By William Fellows
Internet billing specialist Portal Software Inc says Lucent Technologies’ $1.48bn acquisition of rival billing house Kenan Systems Corp was the best thing that could have happened to it. Lucent took Kenan out of the market, said Portal president and CEO John Little. He said it was this act which promoted Lucent’s arch rival Cisco Systems Inc to assess what its own billing software strategy should be. Cisco, which shines a torch for the open systems model pursued by Sun Microsystems Inc, decided it should follow this route rather than the type of lock-in solution the Lucent/Kenan combination will provide.
As a result, Cisco spent $39m on 3 million of Portal’s recently IPO’d shares (4.8%) at $13 each – a snip given it’s now trading at over $44 – and is using Portal as its strategic billing software. But it expects Portal to continue developing its software for other platforms and forming other partnerships as well.
Little says Portal expects to make money not simply through the convergence of IP, data and voice networks – it doesn’t do telephone billing – but mainly by supporting new advanced services. Its billing software can track every customer action and analyze behavior either through its own reporting software or by using a range of third party applications. The service providers are battling over business models, not technology, Little believes, which plays right into Portal’s hand.
The 14 year-old Cupertino, California company is now on its fifth generation of software and believes its long term future is well assured. It doesn’t want to be traded like an internet stock and is happy institutions which make long-term bets are its key investors. It raised its first venture capital just three years ago and says it has deliberately tried to keep below the radar screens trained on the internet economy. Little likens Portal’s experience in the internet market to the days of the Wild West. Few could name a gold mine or gold miner but most everyone knows the infrastructure service companies which sprung up around it because they are still in existence today, such as Hearst, Levis Strauss and Wells Fargo.
Portal will continue to focus on the high-end ISP market and expects voice over IP to become increasingly important for it. But to keep ahead of the game it will, Little says, make every effort to get into pre-revenue companies to learn new IP business models. The European ‘free ISPs’ are using its software to track customer activity even though they don’t issue bills to their customers. They will be selling other kinds of services to these same subscribers.
Take MP3, he says. E-commerce companies are going to offer consumers every conceivable way of purchasing music; by song, per week, by download size, via promotions and so on. Moreover every company is going to move some services to the internet, and they are all going to need billing software. Portal will enable any traffic to be defined as a billable event.
As well as developing its customer billing software for use in specific vertical industries Portal expects to build out its coalition sales model by striking additional partnerships with technology suppliers who will sell its software with their infrastructure products.
