iLocus Interview with Konstantin Nikashov, CEO, MERA Systems
November 3, 2005
Basharat H Ashai, Researcher, iLocus: You have been getting nearly half your revenue from European and East European market. What factors, apart from the market downturn, have held the deployment of softswitch solutions in this region in the past and what factors have speeded up the deployment recently?
Konstantin Nikashov, CEO, MERA Systems: As in other parts of the world, most of the carriers in this region have changed their business model from selling minutes to the customers to selling services to customers, and in general softswitch will allow much faster deployment of new services in their network. Carriers compare not only price and performance but also delivery time. The time to market is much more crucial than ever before. This leads to increased sales of softswitch as they are all based on open standards and it is much easier to write new applications than on traditional PSTN switches.
Basharat H Ashai: What is your recipe for competing with the likes of Sonus and Veraz, for instance, in your market?
Konstantin Nikashov: Both Sonus and Veraz are much larger companies than Mera. But carriers are very sensitive to time-to-market and we believe that being able to customize our solutions to carrier needs much faster than Sonus and Veraz gives us some advantage in the market. In most cases we are able to compete with much larger vendors. I also believe that we are providing better customer service. Another advantage of our solution is that you get a free demo. Anyone can download the limited version of our software from the website. This allows tier 2 and tier 3 carriers to test our solution before making any commitments. The demo is for our Class 4 softswitch, which is basically SBC with elements of Class 4 softswitch. It allows 90 calls per installation before buying the software. In most cases it is more than enough. We also have a demo of our service platform which is closer to Class 5 softswitch.
Basharat H Ashai: And how to compete with the Chinese vendors such as Huawei and ZTE that are offering solutions for a very low price?
Konstantin Nikashov: Chinese threat is very serious. We also feel strong competition from Chinese companies. They are basically offering same solutions at a lower price. Introducing new features, being more active in development, and investing more into the development of new products is the only way to compete with Chinese manufacturers. I think the quality of their product is quite good and price is almost half of the price of North American vendors. However, in general, what we see is that as of today they are a little bit behind in terms of technology. They are not the leaders in the market.
Basharat H Ashai: Among the independent softswitch vendors - not including large telecom manufacturers like Nortel and Alcatel - who do you think has a good solution?
Konstantin Nikashov: I think Broadsoft is the leader in this area. Their solution is most flexible. Broadsoft is in a very good position to become number one 'softswitch' vendor.
Basharat H Ashai: Your traditional marketplace has been CIS. What is your strategy in terms of geographic focus going forward?
Konstantin Nikashov: We were founded in Russia and we just moved the headquarters of the company to Canada four years ago. We think that we understand needs of East European and CIS carriers better than anybody else. We invest most of our marketing money in this part of the world. For North America, it seems we were little bit late in this market. SBC and softswitch market is pretty much established here. We are doing our best to have our slice of the pie. Probably it will be not be that significant as in the EMEA market.
Basharat H Ashai: Are there any major OEM partnerships you have established so far?
Konstantin Nikashov: Actually it is quite hard for me to answer this question. Now I am in the middle of negotiations with a large international company, which is going to sell our solution under their brand name. I am bound by NDA. This will be the first OEM relationship and the vendor is an international player. We expect the deal to be closed before the end of the year.
Basharat H Ashai: You market your solution as Session Controller and an SBC. Is that done consciously in order to present yourselves as IMS compliant?
Konstantin Nikashov: The feedback we had from our carrier customers was that they did not need all the new functionalities put into the softswitch. We developed the new features they asked for, and introduced it to the market in early 2001. The term session controller appeared little bit later and it just happened that the functionality that we are having in our softswitch - and we still call it MVTS(Mera Voice Transit Softswitch) - is exactly the way as SBC is defined in IMS. It just happened that way. We did not do it on purpose just to be IMS compliant. IMS architecture seems to be quite successful especially when a deployment of 3G and 4G networks will take place.
Basharat H Ashai: What are the prospects of a SBC player doing an IPO?
Konstantin Nikashov: I believe doing IPO with SBC type of product today is little bit late as most of the big players in the market already have a product like that in their portfolio. We explored this option a couple of years ago but we have conceded that it is not suitable for us. In addition our major market is in Europe and Asia. So it does not make sense to do an IPO in North America.
Basharat H Ashai: Have you explored any acquisition options?
Konstantin Nikashov: We are negotiating different acquisition proposals from other companies. It would be a safer option to be acquired. We have several proposals on table, which we are discussing with the Board of Directors and with shareholders of the company. We have not made any decision so far.
Basharat H Ashai: If a major telecom company tomorrow acquires Mera, what kind of customer base, assets, and solutions do they get?
Konstantin Nikashov: I think they will get very high penetration in Russia and CIS countries. We are definitely number 1 vendor in this part of the world, which is still very attractive for the telecom industry. We also have our own proprietary technology of adding new features quite fast. As an example, two weeks ago there was a major event in Russia whereby we were required to set up ‘President’s Line’ that everybody could call in order to speak to Mr Putin. We were able to provide the complete solution to the carrier that was contracted by President’s administration to do that within one week. That shows how fast you can create new features with our platform.
Basharat H Ashai: What type of company would be ideally suited to acquire Mera?
Konstantin Nikashov: In my opinion it should be a softswitch centric company. We do not expect to be acquired by big players like Nortel or Alcatel. Companies such as Sonus or Broadsoft could be possible companies that could definitely benefit. We want to be acquired by a softswitch centric company rather than SBC centric company. We believe adding our SBC installation base to a good softswitch and having our services platform will be a much better combination.
This Interview can be found at the site of iLocus
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