Changing the message

22 February 2007

How does a start-up inject an entrepreneurial philosophy into a 14-year-old technology company? Airwide Solutions, created through a 2004 merger, has focused on both products and business strategy

Jay Seaton is CMO of Airwide Solutions, which has a 14-year history in the mobile messaging market. Originally known as Schlumberger Messaging Solutions Group (MSG) and part of Schlumberger's SEMA IT division, the UK-based mobile messaging operation was acquired by start-up Taral Networks in 2004, aided by a third round of seed funding from US investors. Now a global company with headquarters in Boston, US and Reading, and major operations in Asia and Australia, it has since secured a further round of funding and expanded into India. It's now focusing on establishing its credentials for the next generation of mobile messaging.

You have a long history in mobile messaging, which is obviously attractive to customers. Has it been hard to keep at the forefront of technology change - particularly when you're up against start-ups that can launch on the newest platforms?

MSG was a pioneer of mobile messaging. It literally designed the first mobile messaging systems, and an Airwide engineer who's still here today was the first person to send an SMS message - to a customer at Vodafone. But it was really an integration-focused company building large complex infrastructures for the largest messaging vendors in the world and working with customers to design what have proved to be massively scalable systems. When a company has that integration profile, the flipside is that it is not necessarily scalable to mass-market products. Taral Networks, the entity we merged MSG with, was more of a product-oriented company, and it was more focused on the emerging multimedia message service (MMS) standard.

With the merger we got the benefit of lots of experience and knowledge and a traditional start-up type company, with innovative technology. We have this rich history and relationships with clients, and that's important in this market because the mobile operators often talk about innovation but they don't buy innovation. Every customer situation is different and complex, and they have to buy something that's tested, proven and reliable.

From the technology side, the merger brought together the two most prevalent messaging technologies - SMS and MMS. Operators this year will make $60bn from SMS traffic, and while there's always a lot of talk about mobile IM, MMS and mobile e-mail displacing SMS, the reality is all those others combined only add up to a fraction of SMS revenue. With SMS, you've got ubiquitous service - every handset is enabled for SMS - and also very high adoption rates, because it's not difficult to adopt.

So what's the challenge when you bring together two very different companies like this?

From a cultural perspective, it's trying to take the entrepreneurship and innovation of a start-up and blend that with a company that is more focused on quality and process, the goal being to highlight the strength of both of those approaches. Taral had leading-edge technologies but they were mostly focused around MMS and there are many companies in that space. MSG was one of the three leaders in SMS infrastructure.

Senior management from both sides joined the new company, together with a number of veterans from the telecoms industry, and Airwide has taken on board both the SMS and MMS products of the two companies. In addition, we are now providing a migration path for customers to IP-based multimedia subsystem (IMS) open systems. The company has grown since the merger from 200 to 300 employees and now has two headquarters in the US and UK, with global offices in Asia and Australia and last year expanded into India with dedicated sales, delivery, support and development operations.

The company's evolution has mirrored the way the mobile messaging market has developed. Are there lessons here for other entrepreneurs looking to sell or merge?

Certainly. The first 10-12 years of mobile messaging were characterised by large established networks - so if you were a Vodafone or a T-Mobile or another mobile operator you tended to have one dominant messaging vendor because the infrastructure that you'd put in place didn't have a high degree of interoperability. This is typical of any emerging technology.

If I sent a text 7 or 8 years ago, there'd be an 85% probability you wouldn't get the message at the first attempt. You and I might never realise this - but behind the scenes the system would have to take the message, store it and keep attempting to deliver it until it was successfully delivered and that could take 10 or 20 times. Mobile coverage was poor, handsets didn't last long, and you went in and out of coverage zones. So the systems were built around having to do that repeated delivery, with interfaces to billing systems to ensure you weren't billed 10 times for a message that took 10 attempts to get through.

Operators didn't have the flexibility to choose components from different vendors - you just had to have a system that worked well. And the only way that integration worked well was buying it from one vendor. The market share leaders in SMS were Logica CMG, Comverse and MSG. And we all sold large monolithic networks by today's standards.

And how has that changed?

We are now going through this profound change in messaging systems and the paradigm has completely reversed. Handsets are now more reliable, batteries last longer, coverage zones are broader and more effective and overall, the efficiency of the networks has improved dramatically. So now if you look at that text you sent me 8 years ago, it's completely reversed - there's an 85% chance I would just get it on the first attempt. And that means you don't have to store it, don't have to worry about controlling delivery and because of interoperability, systems can be broken down into separate components. So if you are an operator, you can buy just delivery capability - what you need when you need it - in the form of a messaging router or gateway. In addition, because of the infrastructure, you don't need to worry about a change in technology, you can just layer modules of capacity on top of what you have today.

You've recently secured an additional $25m in funding: on what basis was that money provided and what do you plan to spend it on?

Our investors appreciated that we are in a situation where we have an understanding of the full infrastructure. but we also have best-of breed products to compete with the newer companies. For example, one of our operators bought some routers from a specialist messaging router company and spent a year and a half trying to get them to interface with its billing system. It wasn't that the router itself was bad, they just didn't have an understanding of what it took to ensure that it worked with other systems.

A significant portion is going on developing the next generation of our products, but another chunk is for expanding Airwide's presence in the market - meaning sales and marketing. The MSG part of Airwide had the top mobile operators as customers already - and everything was customised for them. So they didn't put a lot of effort into sales and marketing beyond their customer base and instead spent resources on satisfying the needs of existing customers. That's all now changed and our challenge is to establish leadership in the next generation of mobile messaging.

Were also expanding globally both with existing customers and their global reach (we've just signed a new deal with Vodafone Ireland for example) and new ones. In new markets we are creating partnerships - for example with Ericsson.

What's your investors' strategy?

Our challenge now is to establish leadership in the next generation of mobile messaging. Advent International, which led the VC investment in 2006, saw that this market will not wind down; the old way of doing things will wind down, but there's a whole new way of doing things and the investors are totally behind us in trying to establish leadership in that new world.

Jay Seaton was talking to David Longworth of Webster Buchanan Research