The article was written by Rich Terani, but all of the interview text was written by Brough. http://www.tmcnet.com/articles/comsol/0900/0900pubout.htm Smart Company BY RICH TEHRANI Nimble, creative, adaptable -- these words have been awfully busy of late, especially since the celebration of the "New E-conomy" has practically become an industry unto itself. But when I flip through my copies of Fast Company, and hear tell of "businessman as revolutionary" or "the end of business as usual," I have to wonder, what about companies that simply (and consistently) practice ... innovation as usual? Such companies do exist, justifying the idea that a company may serve as a creative locus, a catalyst for achievement. Some companies -- smart companies -- are in it for the long run. When adversity strikes, they endure, and they emerge stronger in the end. One such company is Natural MicroSystems (NMS). Like many other companies associated with computer telephony, NMS suffered when Wall Street decided computer telephony merited "correction." NMS saw their stock price drop more than 90 percent to a low of around $5 per share. Today, many communications companies won't even acknowledge that they are in the computer telephony field. They feel that being associated with computer telephony is, financially, the kiss of death. So, what was NMS to do? In brief, NMS identified opportunities, and leveraged its fundamental strengths to seize those opportunities. NMS recognized that it was hardly coincidental that the traditional computer telephony market declined even while the communications industry embraced IP telephony and services-oriented solutions. NMS, relying on its expertise as a provider of DSP resource boards and convergence components, positioned itself as a provider of building blocks for services-oriented solutions. NMS bet the farm on this strategy, and I am happy to say that the bet has paid off. In recent weeks, the company's stock price has risen from $5 to over $130, inspiring no little "buzz" about the company and its prospects. All indications are that the company will continue to enjoy an incredible amount of well-deserved success. But NMS is by no means an overnight success. For many years, NMS has been a leader in the communications field, producing components at the heart of a broad range of solutions, from call center speech recognition systems to wireless service provider equipment... and more. We've seen NMS grow in sophistication over the years, and it has been an inspiration. In fact, the success of this publication was greatly influenced by the pioneering efforts of NMS and a handful of their competitors. And we at TMC look to NMS for continued guidance. NMS has always been more than a leader and innovator, and more than a company that employed wonderfully talented people. NMS has always demonstrated a great corporate culture. NMS is a class act -- approachable and forthcoming, always gracious, and engagingly visionary. We're happy to say that our very first Communications Solutions Expo (in Fall 1998) and our very first Internet Telephony Expo (in 1999) featured Bob Schecter, NMS's president, as a keynote speaker. A unique distinction for NMS, and a singular benefit to our attendees. It will not escape the notice of astute readers that recent moves by TMC parallel those made by NMS. We, too, recognize that the service provider market has become one of the fastest growing areas in all of communications. This realization accounts for much of the coverage in this publication, particularly in the "next-gen" sections. It also explains why we'll soon launch a sister publication to this magazine. The new magazine is called Communications ASP. (Feel free to visit us and subscribe at www.caspmag.com.) But enough about TMC! Right now, let's get back to NMS, a jewel of a company. What accounts for its success? To help us with that question, we had a talk with the CTO and co-founder of NMS (and frequent contributor to Communications Solutions™), Brough Turner. CS: NMS has an awesome corporate culture. How do you attract and retain such highly talented and motivated people, through good times and bad? BT: From the start, we were trying to establish a company where it would be fun to work. We've expressed this with three key ideas: technology leadership, customer focus, and best place to work. In hiring, we strive to hire the very best talent for every job, whether it's a design engineer, sales manager, or administrator. And we train our managers on how to interview and identify the top candidates. As a result, we have a team of talented and motivated people who enjoy working together. Then, we communicate objectives and let people go on their own. If there have been times when the rest of the world has questioned our strategy, we've understood what we're doing internally -- and that's kept us all working towards our goals. CS: What accounts for the success of NMS's approach to the communications market? BT: Technology leadership and focus ... When we were a small player coming into the CTI market in the early 90s, we focused on sub-segments that were underserved. Our DSP and density leadership got us extra growth from the high end of the market -- enhanced services in the public network -- at a time when the rest of the CT market was slowing down. Next, our early attention and focus on packet-based telecom positioned us for today's converging networks. Finally, our focus on a pure OEM model, with a limited number of key customers, has allowed us to provide excellent support to a set of companies, and these companies drive large volumes of business. Today, our company is focused on the large, hot markets and applications that these companies are targeting and winning: network access, network services, IP services management, and enterprise solutions. CS: NMS is cited as being the first company to build DSP resource boards especially geared for building Internet telephony gateways. How do you see this market progressing, if at all, in light of the fact that vendors such as Cisco are successfully producing IP telephony gateways devoid of open, standards-based DSP resource boards? BT: While we are intimately associated with open, standards-based platforms, our core strategy is to leverage mass-market computer technology to solve telecommunications problems in the most appropriate fashion. We were able to leverage PC technology to get IP telephony gateway technology to market before anyone else. Through our NaturalEdge Engineering Consulting Services division, we have been able to port this technology to a variety of embedded environments as well. Combine this with our willingness to sell or license our technology, and the result is that we have been designed into a variety of IP telephony gateways that are no longer open. The good news is that internally, they still leverage the open, standards-based software environments -- and that helps us and our customers get new products to market rapidly. Commenting on Cisco gateways specifically: No, we are not designed into the mainstream Cisco gateways at present. (Although Cisco is a customer, it isn't as large a customer as we think it should be). On the other hand, we are designed into gateways from competing equipment suppliers such as Lucent and Siemens. CS: Please discuss NMS's prescient acquisition of a Teknique, a company with SS7 expertise, as well as your more recent acquisitions, including InnoMediaLogic and QWES.com. What is NMS's strategy for acquisitions going forward? BT: We've made a number of careful acquisitions over the past six years. We started with Vox S.A. in France in 1994, which helped us reach critical mass in the European market and added substantially to our DSP capabilities. Next, we acquired Teknique in 1996 for their SS7 and data communications expertise. At that time, we had direct need of SS7 capability for our public network business, and we were just starting to develop our first IP gateway. Teknique brought us the needed expertise. A little later, we acquired ViaDSP for their DSP expertise -- they helped accelerate our gateway developments. In 1999, we acquired QWES.com for their PolicyPoint product and their expertise in Quality of Service (QoS). QoS is a critical missing piece for the widespread adoption of VoIP technology. Most recently, we acquired InnoMediaLogic (IML) for their leadership in the voice over ATM market and their next-generation access network technology. With this acquisition, our network access technologies, products, and services deliver limitless scalability with thousands of voice and data channels per card, and unlimited interconnection for advanced voice switching. As a result of our best-available -- and exclusive -- DSP and ASIC technology, we are now able to offer highest performance, highest density, and lowest cost-per-port solutions. CS: You've worked hard to popularize CompactPCI. What are your opinions and insights with regards to CompactPCI in the present and future? BT: We expect the CompactPCI market to continue to grow and evolve. There are several schemes in development that promise to carry CompactPCI far beyond the capacity of the current CT Bus (H.110) and PCI Bus. The best of these schemes evolve gracefully from existing CompactPCI products and continue to leverage mass market PC technology in CompactPCI's robust packaging. We expect to help drive these evolution efforts beginning later this year and in 2001. CS: NMS was one of the first telecom companies to embrace open source technology. How has the move to open source affected your business? BT: Typically, our key customers look to us to provide direct support, not just open source, so in that sense, open source is not so key for our business, but it was key to advancing the adoption of CompactPCI -- an initiative we felt was important for our industry and for NMS. Our open source initiative was firstly an effort to speed the adoption of CompactPCI by providing adaptable hot-swap software, and secondly a way to make our boards available to Linux programmers before we had the resources to directly support Linux. I know of several companies who have directly used our hot-swap software to get their CompactPCI products to market and hundreds of people who have at least looked at our hot-swap software for guidance. CS: NMS was on the forefront of ending the bus wars between MVIP and SCSA. Please give us a synopsis of the market before and after the bus war era. BT: We never wanted a "bus war." When we invented MVIP in 1990, there was no open bus that could switch digital telephony signals. But by the mid-90s there were two camps. We didn't want to put two connectors on each board, so in December 1995, we made an ECTF submission entitled "Ending the Bus Wars." Then we got a dozen or so companies involved in making it happen. This included NMS, Dialogic, and several larger players, including Lucent, Nortel, and Siemens. The result was the CT Bus (H.100 and H.110), now the only telephony bus for new designs. CS: Discuss the state of standards in general. Where have we come and where do we need to go to ensure continued growth in the telecom market? BT: New markets can emerge without standards, but explosive growth requires standards of some sort, whether sanctioned by official bodies or promoted by one or a few market leaders. CompactPCI is a standards success story. IP telephony has settled on a few standards -- H.323, MGCP, and SIP for now. That's a bit too many, but the market is evolving, and vendors are just implementing all three. Would we progress faster if there were only one? Probably yes, but there are still arguments over which standard is rich enough to support all the new services we are all hoping for. Perhaps the important area where widespread adoption of one set of standards could help grow the telephony market is in software development. New services, that is, new applications, drive the industry. And yet, no software standard has really taken off -- not TAPI, JTAPI, or any of the ECTF software standards. Telephony application development remains in the hands of a relatively small community, untouched by the millions of Windows, Java, or Web developers. My current bet to break this logjam is an emerging set of IETF developments that are partly associated with SIP, that is, CPL (call processing language) and various XML derivatives like VXML or XTML. But this will depend upon the completion and widespread adoption of the SIP family of standards. Whatever happens, we have some exciting times ahead. CS: At the latest Communications Solutions Expo, we noticed that many of your partners displayed truly state-of-the-art communications solutions. (In particular, we were wowed by NMS's voice portal technology and partnerships.) Please update us on the interesting things your partners are doing. BT: We firmly believe that speech is the "natural" interface to the rich, dynamic content of the Web... and we are wowed by the announcements our partners are making in the voice portal arena. As background, NMS's HearSay is the industry's first integrated, extensible voice portal platform, designed to accelerate the development and deployment of a new generation of voice-driven Web applications, voice portal solutions, and v-commerce (voice-enabled e-commerce) solutions. In the area of unified messaging , there are more incredibly interesting services coming on the market. One from our partners, EnvoyWorldWide (formerly Message Blaster.com), has recently brought out a Web-based messaging application, called MessageBlaster, that lets organizations communicate with customers regardless of location or choice of delivery media (phone, cell phone, fax, pager, or e-mail). This application, which uses our AG4000 platform, tracks, monitors, and reports responses across platforms and recipients in real time. CS: NMS seems to be increasingly focusing on enhanced services and network access. Fair assessment? Why? What are your plans for these areas? BT: Actually we have five market-centered business units. We have progressed from a functional organization to a set of business units, allowing us to be more responsive to our customers, who are developing solutions for the hottest, fastest-growing markets in this new era of communications. These business units are: New Network Access, New Network Services, IP Services Management, Enterprise Solutions, and Engineering Consulting Services. CS: Traditionally, industry watchers have considered NMS, Intel/Dialogic, and Brooktrout to be "The Big Three," and most directly competitive with one another. Is that still the case? How have the three companies changed over the years? BT: Actually, at this point our principal competitors are the internal development groups at the large communications equipment suppliers. Luckily, their management increasingly realizes that it's more efficient to go outside for technology, freeing their own teams to focus on solutions. In specific market segments, we sometimes see these competitors, but by now, we are also both a customer of and supplier to Dialogic/Intel and a partner with Brooktrout in some markets, so it's a different world from that of three years ago. CS: NMS now generates about 60 percent of its revenues outside of North America. Has that always been the case? BT: It's fair to say that about 60 percent of our revenues are due to international business. Global markets are very large, we have comprehensive international telecom approvals, and we're able to rapidly obtain approvals in other remote markets when our customers need them. Actually, about 33 percent of our revenue is from direct sales outside of the United States, but many of the products we sell to companies in the United States are for systems that are destined for export. Our solutions are deployed in over 65 countries worldwide. CS: The industry has always credited NMS with articulating clear and expansive (and inclusive) visions, encouraging coalition building and growth throughout communications. How will you apply this philosophy to ensure future growth? BT: We are well on our way to being the dominant supplier of enabling technology in this new era of communications. This has and will continue to require not only internal development, but also acquisitions and partnerships. Even in these rapidly moving markets, you can also expect to see us following our established path of fostering industry coalitions whenever it can help enlarge to total market for all. I've already alluded to our forthcoming efforts towards an evolution strategy to dramatically expand the value of CompactPCI -- and you'll see us contributing even more to initiatives within the IETF and other large bodies.