Gross Margin ($) - the difference between Total Sales and Cost of Sales (in $000).
5. Gross Percent (%) - the ratio of Gross Margin ($) to Total Sales times 100.
6. Total Operating Expenses - the sum of marketing, general and administrative costs, and depreciation (of capital equipment).
7. Operating Profit ($) - the difference between Gross Margin ($) and Total Operating Expenses (in $000).
8. Operating Profit (%) - the ratio of Operating Profit to Total Operating Expense times 100.
9. Interest Expense - the amount of interest paid on bank loans (assumed to be 1%/month).
10. Interest Income - the amount interest received from a bank on the previous month's net income (assumed to be 1/2% per month).
11. Net Income - the sum of Net Operating Profit and Interest Income minus Interest Expense.
12. Federal Income Tax - allowance for Federal Corporate Income tax (assumed to be 28%).
13. Net Income After Tax - the difference between Net Income and Federal Income Tax.

2.7.3  Projected Cash Flow (Years 1-2)

Projected Cash Flow Notes for Tables 2.7.3­1 and 2.7.3­2

1. Net Sales is the sum of Direct Sales and Contract Sales.
2. Direct Labor is the estimated monthly cost of salaries of personnel (unburdened and no G&A).
3. Cost of Goods Sold is the sum of Direct Labor and Other Operating Expenses.
4. Gross Profit is the difference between Net Sales and Cost of Goods Sold.
5. Operating Profit is the difference between Gross Profit and the sum of sales, warranty, G&A and Burden costs.
6. Net Profit is the difference between Operating Profit and the sum of other expenses such as corporate income taxes.
7. Profit and Loss Ratio Analysis provides metrics for sales, cost of goods sold, gross margin, net profit, marketing, and burden (overhead and G&A).
8. Sales Ratio is the Net Sales divided by Total Sales. Net Sales = Total Sales - Returns (i.e., Book Value of Canceled Subscriptions).
9. Cost of Goods Sold Ratio is Cost of Goods Sold divided by Net Sales. Shows the percentage of each sales dollar that goes to direct labor and other operating expenses to provide the DCN/ICN services.
10. Gross Margin Ratio is Gross Profit divided by Net Sales.
11. Net Profit on Sales Ratio is Net Profit divided by Net Sales. Shows the percentage of each sales dollar that results in net income.
12. Marketing Ratio is Marketing Costs divided by Net Sales.
13. Admin. Ratio is the sum of Burden and General & Admin. Costs divided by Net Sales.
14. Cash Balance shows the monthly receipts minus disbursements and shows the amount of cash on hand at the beginning and close of each month.

2.7.4  Projected Balance Sheets (Years 1-2)

Balance Sheet Notes

1. Assets include cash, marketable securities, receivables, and (net) inventory. Because the DCN/ICN provides services and not products, the net inventory is set to 0.
2. Total Current Assets - the sum of cash, marketable securities, receivables, and (net) inventory.
3. Fixed Assets - these assets are assets that have a value beyond the current period (one year). For the DCN/ICN, the fixed assets include computer hardware and software, and any property (real estate) or buildings that may be owned. The DCN/ICN does not own any property or buildings.
4. Deferred Charges - these charges include obligations for goods and services that the company must deliver in return for advance payment from a customer (e.g., annual subscription for DCN/ICN core services).
5. Totals Assets - the sum of current assets, fixed assets, and deferred charges.
6. Current Liabilities - the sum of Notes payable, trade accounts payable (short term obligations to suppliers for goods or services), income tax and accruals (e.g., prepaid expenses such as insurance).
7. Capital Stock - Net Worth - the difference between Total Assets and Current Liabilities.
8. Total Liabilities and Net Worth - the sum of Net Worth and Current Liabilities.
9. Balance Sheet Ratio Analysis - set of metrics that assess a company's liquidity, debt-ratio, return on assets, return on equity, investment turnover, return on investment, and working capital.
10. Current ratio- the ratio of current assets to current liabilities; another measure of liquidity closely related to working capital, believed by many bankers and other creditors to be a good indicator of a company's ability to pay its bills and to repay outstanding loans.
11. Debt-to-equity - the ratio of total liabilities to owners' equity; another measure of a company's ability to earn income; this measure shows the proportion of the company financed by creditors in comparison to that financed by the owners.
12. Return on Assets - measures the ratio of operating profit (before taxes) to average total assets; this measure indicates the income generating strength (profit margin) of the company's resources and how efficiently the company is using all its assets (asset turnover).
13. Return on Equity - the ratio of net income to average owner's equity; measures the efficiency in the generation of income for an owner's investment.
14. Investment Turnover - the ratio of net sales to average total assets; measures the efficiency of assets to generate sales.
15. Return on Investment (ROI) - ratio of net income (after taxes) to total assets; measures the efficiency of profit generation to total assets (investment by owners and other financial resources into assets).
16. Working Capital - the amount by which the total current assets exceed total current liabilities; an important measure of liquidity that assesses the amount of money a company has on hand to pay bills when due and to meet unexpected needs for cash.

2.7.5  Break-Even Analysis

To achieve a break-even target sales, additional subscription sales or advertising revenue must be generated to cover any subscription cancellations.

To achieve a break-even target sales, additional subscription sales or advertising revenue must be generated to cover any subscription cancellations.

To achieve a break-even target sales, additional subscription sales or advertising revenue must be generated to cover any subscription cancellations.

To achieve a break-even target sales, additional subscription sales or advertising revenue must be generated to cover any subscription cancellations.

To achieve a break-even target sales, additional subscription sales or advertising revenue must be generated to cover any subscription cancellations.

3.0  FINANCIAL PROJECTIONS

      

3.1  Manpower Budget

3.2  Budget Worksheets

Operating Budget Worksheet Notes

1. Salary and Wages - salary and wages for the DCN/ICN personnel assigned to the Management Operations Control Center.
2. Payroll Benefits - includes contributions to Social Security (6.2%), Medicare (1.45%), healthcare contribution (5.35%), and 401K Plan (10%); assumed to be 23% of hourly rate.
3. Employee Development - includes support for college courses, seminars, and other training related to an employee's current position (est. 5% of average hourly rate).
4. Contract Labor - this category is for temporary personnel assigned specific tasks.
5. Marketing - this expense element is covered in other budgets; preliminary estimate is 5% of sales; a refined marketing budget will be developed based on anticipated marketing tasks to generate DCN/ICN subscriptions from individuals, associations, government, and corporations.
6. Office Supplies - this category includes but is not limited to accounting supplies, copier/printer/fax supplies, files/labels/binders, paper, writing instruments, storage, and shipping supplies.
7. Expensed Equipment - This category includes small purchase equipment items including but not limited to facsimile, modems, scanners, and computer projection devices.
8. Hardware Maintenance - estimated at 5% of hardware capital expenditures.
9. Software Maintenance - estimated at 10% of software capital expenditures.
10. Operating Supplies - includes magnetic tapes, diskettes, smart cards, postage.
11. Marketing - includes travel and entertainment costs related to marketing.
12. Capital Equipment - Computer Hardware and Software delineated in Capital Expenditure tables of Section 3.3 - Capital Expenditure Investment.
13. Office Rent - based on estimated $7.50/sq. ft (Fairmont, WV).
14. Telephone - based on historical experience.
15. Electricity and Gas - based on historical experience.
16. Internet Access - est. for T1 line and related access services.
17. Depreciation and Amortization - Straight-Line (3 yr.) depreciation schedule for capital investment.

3.3  Capital Equipment Investment and Recurring Maintenance Estimates