DV: Niall, thank you for talking to us today – let me start with this: how would describe what Openet does now, in less than a hundred words?
NN: So, we provide a combination of expertise and software tools to telecoms and cable companies that enable the transaction management and engagement with their customers by taking a lot of complexity out of legacy networks and simplifying things so that they can get new services launched fast.
DV: That is very different to how you started out, so how do you determine which direction to take and how to allocate resources.
And you are right, when we started out, some 15 years ago, we were a specialist mediation provider that supported the new need for real-time transaction management, as pre-paid became huge. Then, as we helped launch the iPhone and iPad we adapted our value proposition to support the carrier need. This evolved into providing a fuller service offering, then a managed services offering. We realised that the middleware space that we inhabited between the networks and the big CRM and billing systems was where the action was going to be, so that was where we planted our flag.
DV: You were the first company to virtualise your offering, so when do you see virtualisation becoming real?
NN: Good question. So, back in 2011, we began investing significantly in virtualisation and actually deployed our first solutions to some of the big North American carriers in 2012, 2013. Actually, we haven’t answered an RFP in two to three years that hasn’t asked for some level of virtualisation. And if you are competing against the big guys, like Ericsson, Huawei and Amdocs, being first to the punch with what carriers need is how we have survived and prospered. With those players you tend to get a lot of industrialisation but maybe a little less innovation. What we find exciting at the moment is that the need for innovative systems and business solutions is getting faster and faster, and this gives us greater and greater opportunity. We can work with the really big players to help with their strategy.
Over the next couple of years we see we will need to support open source pricing and premium models, things like that. We also see the operator challenge as being particularly hard at the moment. Volumes will go up by an order of magnitude of two or three times, but revenues won’t necessarily follow suit. So how do they develop highly automated, highly cost efficient infrastructures to support this? In fact, the reason we are fizzing and buzzing at the moment is that we think we are ideally placed to provide this. Yet, I will admit there is also constant paranoia as well.
DV: I was going to ask the ‘paranoia’ question actually. It must happen that you get a big carrier as a customer, with your innovative thinking and good relationships, and then one of the giants pitches to take over the whole deal.
NN: You are right, there is no denying that it does happen from time to time. And they will try to take over the whole of the network footprint. The good news is that we have incredibly supportive investors and I am able to produce business plans that show that the graph will keep going to the right and upwards. We have learned to live with it, and actually we got into a crowded market and we are still very much here. Also, we don’t compete with people who look like us anymore, we compete with the Huaweis and the Ericssons now, so we spend a lot of time with our customers showing them the value proposition. It is not always easy, but as systems and networks become more automated, we place ourselves at the tip of the spear of the things that operators need to embrace. We are also vendor agnostic, so we can work with a wide range of innovative players. And actually, we do collaborate with the Huaweis and Ericssons of the world because they bring things to the party that we won’t. So as long as the operator likes the overall proposition, we can River Dance our way into the right situation.
DV: We look forward to seeing Niall Flatley’s performances. So, Openet is very good at producing examples of innovative pricing and partnerships with digital service providers, but do you think operators really understand the need to partner and innovate on pricing?
NN: This is obviously a big discussion point at the moment. What we see, though, is that the forward thinking operators are moving and they see that the real threat is coming from being left behind by Google and Apple and the guys who are creating the fabric for the Internet of Things, and becoming just the transit layer for all these entities. The innovative operators such as America Moviles are taking the approach of creating services from the device back into the network. This means that we can work simultaneously with the IT, network and Marketing guys to design this enablement capability to allow them to fully participate in the Internet economy. I came from an operator and I know that the structural pressure is to dampen down innovation because the goal was to run a safe network. Now, though, with commodity hardware and open source software they are seeing the need to revisit revenue models, and that plays well for our goals too. Our real-time enablement capability allows us, not to re-invent their older, fragile systems, but to leap-frog them into being able to get the presentation and customer experience aspects of the new offers right. And it is those aspects which are key. If they get this wrong, it will mean them getting further and further away from their customers, and they definitely see this as a dead-end.
DV: you mentioned the IoT, do you see that as the fastest growing market at the moment, and why?
NN: Hmm, actually I don’t. It is certainly incredibly interesting, but like a lot of things in telco, it can take a year or two for the blindingly obvious to catch fire. I tend to look at devices, because while everyone has a slightly different opinion on what the IoT actually is, it is the devices that will drive the market, in the same way that the iPhone did. So, I watch Intel and GE, for example. I think, though, that the IoT will be a hot interest item in 2016, but at the moment, the traffic is manageable and the services models are still relatively simple. What is really happening right now is a lot of activity in the wholesale space, with MVNEs springing up left, right and centre. Large enterprises are basically becoming multiple network MVNOs to enable their own visions. For instance we are working with Facebook to support their internet.org project. So, I think the emphasis will be on those areas, rather than necessarily on the IoT. I also think that we will not see 5G anytime soon, as I think we are entering the age of the marketeer within telecoms, rather than staying in the age of the technologist.
DV: Time for the difficult question. Well, an easy question with a bigger question lurking in the background. What is your reaction to the Redknee, Orga deal and what do you think it means in the wider market perspective?
NN: I have got to know Lucas pretty well over the last few years and it is clearly his ambition to sit at the top table with Amdocs and so on and he sees consolidation as the way to do it. He thinks that doing roll ups, which improve the top line is the way forward, and he can sort out the bottom line later. I applaud what he is doing and I agree with most of his thinking, he sees Ericsson and Tech Mahindra coming in and taking over the whole network space and thinks this is the way to get back at them. I think Orga was one of those companies that was, sadly, slightly ahead of its time. Great technology and some great people. On a personal level, I am sad it is gone, but on a business level of course I am pleased that it is gone. To make that acquisition work is tough, working out the operational synergies and so on, but if anyone is capable of making it work it is probably Lucas.
As to what it means for the industry, I think further consolidation is inevitable. I think that the bigger players will begin to realise that their inventory is no longer fit for purpose over the next couple of years. That will drive the consolidation as the big guys buy the smaller, innovative players to refresh their inventories. It will be interesting to watch Lucas and what he does next, for sure.
We have a slightly different approach obviously. Both Redknee and we can continue to do what we do, which is a good way to getting a decent pension, but I don’t think it makes for a very interesting company. We will continue to do some small scale acquisitions, but we have grown from a single product company to a multiple product company with a services capability and the next iteration makes us much more valuable but in a slightly differentiated way from the big guys. Also the move to commoditised hardware and infrastructure is great because we think we have a really good play over the next few years.
DV: That move is going to be tough for operators, too, I guess.
NN: Absolutely. If you had gone to a Verizon or a Sprint four or five years ago and said ‘look you can run this stuff on commodity blades,’ the engineers would have thrown you out. In those days, it had to be an HP or a Sun blade because you can guarantee the performance. What’s happened is that Google and Amazon have proved that you don’t have to go with the specialised infrastructure and that has been a major change – and difficult for them to accept. We are about to launch some pretty innovative thinking on pricing strategies and so on, which we hope will help operators in their thought processes. But actually, most operators are quite settled in their thinking about where they need to go. One issue will be that the supply chain guys are going to come under a lot of pressure to move quickly, in the next couple of years as the Board and IT understand the need to move fast.
DV: Given the fear of what Google might do, how do you think operators will react?
NN: I think you will see more consolidation amongst operators. We are already seeing alliances and so on in North America, for example T-Mobile doing this in Mexico and Canada and this is to counteract AT&T doing acquisitions in those countries. It is quite similar to the airlines at the moment, you either buy all the other airlines or you take a Star Alliance approach. I also think it will be much more efficient than it was before. Things like IPX and other carrier exchanges are much efficient than the old world of CAMEL etc. So, I think operators will survive but it is a question of how exciting they will be. They will either become a commodity part of the internet economy or an active participant.
DV: But they are really bad at alliances, in fact can you mention any that are still alive?
NN: Good point. But there is a difference. Then, there was no external threat. Now, if they don’t band together and get their cost equation right, and embrace third parties to provide new product lines, they will be wiped out by the Googles and WiFi network providers. They now acknowledge that there is an external threat that is more than credible. There was a mistrust of each other, which is why those alliances did not work. They also had a regulatory regime which was more benign. This time it will be different.
We have some interesting things coming up and it will fun as an agile upstart, as we will be able to watch the big boys being beaten up.
DV: Any last thoughts about the next few years, Niall?
NN: Well, I think privacy, personal privacy, will become a huge issue. It may need more regulation to make it all safe, and there is a lot of education that needs to happen, which you definitely help with. I actually go and speak to kids in primary school about this. I tell them that the moment they post something on the internet they stop owning it and it is there forever. I liken it to getting a tattoo. When you get it, it is really cool, but when you get to my age it about a foot wide, and grey. It is a generational thing, and it will be solved, but I think it a big issue for the next couple of years.
DV: Niall, thank you, that was a very interesting conversation and there is much to think about.
NN: A pleasure, and maybe we should do this every six months or so, as these are good sessions.
DV: Definitely, we’ll make a date.