Business model of ARRIS

Customer Segments

ARRIS has a niche market business model, with a specialized customer segment. The company targets its offerings at cable and telecommunications video service providers, particularly those that are facilities-based and multi-channel. Its two largest customers, Comcast and Time Warner Cable, represented a third of business in 2015, accounting for 21% and 14.3% of revenues, respectively.

Value Proposition

ARRIS offers two primary value propositions: innovation and brand/status.

The company has placed a strong emphasis on innovation throughout its history. It has accomplished many industry firsts, which include the following:

• First MPEG-4 and MPEG-2 digital ad insertion
• First to demonstrate HEVC compression system
• First HD set-top with DVR
• First wireless broadband gateway
• First whole-home video gateway
• First operational all-digital HDTV system
• Pioneered broadband data & voice over IP
• Pioneered security and DRM

The company has established a strong brand as a result of its performance. Between 2003 and 2012 it experienced a compound annual growth rate (CAGR) of 13.47%, and growth has been strong since. It maintains a direct presence in more than 30 countries and a channel presence in more than 85 countries. It has many prominent customers, including Comcast, Cox Communications, Time Warner Cable, Verizon, and Virgin Media. Lastly, it has been recognized with 14 technical Emmy Awards.

Channels

ARRIS’s main channel is its direct sales force, which operates worldwide. It also partners with value-added resellers, channel partners, and sales representatives to extend its presence into markets where it does not have established offices. The company promotes its offerings through its website, social media pages, advertising, sponsorships, and attendance of trade shows and conferences.

Customer Relationships

ARRIS’s customer relationship is primarily of a personal assistance nature. The company assists customers in the following ways:

Customer Service – ARRIS provides phone, e-mail, and live chat support

Training Services – ARRIS provides instructor-led training classes online and on client sites; it also offers a DOCSIS CMTS Operator Certification program so clients can ensure their employees are highly knowledgeable in DOSCIS technology and the usage of ARRIS CMTS products

Day 2 Support Services – ARRIS provides a variety of services to help clients immediately after they have completed product deployment. They include the following:

• Performance Improvement Programs – ARRIS maintains the “Baseline Service” that offers regular maintenance of implemented systems and the “Advanced Service” that uses analytics to evaluate system health and recommend ways to enhance it
• Mentoring Programs – ARRIS works with clients to develop product experts among their staff by pairing employees with category specialists for a lengthy time; e-mail, phone, and on-site formats are available
• Staff Augmentation Services – ARRIS provides support services for activities requiring specialized expertise that cannot be handled by existing staff; specific areas include hub maintenance, wiring, DC powering, Wi-Fi engineering, and CER/CMTS troubleshooting
• Engineering Assistance – ARRIS has experts who offer engineering support remotely for services outside the standard support agreement in operational areas such as design and configuration

Professional Services – ARRIS provides long-term support services from professionals that include the following:

• Systems Integration & Consulting – ARRIS has experts who can provide technology evolution, network planning, and business process improvement consulting services
• Service Provider Wi-Fi – ARRIS provides assistance for every phase of deployment and engineering of Wi-Fi networks
• Outsourcing – ARRIS provides managed services and strategic outsourcing capabilities
• Lab Services – ARRIS has validation engineers who can assist with introductions and migrations of new equipment to clients’ networks

Despite this orientation, there is a self-service component. The company’s website features a “Resources” section that includes white papers, data sheets, infographics, and videos. It also has a section that provides answers to frequently asked questions. Lastly, its training program includes a selection of self-paced virtual classes.

Key Activities

ARRIS’s business model entails offering services and designing, developing, and manufacturing products for its customers. The company maintains manufacturing facilities in Taipei, Taiwan; Manaus, Brazil; and Tijuana, Mexico. It also utilizes third-party contract firms in some cases, who are located in the United States, China, Brazil, Thailand, Mexico, Malaysia, and South Africa.

Key Partners

ARRIS maintains the Channel Program, in which it works with value-added resellers globally who purchase and sell its products so it can expand its customer base and provide more localized service. The company evaluates a variety of criteria for selection that includes revenues, number of employees trained and certified in use of ARRIS products, and quality of customer support. Companies that are chosen receive a number of benefits, including access to an online portal featuring updated sales, marketing, and technical documents; an online co-branding marketing tool; a technical training course calendar; and a Channel Identifier Logo to indicate program membership.

Key Resources

ARRIS’s main resource is its staff of over 1,100 technical professionals with significant data, video, and IP networking experience. In addition, the company places a high priority on its intellectual property, with 2,340 issued and 1,282 pending U.S. and foreign patents as of January 2016.

Cost Structure

ARRIS has a value-driven structure, aiming to provide a premium proposition through significant personal service and regular product/service enhancements. Its biggest cost driver is cost of sales, a variable expense. Other major drivers are in the areas of research and development, sales/marketing, and administration, all fixed costs.

Revenue Streams

ARRIS has two revenue streams:

Product Revenues - Revenues generated through sales of equipment

Service Revenues – Revenues generated through sales of custom design/installation and other services (training, consulting, etc.)