Sangoma's Corporate Makeover
February 14, 2012
The one constant in communications technology is change. Nothing ever stays the same. From the time Apple’s (News - Alert) II series of PCs hit the market almost half a century ago, the pace of change in communications technology has been nothing short of remarkable. Just as Apple did for PCs, Motorola (News - Alert) changed the mobile game forever with its amazing StarTac, and while calls have been made over the Internet for almost 40 years, VocalTec thrust VoIP into the mainstream in the mid-1990s, to the point where TDM growth has now slowed to a crawl, and the migration to IP is in full swing at businesses across the globe.
What it amounts to is a massive and ongoing opportunity for communications technology vendors, which have had to constantly find ways to revise and reinvent their products and services to help businesses take advantage of the latest cost-saving and efficiency-enhancing technologies.
For some, it has meant acquisition to drive growth and expansion – the market has witnessed an unprecedented amount of M&A activity during the past five years. For others, it has meant organic growth through product evolution as they seek to develop new products to take advantage of the benefits of IP. And for others, it has meant a combination of both, leveraging acquisition to help drive growth and continued innovation.
A prime example is Sangoma Technologies (News - Alert), known historically for its data communications products and, more recently, for its robust line of telephony boards supporting both open source and proprietary technologies. Despite its successes, it, like the rest of the industry, must struggle with the question, “How can we effectively continue to meet the dynamic needs of our customers driven by the significant trends in the industry?”
A New Direction
During the past year, under the leadership of new CEO Bill Wignall, Sangoma has undertaken what can best be described as a corporate metamorphosis as it seeks to answer that question. With Wignall at the helm, Sangoma devised a three-phase process that would launch it towards a new evolutionary path.
It started with internal reorganization, including reallocation of most of its corporate executives into new areas of responsibility, along with more than half of its staff. That would allow it to realign its corporate strategy and build new product and geographic roadmaps, which, in turn, led to corporate development, beginning with the acquisition of the product line and key assets of VegaStream in August.
“The process was intended to be a means to an end, with the end being accelerated growth at Sangoma to better meet the needs of more customers and more of their needs,” explained Wignall. “In effect, we were trying to reinvent the company.”
It wasn’t a question of righting a capsized ship; Sangoma had been a stable organization for a long time. Rather, it was about recognizing the need to accommodate the evolution in the communications market and innovate alongside it.
Anyone who has followed Sangoma over the years knows it has traditionally not been one to make more than a few product announcements each year. With its new strategy, that is set to change, along with a major move into new geographies. Wignall says Sangoma plans to launch six to ten new products each year, along with putting people on the ground locally to serve customers in Latin America, Europe and the Middle East, and Asia.
For the market, the change is already apparent, with Sangoma having met all five of its launch targets for the second half of 2011, including the integration of the VegaStream gateways into its own product line – they were relaunched globally in December as the Vega gateway suite. Importantly, Sangoma is not moving away from the board business that has been its bread and butter for so many years. Rather, this signifies a new era for the company as a multi-product vendor.
The Vega appliances perform much of the same functions as the traditional boards, playing to Sangoma’s strength in helping customers bridge different networks or different places in a network, whether that requires TDM-to-SIP conversion, SS7 signaling, media servers, or other network interoperability requirements. But, the expanded product set allows Sangoma to follow its strategy to new customer acquisition, including expanding its relationships with the carrier market.
Service providers have a real need to quickly introduce new services to subscribers. Those services, including SIP trunking and cloud-based services, often require equipment to be installed on customer premises. Rather than building solutions to enable that connectivity, it is much easier and cost effective – especially when considering the impact on time to market – to seek complete solutions with proven interoperability to third-party vendor equipment in the carrier network.
“That was one of the primary motivators from going from boards to boards and appliances,” says Wignall. “Some clients want boards for perfectly good reasons, and others want gateways for equally good reasons – we should have both.”
That philosophy also applies to the broader question of IP migration. The business market is rapidly investing in IP technologies, some undertaking full-scale forklifts to all-IP infrastructures, and others developing migration roadmaps that will allow them to transition at a pace that meets their fiscal and operations needs.
Does customer strategy make a difference to Sangoma? Yes, but not because it prefers one over the other or because it has products to support one and not the other. Rather, the difference is which of its expanding product line will be best suited for individual customer strategies.
Businesses making transitional migrations to IP will need products that support and interconnect both TDM and IP; those making a wholesale swap need don’t need the TDM capabilities. Sangoma will continue to develop products that that target both strategies, helping drive the global migration to IP.
But the migration to IP is not going to happen overnight and even with the FCC having opened discussion on ending the PSTN, many businesses are still as many as ten years away, perhaps more, if the can put it off. Whether 2018 ends up being anywhere close to when we ultimately see the end of the PSTN remains to be seen, but odds are against it. Consider how long the migration to digital TV took, even with the motivation of being able to repurpose the spectrum, an issue that doesn’t exist with existing copper and cable.
Still, with its already growing product set, Sangoma has already made significant steps towards ensuring its stability well beyond the end of the PSTN.
Furthermore, the end of the PSTN, in fact, presents yet another opportunity for Sangoma. Just as the digital TV transition is still hardly complete – there are many analog TVs still being used and digital converters on the shelves at retailers – even when the PSTN becomes a part of history, there will still be a very significant amount of TDM infrastructure in place.
While there are many great reasons for businesses to make the transition to IP, there are equally good reasons for delaying, not the least of which are a desire to maximize ROI on existing equipment and the convenience of familiar equipment – as well as multi-nationals that have infrastructure in multiple geographies, some of which may go all-IP before the US, and others that will be well behind.
This brings new opportunities for Sangoma that play directly into its redefined strategy of identifying macro trends and developing based on customer needs in the wake of those emerging trends. There will be a demand for backwards compatibility between existing legacy infrastructure, currently connected to the PSTN, and next generation IP networks, which will allow Sangoma to leverage its existing technology to extend the value of its customers’ legacy investments well beyond the end of TDM networks globally.
The Big Picture
The end of the PSTN is still in the distant future, but other trends, including cloud computing and mobility, are becoming integral parts of the global communications infrastructure that will continue to drive product roadmaps for vendors globally.
With its transition from purely a board vendor, Sangoma has already begun diversifying its portfolio to help its customers easily take advantage of cloud infrastructures. Still, cloud is only part of Sangoma’s overall strategy, which is fundamentally designed not to focus on any single technology, but to build products to support the multiple and varied needs of an expanding global customer base.
As rapidly as the cloud phenomenon has grown, it is still in its infancy, and the greatest challenge remains a lack of understanding about how to effectively leverage it. The selling points of cloud typically revolve around cost savings and ease of management, but getting to that point is largely a mystery to businesses.
“What we hear most often from our customers is that cloud is supposed to make things easier and cheaper, but it seems hard to get it working,” says Wignall. “Solving that by isolating them from the complexity so they can enjoy the benefits is one of the things setting Sangoma apart.”
Cloud connectivity is merely an extension of Sangoma’s core competency in bridging networks and services. If one of those networks or services involves the cloud, it sees that as an opportunity to further enhance its product line by eliminating the complexities of connecting existing infrastructure to the cloud.
Cloud is important but, to Sangoma, it is no more important that the other key product needs it has identified as being critical for supporting its customers’ communications needs. As a company that excels in connecting different technologies, cloud is an obvious growth area, but it ultimately becomes just another part of its broad product capabilities.
“That’s what Sangoma is good at – translating these macro industry trends into specific products that will help our customers build their businesses,” explains Wignall. “Cloud and mobility are two of those macro trends.”
What’s the ROI?
While Sangoma’s core competencies haven’t changed, its new corporate initiatives are geared towards leveraging those strengths to drive it into new markets, both in terms of product and geography. Is it working?
As a public company, the proof is in the numbers. Through FY2011, Sangoma grew by 30 percent, with an additional 20 percent growth in Q1 2012. The simple answer, based on the numbers, it is.
But, according to Wignall, that’s only part of the picture. While customers may look at the numbers for assurance that Sangoma is fiscally stable, they are more interested in product and, more importantly, new products that will help them. Sangoma’s aggressive product roadmap and expansion into new global markets to support customers locally with its own staff and new distribution partners has the promise of continued success.
“The successes of the last year have created more ambition and confidence and accelerated product release plans and expectations for growth,” concludes Wignall. “It has created an energy that will help Sangoma continue to redefine VoIP gateways.”Erik Linask (News - Alert) is Group Editorial Director of TMC, which brings news and compelling feature articles, podcasts, and videos to 2,000,000 visitors each month. To see more of his articles, please visit his columnist page. Follow Erik on Twitter (News - Alert) @elinask.
Edited by Stefania Viscusi