Openet secures major deal with AT&T

Irish telecommunications software company Openet Telecom will create 200 jobs following an eight-figure deal with US telecommunications giant AT&T. Bankers JP Morgan say it is the largest deal of its kind.

The company, which is also completing a £10 million to £15 million (P12.7 million to P19.05 million) second round of funding, will add employees in the Republic, Europe and the US, including an engineering laboratory in Hungary, by 2002.

In 2000, Openet experienced 1,000 per cent growth and will be profitable - although just - this year.

Openet makes "mediation" software that enables large communications service providers - primarily telecommunications operators - to analyse their networks, and identify and bill customers on the basis of services and usage, rather than time and distance.

The software, called FusionWorks, capitalises on the increasing convergence of voice and data networks, and the need for operators to move towards services rather than rely on voice networks for revenue.

According to chief executive Mr Barry Murphy, a former head of the National Software Directorate, a Lehmann Brothers report recently ranked Openet among the top players in its sector.

The company hopes the flagship deal with AT&T will help propel it to market-leader status in the next two years.

"Certainly we're building the company with an IPO in mind," Mr Murphy says. Such a move is likely within the next 12 months.

He refers to Openet as "an experienced start-up" because it was assembled with a management team of software and telecommunications industry veterans. "All senior management was selected in advance," he says. The company, founded and chaired by Mr Declan Conway, has kept a low profile since its launch in July 1999, although it had a product engineered by September of that year and its first customer in October.

In December 1999, Openet received £2 million in seed funding from Cross Atlantic Channel Partners and last year the company provided the billing system for Esat Business. But Mr Murphy says Openet's market is primarily Europe, the largest telecommunications market, and the United States - the Republic has few potential customers of the right size. Asia, a developing market, is expected to make up 20 per cent of Openet's revenue within a few years.

He also recognises that mediation software has, to date, not been one of the more high-profile software sectors.

"This was the most unsexy part of telecommunications for a long time," he says. However, convergent mediation is one of the fastest-growing areas. Analysts predict it will be a $4 billion to $5 billion market by 2003 as operators watch voice revenue decline and hurry to offer new data services.

Openet's software lets operators quickly add in, and start billing for, new services. Because it serves as a layer between the network and the customer, FusionWorks also captures data about how networks are being used, which can assist customer relationship management or the development of new service offerings.

"The bane of a telco's life is they want to introduce a new service and the IT department says it will be six to nine months, while their competitor is making hay with the same product," says Mr Murphy. As networks progress from old-style circuits towards moving information using Internet protocol (IP) via small, efficient "packets" that scatter across networks and reassemble at their destination, data analysis will also become a vital part of network management.

"The data's not contained in one place like a [circuit] switch, where you can grab it. It's spread through the network", requiring software that can find and interpret it, says Mr Murphy.

The company has won clients such as telecommunications operator GTS, but the AT&T contract, expected to be worth eight figures over three years, marks Openet as a serious player to the world market.

Openet's software will replace the existing system AT&T uses for managing its wireless services, which have some 12 million subscribers.

The company got the contract after going through an extensive due-diligence process, which narrowed the prospective field from an initial shortlist of eight companies down to four. The competitors were then given two weeks in which to come up with solutions for 30 potential network scenarios. During each company's presentation, engineers had an additional scenario thrown at them, says Mr Murphy.

Openet was the only company to successfully handle all 30 scenarios and resolved the on-the-fly scenario in under 30 minutes, he says.

"We were the smallest company, and the only European-based company," he said, still sounding slightly incredulous with the win.

"I suppose in our hearts and souls, we didn't expect to have a customer this large so quickly."

Openet has 80 employees - double last year - and expects to have 280, with 200 in Dublin, by the end of 2001. About 40 will be based in Hungary - all engineers who can roll out the product for customers - and the remainder will be in the US, where Openet has a San Francisco office.

Mr Murphy says Openet decided on the Hungarian operation because of the shortage of engineers in the Republic and the "can do" attitude of the Hungarians. Research and development will remain here.

Mr Murphy was previously head of the National Software Directorate for five years and chief executive of high-tech investment firm the Cullinane Group.

In the 1980s, he was managing director of Irish software company Insight Software, which was acquired by Hoskyns (now Cap Gemini).