Gerard Rudisin

As it turns out, the customer isn't always right. About 18 months ago, NightFire caught a little flack for getting tossed out of a key account. A confident and, in retrospect, brash CLEC named NorthPoint Communications grew impatient with first generation back office solutions from NightFire and other vendors, so it switched vendors midstream.

“That was a year and a half ago and with a much earlier version of our product,” says Gerard Rudisin, president and CEO of NightFire. “And they went bankrupt, so good riddance. And by the way, they are the only one of the top five DSL providers who didn't use NightFire software.”

Coincidence? Maybe. But in a recent study by The Yankee Group, NightFire was ranked highest for enhanced and value-added services offered out of 10 interconnection companies. And NightFire claims to have been involved in approximately 40% of all local loop orders placed between competitive carriers and incumbents. It was the first vendor to be certified by all RBOCs for passing electronic loop orders.

And although it has turned out to be more trouble than it was worth, NightFire was one of the first companies to offer automatic pre-qualification through the Web.

To keep that momentum going with its primary customer base collapsing around it, NightFire has had to diversify. “Sixteen months ago, 100% of our business came from the DSL world from either pure DSL carriers or from ISPs reselling DSL,” Rudisin says. “This year, less than 25% of our business will be from DSL.” The rest of the company's business will come from fixed wireless, utility telecoms and long-distance carriers, according to Rudisin.

NightFire made 117% of its revenue target for first quarter 2001, due largely to those new markets. However, the vendor will not be abandoning its roots. “The valuation of the DSL carriers is pretty ugly, but on the other hand, they are turning on more customers each week,” Rudisin says. “They are still spending money with NightFire.”

The combination of revenue from new sources and a 22% cut in its work force in December helped the company realize its goal of becoming cash-flow positive in the first quarter.

Like other interconnection software companies, NightFire must retain enough talent to keep its high-maintenance software up to date. Therefore, most of its personnel cuts came in marketing and business development rather than engineering.

Changes will occur within NightFire's customer base as well, which Rudisin believes will be good news in the long run. “This slowdown is going to force consolidation among the carriers,” Rudisin says. “You end up with a smaller number of carriers, but it will be a smaller number of healthy carriers of all kinds.”

For those carriers and those who continue to struggle, Rudisin believes help can come in small packages.

“If a small amount of software can leverage those vast investments in the network and help get revenue turned on quicker, that may be a good deal even in tough times.”

But as some other vendors have mentioned, potential customers are trying to get NightFire to bend a little on pricing and terms. Rudisin says his new cash-flow positive position helps his company hold its ground.

“Some customers would like us to act like a bank, but we're not a bank. We are a software company, and we're not going to lend [them] money to pay for software in nine months that we sold them today,” Rudisin says. If they can't afford to pay us for the software on standard payment terms, they probably won't be around to pay us ever.”