innovation nation: metaswitch

Upwardly mobileFor 30 years Metaswitch has followed technological changes in the telecoms sector. It’s now looking to make significant gains from current upheaval. By Pip Brooking

metaswitch at a glance» established

1981» headquarters

enfield, london

» employees

600 » turnover

£82m

the rapid growth of the mobile internet has

sparked massive upheaval in the telecoms industry,

forcing business models to change. While the global

fixed-line and mobile voice industry is worth $1tn to

telecoms operators, the average length of calls has

gone down from three minutes to just 90 seconds.

Software solutions specialist Metaswitch is

attempting to benefit from these shifts. The company,

founded and headquartered in Enfield, London,

focuses on voice over internet technology, which helps

enable services such as Skype. To capitalise on the

growth opportunities this offers, its chief executive

Kevin DeNuccio is steering Metaswitch through the

second major transformation in its history.

“For the first 20 years the business built very

complicated internet software for other telecom

equipment manufacturers. We’re probably in every

telecoms network in the world,” he explains. “Then

ten years ago when the dotcom and telecom bust

hit, we made a decision to start building our own

systems – essentially specialised computers that

allow voice to work over the internet – to sell

directly to the carriers.”

That led to business revenue being concentrated

in North America, as it is the largest homogeneous

market that Metaswitch could penetrate by selling

the same product to different carriers. It meant the

company could keep a closer eye on smartphone

developments in Silicon Valley and attract investment

from the likes of venture capitalists Sequoia and

Francisco Partners, which it secured in 2008.

The company’s new mantra is “global and

mobile” and it’s opening up in a different country on

a monthly basis. The scale of the opportunity can be

seen when you compare the first wave of the

internet, which had up to 1.5 billion users, with the

2.5 billion already using mobile internet. DeNuccio

believes that will extend to “virtually everybody on

the planet in the next few years”.

Such rapid development brings problems,

however. DeNuccio points to security concerns that

we won’t have experienced before in the way a

phone works.

“If we’re doing everything over the internet,

including our voice calls and text messaging, it is

exposed to attack just like the internet,” he explains.

He believes Metaswitch has both the technology

and the expertise to tackle this.

A rich experienceDespite its Silicon Valley connections, Metaswitch’s

research and development capability is still firmly

rooted in the UK, where the company has ranked

in the top 15 of the The Sunday Times 100 Best

Companies to Work For for the past eight years.

To ensure the company remains on top of trends,

it invests a third of its revenues into R&D.

Metaswitch’s strong financial performance – it has

achieved profitability in every year of its existence –

has supported this investment. It also invests heavily

in its employees – and, as the company is 40 per cent

owned by them, they share in its financial success.

DeNuccio believes it is very motivational to be

part of how people’s communication is changing.

And last year, Metaswitch won a Queen’s Award for

Innovation for its Metasphere application server –

a platform used to deliver the new breed of

broadband-enabled telephone services.

The company’s latest product, Thrutu, is an app

which has been created by a small R&D team from

London in partnership with a group of the company’s

Silicon Valley engineers. When the tool is downloaded

by two people making a phone call, a set of icons

appear on the screen, providing a way for them to

share contact information, pictures, videos or even

their location during their call. “It makes that call a

much richer experience than it has been in the past,

and keeps them on the phone longer, which helps

carriers transition to a new model as they try to get

consumers to use more minutes,” he adds.

DeNuccio values agility over all other business

qualities. The Silicon Valley investment was the

company’s first step away from self-funding and it is

now planning an IPO in the next 24 months.

He is more than aware that with every industry

upheaval, structures will change and new

competitors will emerge. “We don’t necessarily

know who those winners are going to be yet, but we

intend to be one of them,” he says.

“I always say to people that this company was built

to last. But what we’re doing now is making sure

that it’s also built for change.”

BUSINESSVOICE I April 2011 49