Software firms pool skills for profit

22 Nov 2007

Vincent Ryan was shrugging off jetlag when he arrived at Toronto Airport. He had only just turned on his mobile phone when a call came through from an old friend.

He had known Denis Murphy (pictured) since 1989 when the two had worked together on technology infrastructure for the Defence Forces. Murphy was actively recruiting software companies for a partnership he had in mind and Ryan’s firm, ChangingWorlds, fit the bill.

It was one of many phone calls around the spring of 2006, which led to six companies meeting at Dublin’s Berkeley Court Hotel to discuss how they could work together and win more business as a result.

The players were some of Ireland’s leading software providers to the mobile phone market. There was Aepona and Murphy’s company, Mobile Cohesion, from Northern Ireland, along with ChangingWorlds, Cybenix, Openet, and Xiam from the Republic.

The opportunity for all concerned was to provide mobile operators with the means to grow revenue from multimedia services — a market worth multiple millions of euro.

To do this, mobile firms need service delivery platforms (SDPs) and building these has traditionally entailed large, time-consuming and expensive technology projects. “We’re saying that’s not necessary — we’re suggesting we can do it cheaper, faster and at lower risk,” says Murphy.

Murphy said the heritage of companies such as Aldiscon, which have helped develop the technology behind text messaging, has left the country with a head start in technological terms. “Ireland is the worldwide centre of competence in this space,” he says.

The SDP Alliance, as the group has since dubbed itself, proposes that much of the necessary components can be supplied in product form.

Each player agreed to provide part of a larger technology architecture, based on its own area of specialisation (see panel), using open standards so that all systems can be compatible with one another.

The benefits of the alliance have been tangible. Since it was formally launched at the 3GSM conference in Barcelona this year, the group has partnered with Nokia Siemens Networks, which in turn led to a million-euro deal with Hutchison Telecom in Asia.

Even still, the nascent partnership almost ran aground. Those present remember one meeting to work out the rules of engagement had been floundering. The question was: “What if a customer already had part of what the consortium was proposing? Would the other participants walk away from a deal?” Mike Brady, chief executive of Cybenix, broke the ice with his own version of a classical quote: “These, gentlemen, are my friends. If you don’t like them, I have others.”

Recalling the events later, Brady says: “I plagiarised the quote somewhat. If we go in to an operator and they already have part of the solution, the big debate is: ‘Is it all or nothing?’ My take was, it has to be some.”

All agreed deals would not be jeopardised by having to exclude one or two of the partners. Instead, customers would decide what pieces of the puzzle they wanted. Pragmatism, rather than ego, won the day. The indigenous technology sector is not renowned for co-operating; this was a significant breakthrough.

“Irish people are supposed to be modest, but we’re arrogant when it comes to technology. We all think ‘I could do that’,” says Brady. “I think we all realised early on that, if we adopted that attitude, this would just be a talking shop.”

“It’s the first time I’d been in a computer nerd meeting and someone was quoting Cicero,” adds Shane O’Flynn, vice-president of managed services and support with Openet.

Although Openet is one of the largest and best-established players in the group, the company also sees the value in clustering.
“We absolutely need each other. One part of the platform without the other is interesting, but not compelling,” he says.

The opportunity presented by coming together is orders of magnitude greater than any one company could hope to achieve by itself, O’Flynn argues. “10pc of a billion-dollar market is better than 100pc of a US$10m market,” he says.

Colm Healy, chief executive of Xiam, believes the companies’ successes to date in their respective fields have helped smooth over any ruffled feathers. “All of the members have a relative degree of maturity. They’re pretty clear on what they’re going after and are less inclined to chase the honeypot,” he says. What the immediate future holds for the group is more deals of similar or greater scale to the Hutchison contract.

Murphy believes it could ultimately lead to a merger of the parts into one larger entity. “There are way too many companies in Ireland below scale – they need to consolidate.”

Ryan’s response leaves all options open. “That’s not to say it doesn’t make sense to look at acquisition in the future, but a loose alliance is the most appropriate way for the moment.”

Ireland has struggled to develop indigenous technology companies of international scale. The SDP Alliance at least offers a successful template for how it can be done – whatever the final outcome.

Consolidating business through partnerships

Keen to promote partnerships such as the SDP Alliance, the Irish Software Association (ISA) can take some of the credit for putting in place an environment for companies to work together. Discussions between the ISA and its Northern Ireland counterpart, Momentum, two years ago led to a project called the All-Island Software Network.

“We’re trying to build an industry of scale on an all-island basis. What we want to do is create large companies of scale from Ireland and one of the great ways to do that is through collaboration,” says Michele Quinn, director of the ISA.
Customers and sellers benefit from this model, says Quinn. “A combined go-to-market offering means, from the buyer’s point of view, they’re meeting one potential supplier as opposed to several.”

The ISA believes the model can be replicated in other industry sectors. “If you look at purchasing trends in the public sector, for example, it’s moving towards framework agreements and buying from large consortia.”

Another vital component in getting the alliance started was early-stage funding from InterTradeIreland. “We’re all small companies and concerned with the next quarter’s sales so what this [funding] allowed us to do was to be strategic,” says Denis Murphy of Mobile Cohesion.

“It took resources outside the companies to do integration and marketing work. It meant we weren’t distracted from the day-to-day business.”

By Gordon Smith