Interview with Owen Mathews, CEO, NewHeights

Let us start with the evolution of your products. How did you come to develop softphones?

Our first customer was a PBX vendor, Mitel. We recognized the need for advanced applications, features and functions that were outside of the normal phone system domain. We started building applications that used advanced features of the phone system and integrated them with enterprise applications such as Outlook, Lotus Notes, CRM systems and personal information managers. And we wanted to use the interface of the personal computer to allow a user to be able to do things with the phone system that they typically did not do very well when using the phone on a standalone basis. For example, being able to see call logs on a phone is rather awkward. With a PC we presented those features in applications which were easy for people to see. Users have a full key board and a mouse and people are used to seeing multiple menus and lots of information on PCs. It is a far simpler environment for people to use advanced features of phone systems.

So we started using the PC environment to do things like call logs and missed calls, received calls, dialed calls, setting up call forwarding profiles, enabling do-not-disturb, access to corporate directories and MCRM systems. That was the original approach to the product and it went very well and we expanded that to more features and functions.

But that sort of work was being done by call centers as well.

We were porting features in phone systems onto the PC in a more generic way as compared to how call centers were doing it at the time. Call centers have been doing this for quite sometime but they are far more rigid in their rules. What we wanted to do was to make it more usable for the average knowledge worker - the average business person - and not make it as structured and controlled as a call center environment.

Besides making phone features manageable via PC interface, what further did you have to do in order to make the product more appealing?

We extended the product specification into knowledge management integration so when calls came up, the user could use that to invoke other kinds of information associated with that person. We also extended into the collaboration space doing video conferencing and desktop sharing. So we really enriched the communication experience triggered by the phone. Everybody seems to use the phone as the basic medium for communication and we use that connection with the phone or with the phone call to launch other advanced collaboration services like video conferencing etc. I believe we were the first to use setting up of the phone call to trigger a video conference.

Did you have any early channels to sell such solutions through?

We relied on direct sales but also had channels such as BellCanada, Metaswitch, Marconi and Ericsson.

What is the size of VoIP softphone market worldwide and which segments contribute the most? Is it the enterprise developments or mobile handsets or any other segment?

We concentrate on the enterprise market place and certainly believe the enterprise market is contributing the most. If you look at the competitive landscape in our area, our competitors are as much channel opportunities and partners as they are competitors. Predominantly they are the vendors themselves building their in-house solutions. Cisco, Nortel and Avaya all have softphone solutions and these are often attached to the phone systems sale. It is very difficult to separate out what is actually the softclient sale because a lot of the soft clients are used to complement a phone system sale. Out of the entire phone system marketplace the softclient sale is typically around 5% of the sale i.e. the advanced soft client application that works with it.

We also see a lot of potential growth in WiFi with soft clients on handsets, although the market for that right now is really just emerging. On the residential softclient side we do not do much. We typically focus on high-value enterprise clients. Pricing is an issue for us on the residential side. Softphone enabled services in the residential segment are often free services or very low cost services, paid for with advertising and things like that. We don’t really focus on that market place though it might be a large market place with respect to the number of users.

How important is the integration of enterprise applications for you and your customers?

A big part of our value is in enterprise application integration. There will be hundreds of features in a high-end PBX and the average user would use two or three at most. On the other hand the value is in using those features and making them part of other enterprise applications. Some of the key applications we work with are enterprise presence systems, enterprise collaboration systems, enterprise CRM systems, personal or information managers. Any sort of knowledge management, knowledge sharing tools that provide integration with those are of great value.

Enterprise application integration is really the key point and the reason why PC drives a lot of market today is because that is where most of the applications sit. The money behind the market is driven by how you integrate with the enterprise applications because those are the things that run the business. As a result there is money spent to make those more usable, more mobile, more manageable. So enterprise application is absolutely critical to the way we conduct business.

Your softphone architecture is optimized for a client server communication. Have you explored peer-to-peer solutions at all?

We mostly focus on client server architectures because the client server allows us to do enterprise integrations. We did originally take a peer to peer approach and there are some peer to peer capabilities in the product but predominantly it is a client server architecture. There are a lot of things that need to continue to operate when the users are not online. You disconnect the soft client because you are going to catch a plane or you go traveling etc. The rules with which you want to communicate like who gets forwarded to your cell phone, caller line ID rules that you have set up in your soft client, whatever enterprise integrations you use for presence, those things still need to continue to operate while you are offline. So the pure peer to peer model really doesn’t work for us in the enterprise and we have migrated more and more to client server because the enterprise application integration needs to continue to operate while the client is offline.

If it was a pure softphone and more like a consumer oriented Skype model then you could really do a pure peer to peer implementation. For the straight communication part peer to peer is sensible but when it comes to enterprise application integration and requiring to respond to enterprise applications and presence systems you really need something that continues to hold your rules while you are off line and in that respect the client server architecture is required.

But there are peer to peer clients like Damaka that claim to be user agent soft switch and application server in one.

Maybe yes. But we have to adopt a business model where we add value rather than displace incumbent vendors. To add value to an enterprise one really needs to specialize and focus on a particular area and be the best at it. If one looks at Asterisk as a free phone system that is open source there are ways with which people can get all-in-one system at low cost but they take lot of internal time and resources and the channels don’t exist. I don’t think the market place is going to switch overnight to an all-in-one solution because it is technically or architecturally more interesting.

The market place is made up of channels and sales people. PBXs still represent most of the sales whether that be IP PBXs or not, they still represent most of the sales into the enterprise market place. And to be successful we focus on adding value and not trying to replace incumbent vendors. So instead of treating Nortel or Cisco or Mitel or Avaya as competitors and trying to do an all in one solution we focus on adding value to the user in environments where there are such phone systems. As soon as we start replicating PBX features or to do the softswitch or the basic trunking or phone management  we are encroaching in an area that has various established players and very established channels. Instead we get to leverage those channels and become partners with them.

Are you mostly focused on desktop based softclient or do you also sell into WiFi and cellular handset area?

Predominantly, from a commercial sale and product perspective, all of the sales are personal computer based. We do mobile clients and WiFi clients but that is still in the area of prototyping and exploring stage. We have seen a lot of these kinds of solutions at trade shows but we have not seen many commercial implementations into an enterprise customer. We are yet to see any customer that says I will pay money for that because that adds value to me. So we are dealing with it very carefully. We haven’t done the hard product commercialization work, pricing and specific roadmaps yet.

I thought there was a lot of buzz about FMC. Interestingly, some of the FMC vendors have come up with their own soft clients. Do you see that as a threat for companies such as yours?

A lot of FMC vendors have built their own soft clients because they didn’t have a choice. They needed to demonstrate their services although that is not real technology that they are committed to. They are in the business of FMC servers or carrier solutions. The soft client isn’t core of it so we see them as partners in general opportunities. We certainly support FMC features in our soft clients. We work very closely with FMC vendors and our focus is on the soft client. They see us as specialists in that area.

In the context of WiFi-Cellular FMC, I guess the prospects of companies such as yours will depend on how intelligent the client is and how much of the server functionality it takes on itself. Are we likely to see a soft client doing the most of the handover in the future without involving the server component a great deal?

In an enterprise typically I believe there would be a server involved because the PC softclient is not always up and running. I don’t think that there will be an entirely server-less environment, I believe you require some phone server to operate when your PC is not online. You can do the cellular and wifi handoff but at the end of the day there has got to be some enterprise infrastructure that allows you to do the authentication. And relying on a PC with a soft client that isn’t necessarily on to do those features and functions I think will not be acceptable to the enterprise. They will want the WiFi and cellular handoff to operate even if your PC isn’t up and running.

I certainly see some server components for example for authentication of that WiFi handset or for the call routing rules of that wifi handset as it hands off between cellular and WiFi. So I do see server components. The approach of pure peer to peer or pure soft client doing everything, there is always some hybrid that makes sense in real commercial implementation. We have learned that pure peer to peer is never perfect just like pure main frame terminal isn’t perfect. Some intelligence on the PC, on the server and on the mobile client certainly makes sense.

Let us move over to video for a while. What do you think are the prospects of video over IP client software? What kind of market would embrace it?

I see a large opportunity for video using softclients. Video is becoming more acceptable. Most of the video conferencing players support SIP standard well, and there will be a major push into video communications by some of the major vendors over the next 6 months. There will certainly be a lot more awareness of video and a lot more ease of access to video solutions and having the soft client that can respond to video communications, I think is very important.

Average business user and even the consumer will end up using a standardized video communication. It will be certainly paid-for services and people are more than willing to pay for those kinds of services in particular if it is good quality, if you have got good quality of service, you minimize network problems and it is easy to use. And easy to use is really the key component, it has got to be as easy as setting up a phone call.

It should also have the ability to very easily expand that into conferencing beyond two parties, very much the way you use bridges. The video conferencing equipment vendors have moved away from the logic of conferencing everybody in and have begun to focus on SIP end points. We make very good video SIP endpoints. We have had video conferencing capabilities for quite sometime as an extension of voice and now it is just becoming more standardized, so we see a great opportunity in the enterprise market place for video.