Ever get a cell phone bill in the mail that felt a little heavy? An estimated one in six mobile users know the feeling of a bill that is a lot larger than they expected. The phenomenon is so common that the US Federal Government has gotten involved. The Cell Phone Bill Shock Act of 2010 would require carriers to notify customers by email or text message, free of charge, when they have used 80 percent of their monthly limits. Of course, in order to notify you that you have hit this mark the carrier itself has to be aware of it. Redknee’s (TSX:RKN) billing solutions run the gamut from the customer side to helping service providers better monitor, understand and monetize their subscriber base. Founded in the solarium of Lucas Skoczkowski’s apartment in 1999, Redknee now does more than $50 million in revenue annually and boasts clients such as Microsoft and Cisco. Cantech Letter talked to Scoczkowski about an eventful decade plus for the company he founded and still leads.
Lucas, Redknee celebrated its tenth anniversary in 2009. You have gone from famously launching the company in the solarium of your apartment to over $50 million in revenue. I look at a lot of tech companies and normally by about halfway through this process the founder, who is usually the “techie” guy is long gone and replaced by a slicker guy with a more expensive suit. How is that you followed it all the way through?
I remain as a CEO-in-learning, and continue to enjoy working with very smart people both within our organization, as well as with our customers, partners and investors. I still have a great deal to learn and remain very motivated by the journey we’ve traveled so far, and even more excited about the journey we will travel moving forward. I have been able to continue at the helm of Redknee thanks largely to my team, the support of our Board of Directors and all my mentors & personal exec coach. I believe in winning, and not necessarily being right, which translates for me into continuous improvement, continuous learning, while failing quickly & cheaply, and making new decisions based on information learned. Lastly, you can only remain in this position if you are enjoying it and staying positive, which I have been on both counts.
Can you walk our readers through where Redknee was when it began and how the company is different today, if at all?
Redknee continues to evolve, as you would expect for a technology-oriented company, and I believe we are only getting better with every quarter passing. We started as a product/technology oriented company; over 80% of our employees were in R&D and our focus was on patents and breaking new ground. Today, while we continue to enhance and broaden our technology capability, our focus is to translate our technology leadership into market leadership. Thus, our sales, marketing and services organizations have grown quite significantly. We no longer sell technology modules, today we focus on business propositions that create value for our customers. We are more engaged with partners (e.g. Microsoft, CGI, Cisco, etc) to help deliver more significant business value to our customers. We are also maturing in terms of how we manage and how we drive our business forward. What has not changed is our level of engagement, our passion, and our drive to become a significant player in the real-time monetization space.
There seems to be a bit of a scene emerging with wireless in Canada. The shares of companies such as DragonWave, Bridgewater, and Redknee have been some of the top performers of late. Two part question: Do you see these companies as peers or part of a new wireless “movement” in Canada? And second, where do you fit in this “stack”?
I think Canada has a lot to be proud of in both wireless and next generation technologies. At the same time, I do believe that Canadian companies could be doing more globally, only if our Canadian customers would be more supportive locally (other countries like Israel come to mind in supporting local suppliers). With regards to the “stack”, we sit on the business side of the stack, whereas other companies are positioned either within the software infrastructure or actual traffic carrying part of the network – all companies are very complementary and are world-class. Our longer term ambition has always been to see telecom as a significant part of our business, but the real-time complex problems we solve in wireless will be very applicable to adjacent markets (such as utilities, smart-grids, toll roads, health care, logistics, etc).
I talked to one analyst recently who suggested to me that Redknee is hitting the sweetest of sweet spots right now; a cloud based billing solution. Are you seeing your partner carriers monetize things that excite you? Are we close to seeing sites like YouTube, Facebook, Twitter and the like have seamless monetization?
I do believe that a cloud offering will transform some of the larger carriers quite significantly over the next 3+ years, and we today support some of our customers from one centralized location across 17+ countries. We are engaged with customers to leverage real-time monetization to their customers’ business e.g. bill for electricity, water, sewage through carrier’s system, while leveraging the carrier’s cash collection capability. I think Google is ahead on monetization, while Facebook and Twitter are evolving rapidly.
What about the pre-paid market? It seems that more and more, cell phones are becoming a consumable item. I’ve even read that the pre-paid market is growing by leaps and bounds in the US. How, do you think, does Redknee stand to benefit from this?
The pre-paid market has been the largest market globally, and over the past two years has grown quite significantly in the US. We have cross-licensed patents for the US market and have won the fastest growing Mobile Virtual Network Operator (MVNO) on Sprint’s network thanks to our business value proposition that has unmatched technology and flexibility. We help our customers drive improved EBITDA margins from all their subscriber segments, especially for prepaid. Our customers used to buy two distinct systems: postpaid billing system and a separate prepaid system – Redknee offers one truly-converged platform that our customers can use for all their subscribers (both prepaid and postpaid) and can now mix prepaid data with postpaid voice as an example. We have helped our customers increase their prepaid usage by 30% as compared to the competition, drive subscriber churn down by 25%+ and lower the total cost of ownership significantly. We expect that the prepaid model will continue to drive real-time technologies in both communication and content, and also in adjacent markets. We have expanded the use of our real-time monetization platform now to logistics, banking and loyalty companies.
You’ve made sales all over the world. Is there a geographic area you are concentrating on or value more than the others?
Our focus has been on customer type: Tier-1’s (ATT, Sprint, Optus, etc) and Global Group Operators (Telefonica/O2 Group, Vodafone Group, Orange Group, KPN, Singtel Group etc). This has resulted in Redknee having a global footprint. We continue to see opportunities in North America (both in US and Canada), as well as growth opportunities in Asia Pacific and in the broader EMEA (Europe Middle East and Africa) region. We are also focused on entering and winning new customers in Latin America in 2012 and beyond.
Do you think the monetization of the social web will be a watershed moment? A few months ago Google put more than $100 million in Zynga, who created Farmville, of all things.. Where is all this going?
Monetization is the key to supporting both the investments and some of the valuation in the social web sphere, but it is also very much required by more legacy players (utilities, loyalty, health networks, etc) where dynamic, real-time, and multi-vector valuation and settlement of transactions is becoming increasingly necessary. Social media is putting a lot of pressure on all businesses to evolve, and that also involves monetization systems in those businesses. We are very excited, although it is an overnight success that is 20 plus years in the making.
A little off topic to end things: You’re a University of Waterloo grad. How proud are you of what has gone on there in the past decade and half, and how large do you think the impact of having such a successful tech cluster develop can be to Ontario or even to Canada in general?
The University of Waterloo and surrounding community has been excellent as a hub for both pure and commercial research. I am now part of The University of Waterloo Engineering Dean’s Development Council in service of supporting expansion of Engineering facilities there. I recently had an opportunity to tour the Engineering 5 building, with its team-oriented workspaces, state of the art infrastructure (for all faculties + video presence capability to link with other universities from around the world), so I expect a lot more in the future from this great institution and its graduates.