Background & The Challenge
Futron’s team is experienced in estimating costs for complex business decisions at the critical intersection between aerospace, satellite, and telecommunications technologies and markets. Our decision management solutions approach offers clients a unified architecture for evaluating, making, and implementing strategic choices related to these key issues. Our technical expertise and financial models equip clients with a clear understanding of the tactical and strategic implications of their technology and market investment decisions.
A Futron team was assigned to estimate and evaluate the cost of a second generation satellite constellation, which required an innovative method due to unique satellite design and systems integration considerations. Successfully developing and launching satellites is central to a satellite operator’s business because it directly impacts product development, revenue, cost and profitability. Orbiting a payload represents an enormous financial investment ranging from hundreds of millions of dollars for a typical telecommunications geostationary satellite upwards to several billion dollars for a low earth orbit constellation satellites. Given the size of the upfront cost and its impact on the entire business, developing accurate cost and risk-reflective financial models is fundamental to the success. Yet because each satellite and constellation is programmatically unique, a combination of skills is required to accurately assess potential cost.
The Journey & The Discovery
Core to our costing method was the triangulation of multiple methodologies—parametric regressions using statistical analysis, top-down comparison of similar existing systems, and a bottom-up capability-based technique. Starting from the current satellite fleet, Futron evaluated the cost inputs and assessed how these costs and relative technology changed over time. Futron also blended several parametric models and overlaid learning curve to account for the high volume of satellites to be constructed.
The Solution & Implementation
The team also developed a cost model based on capabilities which allowed the company to optimize capacity based on a fixed investment. As an additional step, Futron calculated both recurring and non-recurring costs, as well as expenses related to launch, insurance, ground segment, and contingencies. Interestingly, Futron included a novel revenue source by including the potential benefits and costs of hosted payloads as a mechanism to offset investment and possibly generate one-time and recurring revenue.
The Results
The final solution provided an enhanced framework for evaluating the costs, risks, and projected revenue returns associated with the satellite constellation. It included a detailed and complex model that allowed the client to understand the underlying cost drivers and easily change inputs as more information became available. The cost model also incorporated scenarios which enabled executives to play out alternatives such as timing, selection of launch vehicles, changes in costs, etc. To comprehend the complexity of its large-scale, strategic investments, Futron played a key role in the company’s strategic investment planning process.