Continuing the series of Computer Business Review’s profiles of Europe’s high flyers we look at the prospects for Aetheos Communications Systems.
The strategy behind the launch of Aethos Communications Systems Inc is straight out of a business school textbook – identify a gap in the market and exploit. In Aethos’ case, the market is the booming telecommunications sector and the niche is the design, development and deployment of differentiated network services. The inspiration for Aethos, founded in 1993 by Dave Edwards and Richard Russell, came while both men were working for Orange Plc, a UK-based mobile phone network operator. Edwards, Orange’s engineering manager, had been given the task of developing a range of value add services for the company’s network, such as personalized call control, to help the company differentiate its products and win customers. But, when he approached the telecommunications equipment systems suppliers asking for help, the response was rather mute. Edwards was told that, because of overwhelming demand for general telecoms equipment, he faced a lengthy wait. This, coupled with the fact that the US government was selling off chunks of radio spectrum across the US, creating an army of operators clamoring to offer differentiated services, convinced Edwards and Russell there was significant opportunities.
Joint consulting outfit
They quit Orange and, using their own funds, set up a joint consulting outfit to aid other telecoms providers to implement value-added options, with the longer-term aim of developing products. Within a year, the company had grown to 20 employees with customers both sides of the Atlantic. The profits made from those consulting projects helped Edwards and Russell fund some early product development. Then, in October 1995, they decided to expedite the process by going outside for a cash injection. In March 1996, the venture capital companies Atlas Ventures and Quester put up 1m pounds in exchange for a minority interest in the company. Using that money, Aethos has developed two core products which it now offers alongside its consulting services – Service Node, an advanced services delivery platform which allows network operators to supply subscribers with value-added services without making major modifications to their network, and the Odyssey radio planning system, which Aethos describes as ‘the most advanced cellular radio engineering system available’. It has also developed a fraud management system, to help network operators detect and react to fraudulent network use, and a number of other off-the-shelf value-added services offerings. The uptake of those products helped Aethos increase revenues by 100% for the financial year to March 1997, to 7.5m pounds. It was the third year of 100% growth and, according to Dave Lawson the company’s director of marketing, Aethos has never made a loss. For 1998, he is predicting revenues of 11m pounds, a growth of close on 50%. As the market matures, however, Aethos looks set to face some increasingly strong competition. Venture capitalists say that the new, specialist telecoms suppliers are springing up continually, lured by the overwhelming volume of business, and the large incumbent suppliers are now starting to take the area of value added services much more seriously. Aethos, which now employees around 70 people across the UK and US, believes that its dual consulting and product offerings put it in a unique position. We hit the market at the right time, says Lawson.
