"Once the final decision is made, we bring in our 'space lawyer' to sign off on the terms and conditions" ©Peter Spinney
"Once the final decision is made, we bring in our 'space lawyer' to sign off on the terms and conditions" ©Peter Spinney

How to buy a satellite: Caroline Levitt of Inmarsat

Just like the office cleaning contract, the purchase of a £400m satellite goes through procurement, Caroline Levitt of Inmarsat tells SM

Setting up Inmarsat’s buying function meant removing complexities in a world of technical stakeholders, space lawyers and zombie satellites.

Providing broadband at 30,000ft, keeping ships in touch with the shore while out at sea, or enabling a foreign correspondent to deliver news remotely from a far flung location is all in a day’s work for Inmarsat. The UK-based firm – the self-proclaimed industry leader in mobile satellite communication – exists to provide connectivity for complex locations. 

Its services, which cover four key sectors (maritime, government, enterprise and aviation), feed off its 13 satellites, which must be kept geostationary in their allocated parking spaces, connected to at least two of their 26 ground stations and operating effectively.  

“When I first started I told people we send stuff into outer space,” says Caroline Levitt, vice president of global procurement. “But we describe ourselves as a technology company these days.”

Levitt joined in 2014, knowing nothing about buying satellites (how many people would?). At $400m a pop – when you include launch, insurance and infrastructure – it’s a significant spend in anyone’s purchasing budget, and it is not that frequent an activity (it takes two years to build one). But having come from a procurement and supply chain director role in the defence and security division of Babcock, Levitt was no stranger to long procurement cycles and complex and confidential pieces of work.

It was on request of the finance director that Levitt joined, in the first instance to do a feasibility study on setting up a procurement team. “I inherited a team of 12 ‘contracts people’, who weren’t really doing procurement,” she recalls. “It was the engineers and others who went out negotiating.” The plan was to repurpose the contracts team, bring in procurement specialists and build a category management team.

The procurement processes she found were pretty insular, with technical experts who were developing solutions talking mainly to vendors they already had good working relationships with. Procurement skills were not involved until the contracts team was asked to draw up the deal.

Levitt turned that on its head, with the support of the business. Procurement was to be involved in all major buying decisions from the start, and to develop a framework that the business could use for some of the lower value transactions: a procurement portal. “It was a really great remit,” she says. “All encompassing: nothing was out of scope. We weren’t getting this wiggle room where people say ‘it means everyone else but it doesn’t mean us’. Our CEO, CFO and business unit presidents all agreed that would be the remit.”

Bringing in four categories of spend – corporate services, IT telco, products and systems, and satellites and ground network – would cut out any tunnel vision of using known vendors, and look more strategically “not only at the category spend at Inmarsat but what people in the marketplace were doing”. 

Levitt searched the company, finding people with procurement in their job, and transitioning them into the new procurement team or moving them out, often returning them to their area of expertise. Technical and satellite experts are still involved in the purchasing, but are now supported by staff with purchasing expertise. 

Operating in such a specialist arena, it is not unusual for clients, suppliers and partners to be one and the same. “For example, Speedcast and Marlink [two leading global network and satellite communications service providers in the maritime sector, which use Inmarsat’s Fleet Xpress network] are partners of ours,” she explains. “They supply services in the maritime sector, safety services like distress calls, safety at sea. We buy spare capacity from them if we are short or need to augment satellite capacity. They either have satellites or capacity available to purchase.” 

The procurement team now numbers 26, and has delivered about $100m savings since 2015, excluding satellite purchase savings, and against the backdrop of setting up the team and getting systems and training in place. “The team has really been making an impact,” she says. Training being rolled out across the company should strengthen commercial skills further. 

The procurement portal went live in January, directing people to preferred or approved vendors, and improving the internal SAP system that had become too complex. Levitt’s team now sees the majority of spend, direct and indirect. “Everything goes through the e-portal and we are getting great visibility,” she says. “We can see non-compliance where people are still choosing vendors that are not preferred and approved. They can still put them on the system, and we try and encourage that. By the second half of this year we will reduce the vendors significantly by either blocking them or getting contracts in place and pushing people through contracted spend.”

Revisiting long-term relationships

Levitt and her team looked at the vendors the company used and why. “A lot of our vendors had enjoyed very long relationships – sometimes because they had experience and were delivering a great service, but sometimes because it was really difficult to switch.” 

In the products and systems category, covering terminals from the aerials sitting on top of aeroplanes and ships to the laptop and phone connections used by individuals, Levitt has brought in a buyer from BT, who is looking at the components of these units, what they should cost and what they actually cost. “At the end of the day, it is a casing with some technology,” she says. 

Terminals fall into the direct category. “My team put the framework in for those, and they are purchased through a supply team based out of Norway. They call them off the framework and then arrange to put them onto vessels as they come into port.” This keeps management of the installation and maintenance schedule with those who actually do it.

One major job in the corporate services spend category was to tidy up the preferred supplier list and do more “direct procurement”, working with HR’s resourcing team and using an applicant-tracking tool. This means people can now approach Inmarsat directly on the website or apply for jobs via Linkedin. “We think we’ve got a great brand that can attract people rather than using agencies.” 

Brexit presents a potential staffing concern. Inmarsat’s workforce has become increasingly diverse through acquisitions, such as its Italian distribution partner Stratos. There are 65 different nationalities in the London HQ alone. “Procurement has been supporting the business, providing legal advice, help in filling in the forms they might need,” Levitt says. “Until we know what the next steps are, we are in a holding pattern.”

Tackling complexity

Breaking down the complex elements and identifying the common procurement processes is key to Levitt’s strategy. Even the purchase of a new satellite goes through the portal and a traditional RFP process runs as with any other major purchase – after the business case to spend has been signed off by a Transaction Review Board. “We go out to market, invite responses from people like Airbus, Boeing – probably about five vendors. Some will come back being able to meet the criteria and some will have variations.” 

Here the technical experts who have long been involved in buying satellites come into their own, she says, determining whether that technology is wanted or not. “Suppliers might bring innovation, something for the same amount of money that we think is worth having versus not having. I have a category director who supports that team, and once we have agreed the technical scope and spec, they provide pricing.”

The CEO and CFO are kept engaged throughout and presented with the list of ‘downselects’.  “Once the final decision is made, we bring in our ‘space lawyer’ to sign off on all the terms and conditions with the vendors. And then we sign off the contracts.”

A satellite can take two years to build, before being delivered to the launch site, which is selected depending on its final destination in space. “There are better launch locations for different geostationary slots,” Levitt explains. “As you can imagine there are not many people who do satellite launches, so that can be a single source decision.”

Risk management is critical, and the cost of insurance high. The satellites have been constructed in a clean, high tech manufacturing environment, by scientists “in white coats”, so when it leaves the factory risk begins in transportation. A satellite payload (“the technical bit that does all the gubbins”) is roughly the size of a double decker bus. With the remaining parts folded in for launch, it can fit into a transporter plane, or travel by road.

The biggest risk comes when the shiny new satellite is strapped to a rocket and launched into space. The launch may fail, and the satellite could break. “You’d have the satellite cost to write off and the cost of the launch. We’ve been very lucky so far, and haven’t had one fail at launch,” Levitt says, touching wood. But they did have a delay recently, when an Inmarsat launch, part of the network that connects airline passengers to their own devices, was in the queue behind one that did fail. “They won’t put anybody back on the launch until they have thoroughly understood the issues. We were delayed by about six months.” The next launch, a Global Xpress satellite, is scheduled for 2019 at the space centre in French Guiana.

Insurance risk remains high until the satellite gets to its final position, which can take up to three months. Even after launch there’s a lot of work going on, mainly through the operations centre in London, with a back-up facility elsewhere. “We have one room where people steer the satellite into position, and another for keeping it there.” Power is delivered via solar panels or by the limited amount of onboard fuel that is intended to last the life of the satellite – nominally 15-20 years but some last up to 30 years.

Zombie alert

They also have to watch out for space debris, such as out-of-control zombie satellites, which have run out of fuel, or fallen out of their location. “We had to move a satellite of ours out of the way because we could see one heading towards us. It would have crashed.”

Satellite scrappage is being explored at the moment. A space scrapyard does exist, although not by design. “They all collect in the same space, like spoons in the bottom of your sink,” she says. “By attaching something to them, you could manoeuvre them, or even bring them back. A satellite is a huge investment and there are reusable elements.”

In-flight connectivity is a clear growth area. It began in earnest with Inmarsat’s link with Deutsche Telekom in 2015 to create the European Aviation Network, integrating satellite and 4G comms to give high quality broadband service over Europe. That year, Lufthansa signed up with Inmarsat for a 10-year deal to provide in-flight broadband. The EAN has meant the creation of a new ground network, and one of the launches since Levitt joined. “I’ve seen four or five launches,” she says. “We have launch parties, watching on a big screen. It is fantastic: a lot of breath held as things get off the ground.”

New satellites offer new capabilities, different frequencies, and faster, more reliable connections. “We move customers off older satellites if there are capacity constraints, and depending on what they want,” she says. “Technology is moving on all the time, so their capability is expanding, their size, coverage, frequencies.” Inmarsat’s Global Xpress broadband network, whose fourth satellite was launched by SpaceX at NASA’s Kennedy Space Center in Florida in May 2017, continues to provide capacity where there is strongest demand. 

Cost efficiencies for satellite connectivity in the future could be achieved through innovations such as multiple launches from one rocket. Inmarsat is working with suppliers, exploring those options, she says. “And I think Elon Musk is looking at multiple-use rockets,” she adds.

Connected cities is another growth area, and last month Inmarsat signed up to the next part of the Smart Africa Alliance to connect 22 African cities, capable of enabling the Internet of Things. 

“Connected agriculture and mining are being looked at,” she says, addressing needs in areas where terrestrial networks are not available. “Telemetry devices take humidity and soil conditions that can be collected in a central data centre for the client. Sometimes it is not that efficient sending it across a terrestrial network, so a satellite would provide the information quickly and efficiently.” The mining sites could keep track of vehicles and their loads.

A company made up of technical experts can make Inmarsat a challenging place to work, Levitt admits. Procurement needs to gather different perspectives from around the business. “You have to take that information and filter it into something meaningful. It is quite fast paced, and you have to deal with a lot of ambiguity, and that is a skill in itself,” she says. “Procurement needs to facilitate conversations so key stakeholders are not missed.” 

E-procurement user champions

Kerri Engelbrecht is on Web Ex screen talking to the procurement department in London. She works out of the Netherlands office, and is one of about 40 Community of Practice members who connects regularly to give honest user comments on the e-procurement platform.  

“We found people who were raising lots of requisitions in their offices who acted as champions,” says Levitt. “We asked for their feedback and got some really great comments on the system. When we went live we kept them on for regular ‘Web Ex surgeries’ to ask how it was working.”

Levitt adds: “Kerri tells us things like there are a number of small suppliers who want to pay in cash. It’s interesting because I always think payment terms is a commercial discussion – and there is always negotiation to be had. But typically the payment terms in the Netherlands are slightly less than our standard, so we negotiate to get to a term that is agreeable to both of us. 

“We still have a few teething issues,” she adds. “Ongoing surgeries mean the champions can let us know what we need to resolve, and we can ask them about anything they would like adding.”

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