George Hallenbeck

Anyone thinking about penning a book titled “Telecom Business Plans for Dummies” would do well to include a chapter that discusses the merits of creating a product that lets customers fulfill a government mandate while taking a leadership role in developing the standards that will govern the whole area.

In effect, that's what Evolving Systems did in 1996 when it decided — after 10 years of producing software for operations support systems and wireless data applications — to enter the local number portability space. Now, the company hopes to repeat its success in the presence and availability management arena.

While Evolving Systems has achieved some notoriety in both the OSS and wireless data markets with its software solutions, its activity in the LNP space is its claim to fame, says George Hallenbeck, CEO.

“We've been involved in LNP since the beginning and participated in the development of the specs, and these are the products that really transformed our company,” he says. Those products are used by many of the largest carriers, and more than 60% of the ILEC reporting activity that occurs in the U.S. goes through Evolving Systems' software, he says.

Being first helped Evolving Systems quickly build a solid position in the marketplace, but it was the company's vision to enter the LNP space — driven by the realization that carriers were left with little choice by FCC mandates when it came to number portability — that laid the foundation, adds Hallenbeck.

“If you're a telephone company, you can't say, ‘Well, we gotta cut back someplace, so why don't we get rid of local number portability?’ That doesn't work,” Hallenbeck says. “So I think our LNP business is as solid as any business can be.”

As if to validate Hallenbeck's statement, Evolving Systems posted a 20% increase in net income for first quarter 2001 compared with the previous year. Most of the credit went to the LNP line, which generated 53% more sales than in first quarter 2000.

But the success has not translated in strong stock performance during the past year. Per-share value has plunged over the past 18 months, from $14.75 in February 2000 to less than $4 in April.

Hallenbeck believes an FCC mandate on wireless number portability is coming soon and that Evolving Systems will be ready to pounce — and cash in — when it does.

“As we move into wireless local number portability, we expect to have a significant portion of that business because we're moving towards a recurring revenue model where we will be compensated for the wireless LNP transactions,” Hallenbeck says.

Essentially, Evolving Systems is trying to become a service provider instead of a software licensor. Hallenbeck thinks this will work particularly well in the wireless space, given that market's enormous churn.

Jim Ross, Evolving Systems' president and chief operating officer, acknowledges that some customers may not embrace the service-bureau concept, but he maintains that it allows the company to nimbly meet the needs of its customers — both current and potential.

“Historically, our large clients would want to control their own destiny and buy licenses,” Ross says. “As you enter wireless, the history of this market is to outsource a lot of functions. So the concept of service bureau is not a new model.”

As Evolving Systems begins its transition to service provider, Hallenbeck believes now is a good time to enter the PAM space. The company's products let carriers offer customers the ability to control how, when and from whom they will receive communications while maintaining privacy control.

But Megan Gurley, an analyst with The Yankee Group, isn't convinced the world is ready for PAM.

“Technologically, there are no real barriers to it, but culturally, people really don't want anyone looking over their shoulder yet,” Gurley says. “They still kind of think ‘Big Brother’ when they think about that kind of stuff, and that just hasn't gone away. And there haven't been any real compelling applications that have brought people beyond that inclination.”

However, Bill Hills, an analyst with the Aberdeen Group, believes PAM can change such attitudes after privacy concerns dissipate. “The advantages of having your messaging preferences — and maybe transactional preferences and other information — available to whichever device you're using to access or send messages are so strong that, for most people, they're going to outweigh what will turn out to be a very low security risk,” he says.

That's good news for carriers, which need new service offerings that provide better margins than traditional products, Hills says.

“PAM is personalized, and the customer has invested in the service enough that they will not want to switch from carrier to carrier. You want the service to be fat, sticky and addictive. The thing that is good about personal communication services is that you go to them all the time.”

Evolving introduced its first PAM product in the first quarter. OMNIpresence Server is a software application designed to store users' communications preferences and information about their personal communication devices.

With PAM, users “will be able to choose which communications devices — such as cell, office or home phones, or various wired and wireless Internet connections — they want to receive calls or messages on,” Hallenbeck says.

Hallenbeck heads the PAM standards group and hopes Evolving Systems' involvement in the process will help the company as much in this arena as it does in the LNP space.

“This strategic position is very similar to the one we occupied five years ago when Evolving Systems helped create the LNP industry standards,” he says. “If PAM follows the same path as LNP, it could be one of our strongest growth drivers over the next few years.”