Please enjoy the unedited Publisher's Outlook from the July 2007 issue of Internet Telephony Magazine.
One of the most colorful characters in the communications space has to be Iain Milnes the founder of Zarak and Zultys. Zarak sold to Spirent for hundreds of millions in stock just prior to the telecom meltdown and Zultys ended up being acquired after some financial troubles. Iain parted ways with Zultys a few months back and is already at it again.
Some people call him a legend in telecom and for sure he is multifaceted having launched successful companies in testing and the phone systems business.
In less than six months after leaving Zultys, Iain has a new company called Zed-3
and he is the President and majority owner. I had a chance to catch up with Iain at TMC’s Communications Developer Conference
. As the name Zed-3 suggests, this is his third company to start with the letter Z. The company will make phone systems and compete head to head with Zultys and the myriad other companies in the IP PBX space.
The differentiator will be the focus as Iain has relationships all over the world and he will be concentrating on markets like China, Vietnam and India. Zed-3 will be based in the US but Iain seems to thrive on traveling around the world and he is likely on an airplane as you read this.
At Zultys, Iain had a goal of building a $500 million dollar company and at Zed-3 he has revised it downward to $100 million and this is in part due to the cost of the company’s products which will be priced at one-third of what Zultys charged.
Iain believes that Zultys has ignored much of the channel and it should be pointed out Zultys currently tells me they also have strong relationships with the channel. The reality is probably both companies are correct to some degree as it is a big world out there.
At Zarak and Zultys, Iain personally got involved in building worldwide sales channels and as a result he is well entrenched in many countries and can get things done quickly. In fact speed is something Iain seems to be a master at leveraging.
For example, he has just launched a new IP PBX company in a few months. He didn’t start from scratch; he went to a company that OEMs product for many larger telecom equipment providers and purchased it. He then decided to brand some of the products as Zed-3 and in the cases where contracts do not allow rebranding he is able to use the new technology his company has developed to make ever new products.
The PBXs are all VoIP and SIP-based and there is a variant that scales to 30 and 150 users. Soon there will be a 500-user model. The model numbers are the SE30, SE150 and SE500 respectively. The low end VoIP phone will have a user price of $60. There is a mid-range phone as well which has the ability to display graphics and color is coming at the end of the year.
Some sign’s of Iain’s experience are captured in stories where tells you how in many countries it is illegal to use VoIP and subsequently you can’t import products which have the word “VoIP” written on them. “IP telephony” apparently is not flagged and products with such labels get right in.
His company has already installed systems in Bangladesh and China and in Dubai a system is in the process of being rolled out.
Having an established company behind him and relationships with the right people allows Zed-3 to have approvals in over 20 countries already which is an amazing feat. Iain tells a story of how his system was improved in a major country in a mere matter of days while a very large competitor had to wait over a year for the same approval.
When I look at Iain’s business model I am reminded of Cisco and how the company takes promising new companies, buys them and then makes the real money through the distribution of the company’s products worldwide. Granted the scale of the respective operations is quite different but the concept is the same… Leveraging the distribution channel. In addition to a communications equipment provider, Zed-3 is a distribution channel arbitrage play.
As you might imagine Iain thinks Zultys has the best technology around and others in the industry certainly credit the company with technology leadership. Iain thinks that offering 90% of the Zultys feature-set at 1/3 the price is the right formula for success and it is tough to disagree with such logic. In addition Iain says the call center products will have 100% of the Zultys features.
The company is far from a one-trick pony as it also OEMs phones which are resold as phones on corporate jets. The irony here is the same company is behind ultra-sophisticated and expensive retail equipment and this same technology will be built into extremely cost-effective phone systems around the world.
In addition Zed-3 has a SoftPhone client the CU3 which works with a memory stick device. The twist is the audio is embedded in the memory stick so you can plug the headset right into the stick and start speaking right away. This is especially useful for computers with no sound capability built in. The soft client also executes from the memory stick meaning there is nothing to install.
He says the CU3 was designed for a hotel and as such the NAT traversal has been worked out. NAT refers to network address translation and is responsible for assigning computers and devices behind a corporate firewall with local IP addresses which are converted to an external IP address and then back. Generally, NAT wreaks havoc on equipment not designed to deal with it. Iain mentioned at Zultys, NAT traversal is something they just never got right.
He said the hotel client he has gives away the sticks to frequent travelers with a certain amount of free long distance time. The only catch is you have to be staying at one of the company’s properties to use the card as it checks the IP address before calling.
This is a really interesting application and gets one thinking about all the extensions of such a business model in the world of VoIP. He tells me he is also in talks with ITSPs about this product and this makes a great deal of sense. The price of the stick is in the $35 range.
Finally there is a reverse 911 product which Iain thinks has strong homeland security potential. I am aware of other PBX companies such as Iwatsu who have also seen revenue increase from focusing on disaster preparedness solutions such as this.
In the end, Iain is probably one of the more dynamic people in our industry. He has always told it like it is and I respect him for doing so. He should be commended for having such a grand vision and the fact he has already begun execution on his latest plan in less than six months. Certainly the telecom market has tremendous opportunity left to be exploited and if Zed-3 can get a strong foothold in many developing parts of the works, Iain may be in the process of pulling off a true telecom entrepreneurial hat trick.
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