The Killer of Cute

Brian Bogosian is waiting for the day when the war to win the mobile professional will be about something more than devices with cute names. Currently, that market is often thought of in terms of the two devices — the BlackBerry and the Treo — that are most closely connected with white-collar corporate executives.

Visto Corp., the enterprise application vendor of which Bogosian is president and CEO, doesn't make a device, nor does it center its enterprise strategy around any particular device.

The downside is that Visto doesn't have a powerfully simplistic device brand on which to hang its marketing message. The upside is that having no allegiance to a single device should make it easier for Visto to appeal to mobile carriers that want their own service brands to have a prominent position in their enterprise strategies. There also is a second and more important benefit: As the wireless enterprise market matures and large corporations full of hundreds of users look to adopt wireless e-mail, Visto's egalitarian approach means that individuals and groups of users within the same corporation can use whatever devices they want — or that their employers want.

“We're network agnostic, and we're device agnostic,” Bogosian said.

Also, at a time when the market for device operating systems (OS) has yet to shake out, Visto already has moved to support every major OS on the market.

“We're still in the early stage of the wireless enterprise market,” Bogosian said. “As the [enterprise] market matures, that's the way it will go. Customers will want more choices.”

According to the Yankee Group, there are about 50 million mobile workers in the U.S. and among them a minimum addressable market of about 35 million workers for wireless e-mail applications. Yet, only 2 million of those users currently have wireless e-mail.

The problem, according to Gene Signorini, analyst with the Yankee Group, is not that corporations remain unconvinced about the benefits of wireless e-mail.

Stephen Drake, wireless enterprise analyst at IDC, added, “Support and administration of wireless e-mail systems is one of the biggest concerns out there. It's a huge grind on IT.”

Drake said the benefits of enabling enterprises for wireless e-mail are obvious but also difficult to measure in a practical way. However, high-level executives at many corporations have begun to drive wireless e-mail projects into IT budgets because they realize how it can benefit them directly.

“That's something that has turned around more recently,” Drake said. “Top management is saying to IT, ‘Figure out how to do this mobile e-mail thing.’”

To many corporate executives, the mobile e-mail thing probably means Research In Motion's BlackBerry, which possesses the largest number of wireless e-mail users so far — roughly 1.3 million of the 2 million existing users, Signorini said. RIM has been able to garner market share and notoriety from its BlackBerry offering despite the relatively high service price of about $50 per month, plus data device prices higher than the cost of many phones.

“Everyone's going after RIM,” Drake said.

That means Visto, too, and the wireless carriers that are Visto's channel partners. But, so far, wireless carriers have made deliberate investments in the enterprise markets, and a number of overtures to corporate IT executives, but only to modest effect.

Visto believes that providing more flexibility and openness might answer corporate concerns about cost-effectiveness and management. The company also is making a bet — a riskier one, some would say — that wireless carriers present the best possible service channel to the mobile professional.

“The carriers want something they can brand,” Bogosian said. “We like the carriers because carriers already have existing customers we can reach.”

Visto already has deals with major carriers such as AT&T Wireless, Bell Mobility, Nextel Communications and others.

Questioning mobile carriers' effectiveness in the enterprise has become a matter of daily routine, and Bogosian is well aware of the risk.

“Any time you dance with elephants, you've got to be careful,” he said. “Conventional wisdom says carriers can't sell into the enterprise, but we're convinced that they get it strategically.”

Drake said that while carrier subscriber bases for wireless e-mail and related services remain low, and “we'll probably still be talking about that in a couple of years,” carriers will become major players in the area of wireless enterprise e-mail.

As someone who began his career working for Bell Atlantic, SNET and CTC Communications, Bogosian himself might be Visto's most important asset in the effort to win carrier relationships. After his tour with those carriers, those companies became his clients for local exchange bundling service when he served as top executive at U.S. TeleCenters and Intelidata Telecommunications.

“I understand the nature of the beast,” he said, referring to carrier organizations.

If enterprise customers have had problems making decisions about wireless solutions, it might have at least a little bit to do with the variety of solutions that exist on the market. There are three different e-mail approaches they can choose from, said Signorini, including a server-based behind-the-firewall approach, a carrier-hosted solution or a desktop client solution. Server-based solutions have had the most market traction thus far, and this market segment is home to intense vendor competition from Visto, RIM/BlackBerry, Good Technology and JP Mobile. However, Visto philosophically differs from most of these vendors by also offering its middleware as a carrier-hosted solution, a market segment in which its closest rivals are JP Mobile and Seven.

Bogosian feels that Visto offers greater customer flexibility than RIM and a better overall software architecture than Seven. Visto Mobile, the vendor's middleware server solution, is a four-component software architecture that includes a service delivery platform for carriers; a personal desktop linking users' enterprise desktop PCs to their wireless devices; a behind-the-firewall enterprise server that connects a corporation's e-mail server to a carrier's network operations center and e-mail clients that work with a variety of device OSs.

“Being agnostic will be an important thing to have in the future,” said IDC's Drake.

With support for the Microsoft PocketPC and SmartPhone, Symbian, Palm, J2ME and other OS platforms, Visto is making a bet that these devices will see greater adoption in corporate enterprises, yet it's not hanging its hopes on the success of one particular OS.

Visto announced its support for the Symbian OS just last month with the release of Version 5.0 of the Visto Mobile platform.

“The October release gave us support across a broader mix of devices,” Bogosian said. “One-third of cell phones churn out of the market every year, and we have to make modifications to our model to support different devices that take hold.”

According to Bogosian, Visto has kept to the aggressive software upgrade schedule that he instituted when he became CEO of the company more than four years ago, and it will continue to do so. However, the 8-year-old company also has improved its platform and its market positioning through its acquisitions of ViAir, Jarna and Psion Software. The first two deals added desktop client and workgroup server functionality. The Psion deal, meanwhile, augmented Visto's capabilities in the device client area. It provided the support for Symbian that eventually made it into Visto Mobile 5.0, as well as the potentially more valuable capability to “push” e-mail to device clients from a middleware server, rather than making users “pull” the e-mails from the server.

While Visto had to acquire the capability, Bogosian credited RIM with having been “right” about enabling BlackBerry as a push e-mail solution.

IDC's Drake added, “The push capability is a real check-box item for the enterprise.”

Acquisitions such as the Psion deal have not left Visto's coffers dry. After buying ViAir and Jarna in June of 2003, it bought Psion last February, but two months later, Visto was able to refill its war chest with $65 million in venture funding, and Bogosian said other acquisitions may be looming on the horizon.

“We'll look opportunistically at further acquisitions,” he said.

There also has been some speculation that Visto will further pad its financial position through an IPO.

“We've already raised the amount of money we would have raised through an IPO,” Bogosian said. “We want to do it as a measure of success, but we won't do it for the money.”

While Visto didn't invent the BlackBerry, it has invented a lot of other things, gaining 21 patents for various elements of its software architecture. In addition to the company's acquisition, a lot of its money also has gone into funding intellectual property lawsuits against Visto competitors, such as Infowave and Seven. Visto filed lawsuits against both companies in September 2003, alleging one patent infringement violation against Infowave and two against Seven. The legal action against Seven is still pending as of press time, but the lawsuit against Infowave was settled, with Infowave now paying Visto royalties for the patent in question.

Bogosian doesn't bat an eye about spending money on multiple legal campaigns.

“If we had our choice, we would have invested that money in the product, but we felt it was appropriate [to file the lawsuits],” he said.

Patent lawsuits are the kind of thing that happen just when a market is starting to show serious revenue returns, and Bogosian, as well as analysts Drake and Signorini, think that's about to happen. However, as Visto is making its moves to partner with carriers, acquire technology and go to court over patents, its competitors are not sitting idle. Recently RIM has begun to broaden BlackBerry's appeal by working with developers of other device OSs, such as Palm, and new enterprise application partners like PeopleSoft. Also, Seven recently broadened its own appeal through support for J2ME, and JP Mobile has announced several product enhancements.

In the long run, Bogosian believes that a market that has lured several middleware server vendors and application developers will face even more heated competition and also will further consolidate to the point where only a few firms exist.

“Market consolidation is going to happen,” he said. “We will acquire, but we will accelerate our own product development, and we will continue to vigorously protect our intellectual property rights as we're called to do that.”

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