Telecom service providers are moving up the value chain. In the past they left the provision of enterprise IT services to others better equipped to deal with the highly customized IT needs of each enterprise customer. But many service providers have recognized that there is more value in IT services, especially with the cloud making IT resources and the network inextricably linked. “Telecom used to be a hub, but today it’s a spoke in a much bigger wheel, including data, UC [unified communications], and other services, all consolidating into managed services,” comments NetFortris CEO Grant Evans. “We deliver those services through a cloud offering and solve all those complex issues for enterprises.”
Telekenex was an independent network operator based in San Francisco with a nationwide fiber-based network when it was acquired last year by an investment group led by Grant Evans. The company got a new name—NetFortris—and a new growth strategy centered on UC. Today NetFortris is a service provider with revenue running at more than $30 million a year, a growth rate above 20%, and monthly recurring revenue per customer around $3600, about three times the industry average. “We’ve embraced complex systems and we do extremely well with [customers with] multiple locations,” Evans says.
NetFortris shared the decision-making process for the provider of their new UC technology with the Daily Cloud. What follows is a condensed description of a year-long “beauty contest” process that gives a nice insight into the competitive dynamics in the fast-changing UC industry. Our guide was Tom Swayze, NetFortris’s CTO, a 26-year veteran of the telecom business, and the leader of NetFortris’s UC decision-making process.
NetFortris/Telekenex has offered UC services since 2000, back when Cisco was a pioneer of what was then called voice over IP. In 2004, Telekenex adopted new UC technology from VocalData as its standard product, which it enhanced with its own software wrapper in 2007. In 2013, they learned that the VocalData solution was reaching its end of life. “That gave us the opportunity to really dive deep, put the pedal to the metal, and look at the whole market,” says Swayze. “We’re strictly business to business, so we have different requirements from many others,” he adds.
Swayze was looking for a UC system that would be NetFortris’s core offering to its more than 700 customers and on top of which it could add its own custom-created software features. The system they would standardize on would have to have 5-9s reliability (99.999% uptime), and be scalable from 100s to 1000s and ultimately as many as 50,000 users. Currently, NetFortris’s average customer has about 70 seats, but it has aspirations to go bigger. In addition to the expected UC features, such as voice, video, and instant messaging, Swayze was looking for a system with well-developed WebRTC features. That’s the technology that enables telephony and IM features to be integrated into virtually any website and any browser. “I feel WebRTC is a bit of a game-changer and we are going see those features increasingly embedded in regular day-to-day business,” Swayze says.
Right off the bat, Swayze eliminated most of the mid-sized publicly-quoted UC companies. Companies like RingCentral (RNG) or 8×8 (EGHT) or ShoreTel (SHOR) or Mitel (MITL) either target smaller customers, or their IP-based UC systems are still in development. Some of them are transitioning from the old-fashioned premise-based PBX system to a true cloud-based, IP-based UC system, and all the features are not yet battle-hardened and market-tested, Swayze says. He wanted an end-to-end solution. “If you’re looking for a complete solution, there are not as many choices out there as you might think,” he comments.
He ended up with a shortlist that included UC platforms from BroadSoft (BSFT), Cisco (CSCO), Genband, and Metaswitch. He brought all four of them into the NetFortris lab and tested them over many months to see what they offered and how they performed in tests with varying numbers of simulated seats or users.
Metaswitch was eliminated because it did not offer as many UC features as the others. The remaining three systems all performed well in tests with around 10,000 simulated users. All scaled successfully up to the 50,000 mark.
Finance was also an important consideration. “All the systems were close to the same cost at 10,000 users, with Cisco being an exception, at double the cost of the others,” Swayze says. According to Swayze’s math, Cisco HCS (Hosted Communication System) required at least 500 seats per customer to become economical. Obviously that didn’t make sense for a business where the average seat number was 70. One key factor making the Cisco system more expensive was that HCS requires three virtual machines (VMs) per customer. VMs have to be paid for individually, with licenses purchased from the virtualization provider. While the Cisco system has some multitenant management capabilities, it is not designed from the ground up as a multitenant solution, which means it cannot take full advantage of cloud efficiencies. A “cloud” solution that is not multitenant (i.e. multiple users on a single CPU) is a bit like decaffeinated coffee—it might look, smell, and taste like the real thing, but it does not deliver the same kick to your cost-effectiveness.
The two remaining contenders, BroadSoft and Genband, were close. “Both had a nice rich feature set,” says Swayze. “BroadSoft was ahead on features for tablets, but Genband was catching up fast.” Swayze didn’t just rely on the lab tests; he interviewed other service providers in North America and Europe to learn from their experiences with the two vendors. Both got strong positive recommendations. Service providers told him both offered solid, reliable, scalable systems, but both could be a little quicker and more transparent about bringing out new versions with better features. BroadSoft is widely used by many of the world’s largest telecom companies, but Genband also had some impressive customer references, including a subsidiary of British Telecom with a large deployment.
“The Best Choice”
In the end, NetFortris selected Genband. The key deciding factor for Swayze was the end-to-end nature of the Genband system. Genband had a strong software capability for provisioning the system’s back-end resources, while BroadSoft provided interfaces but then required the operator to write his own software to perform provisioning. While the end-user may see and enjoy the “front end”—the cool UC features on his screen (like multiple-location videoconferencing or chat windows in a browser), the back-end provisioning of resources is equally crucial in delivering a service. “Genband really shined on the back end,” says Swayze. Another important feature was the session border controller (SBC), the system’s gateway onto the IP network. Genband’s system included the SBC, while BroadSoft required the operator to buy SBCs from another vendor.
Swayze still had to explain his decision to the NetFortris board of directors. “They wanted to know why we didn’t choose the market leader,” Swayze recalls. The market leader is, of course, BroadSoft. Swayze’s response was that BroadSoft got into the UC business earlier and has won a large number of deals with many of the world’s largest service providers (such at AT&T and Comcast) and is therefore providing UC services for millions of residential households. While Genband is less well-known, it’s actually three times the size of BroadSoft (about $600 million in annual revenue compared to about $200 million for BroadSoft). Crucially, Genband in 2010 acquired assets from bankrupt industry leader Nortel Networks, giving it deep technical resources to make up for lost time.
“Genband was the best choice. It is the right technology at the right time,” says Swayze. “The holistic approach they take to their platform, so it all integrates and works together seamlessly, that’s huge.” He also praises their professional services for supporting NetFortris’s roll-out of the new system.
On August 22, 2014, NetFortris signed a deal to purchase the Genband EXPERiUS. In April this year, they publicly launched the solution to the market. Swayze is optimistic that the new platform will give a big kick-start to their top line. “Our ability to provide services that we couldn’t in the past is definitely helping us. We are now talking to Fortune 200 companies that are looking for solutions for more than 4,000 sites.”