Buying Pieces to Complete the VoIP Puzzle

Seeing powerful synergies between the two organizations, VoIP Inc. last week consummated a deal to acquire the Caerus family of telecom related technology companies.

By Adam Stone | Posted Jun 9, 2005
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As the race heats up to deliver diverse, reliable services using Voice over IP technology, one CEO says his firm's latest acquisition could allow it to leapfrog the competition

"It would have cost us $12 to $15 million to go and develop these capabilities, assuming we were even successful in doing that," said Steven Ivester, who heads up the publicly held products-and-solutions provider VoIP Inc.

VoIP Inc. on June 2 announced that it had acquired Caerus Inc. and that company's wholly owned subsidiaries, Volo Communications, Caerus Networks and Caerus Billing. The buy helps to round out VoIP Inc.'s existing business lines, which include a broadband communications company, a wireless-network design and installation service, and a business line offering software, hardware and project management services to Internet telephony service providers.

The acquisition gives VoIP Inc. two significant new technological capabilities, Ivester said, the first being integration of IP telephony into existing telephone switches, and the second being a fast track toward the development of revenue-enhancing features and services.

"One day in the near future the Voice over IP in your home is going to be free, and it's the features you are going to pay for, features that add value to your life on a daily basis," he said. "With this in mind we are sitting down and evaluating new types of features, some of which we will be announcing in the next few months, features that will be adding that value to the customers."

Caerus and its subsidiaries already were hard at work developing such features at the time VoIP Inc. stepped in. Even more significantly, some would say, Caerus developers have been pushing hard to bridge the great divide between VoIP and existing telephone network switches.

"If you look at how companies are building VoIP networks, those networks are layered on top of the public switch telephone solutions. That is a short term solution," said Shawn Lewis, CTO of Caerus subsidiary Volo Communications. The problem, he said, is that a layered solution can easily generate quality-of-service issues.

"For VoIP to truly succeed, you need a solution that is integrated into the public telephone networks, not layered on top of those networks. Your solution needs to interoperate with those networks as equals."

During the past year Caerus has been rolling out just such a solution, one that is both integrated and also independent of protocol, an issue that has been a sticking point in the effort to integrate networks.

By teaming with VoIP Inc., Lewis said, his firm will have access to greater research resources as well as added marketing muscle.

Analysts say the growth-by-acquisition strategy may be just the right move for a firm like VoIP Inc. at this time.

"Unlike a direct service provider like Vonage, VoIP Inc. is more a consortium, an umbrella company of a lot of different businesses," said Joe Laszlo, research director at Jupiter Research. As VoIP Inc. looks to expand its portfolio of offerings, "adding [Caerus] is definitely another important piece in their overall stable of companies."

Ivester meanwhile is adamant is his belief that the ability to integrate networks is going to be a deciding factor among VoIP providers. It's also a capability providers won't be able to develop in house, thus giving his firm an advantageous place in the fast-moving market.

"If you take a look at Voice over IP technology, if you look at the playing field, AT&T came out very strong a year and a half ago, but you really have not heard a lot of them in the last several months" due to various technological setbacks, he said. "And the only reason you hear about Vonage is because they have been here the longest, but they don't really represent what VoIP technology is about these days."

The leading players may have crafted workable networks, but those networks aren't wisely contrived or especially durable, he insisted. Integration has to happen in order to take advantage of VoIP's full potential, "and it's not like you can go get a telecom guy who has been in the business for 25 years to just come around and build that."

Lesson learned? To hear Ivester and Lewis tell it, the time is ripe for third-party players to get in with their products and services.

"Telephone companies in general don't understand technology; they deploy services," Lewis said. "At the same time, technology companies are not service providers. Now it's a new day and you need to be both in order to succeed." It's up to the third parties to deliver those capabilities, he said.

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