Last week Amdocs Ltd. (NYSE: DOX) launched its "Engage!" program, as part of its "Open Innovation" partnership scheme
Engage! is a platform designed to generate and foster business relationships between Israeli startup companies and Amdocs customers such as AT&T Inc. (NYSE: T), and Sprint Nextel Corp (NYSE: S). The program is focusing on telecommunications providers for the time being, but it could be extended in the future to customers from other sectors such as the financial market.
Amdocs develops billing and customer care and management solutions. The heads of the Open Innovation Scheme, company chief scientist Tal Givoly and director of business development Ziv Koren, told "Globes" about the latest venture.
"The Engage! program expands the scope of our collaboration and enables a better working relationship with Israeli start-ups," explains Koren. "Our goal is to create greater value for our customers. We don't see ourselves as merely a provider, but as a partner, and to justify this status, we aim to identify customers' needs, and match them with suitable solutions from young companies with interesting technology. The backbone of the customers' systems is ours, so we have the ability to understand what they need and to connect them with the right technologies. It's not just a procession of start-ups turning up for meetings."
Road show in March
Engage! is now selecting companies. Amdocs plans to hold a road show in March,during which it will present 12 selected start-ups to senior managers at AT&T. Aside from these, it will also create a pool of more than 200 companies, which it will choose from depending on customer needs.
"We're focusing on start-ups which are no longer at the seed stage," stresses Koren. "It's important to us that they have a product and a customer who can serve as a reference. However, we are still following younger companies so that we keep abreast of developments."
Globes: Are you actively seeking companies or do they contact you?
Givoly: "Both. We have a contact email address which companies can use to get in touch with us, and we're also working very closely with leading venture capital funds. Start-ups tend to come and go, and there could be a new start-up formed tomorrow which hasn't heard of the program. The funds are long-term players in the industry and they know when companies are ready for integration in our program."
Koren points out that Engage! does not require a commitment by either the start-ups or customers to choose Amdocs as part of the equation (the system integrator). "We certainly believe we'll be selected, given our relationship with the customer, and the role we played in making the connection happen," he says. According to him, the program does not require any payment by start-ups for participation and does not try "to plug start-ups with Amdocs' products."
A known risk
However, Amdocs is clearly not in this for philanthropic reasons, and its goal, ultimately, is to make a profit. "We're doing it because there's a business opportunity for us here," says Koren. "We see an opportunity to benefit from the building of long-term relationships, as well as earn revenue from integration and consulting services." A further indirect advantage is the fact that Amdocs, through its involvement in the program, identifies customers' needs and areas of interest. "This is the sort of intimacy we look for in relationships with customers. We don't want to have to wait to find out what a customer wants until it issues a request for proposals to us and ten other companies at the same time," adds Koren.
In effect, by matching a start-up with a major customer such as AT&T, Amdocs not only gives it the opportunity to work with that customer, but also validation. Koren acknowledges that this carries a risk, although he insists it is a calculated one. As examples, he quotes EGlue Business Technologies Ltd. and Pontis Networks Ltd., which joined Amdocs' Ascend! Start-up partnership program as companies which already had customers, and whose systems had already been used to process deals.
"We all take risks, but the risk is known," agrees Givoly. "You have to understand that telecommunications providers are thirsty for innovation, since they won't pick up customers or achieve market share solely on the basis of fixed line and cellular calls. Carriers want to become providers of a 'digital life style' and offer a different experience from that offered by their competitors. So on the one hand, start-up innovation meets a strategic need, but on the other hand, they find it difficult to work with many small companies."
Why not buy the start-ups? Amdocs has $1.18 billion in cash.
Koren: "There is no necessary connection between collaborations and acquisitions, but it is quite possible that some of the start-ups which prove a success in the Ascend or Engage! schemes could be interesting targets for Amdocs' mergers and acquisitions groups.
Going global
Amdocs makes a point of positioning itself as global company, so Koren does not rule out the possibility that the Engage! scheme it is launching in Israel will also be extended to other countries. "If we come across an interesting company not based in Israel, we will certainly consider adding it to the program," he says. "There were a few cases like this in Ascend, where we looked at companies but it didn't lead to collaboration. It's simply a matter of focus, not constraints. That said, Israel is where we come from, and we're connected to the relevant sources of information here, such as venture capital funds. It makes a lot of sense to launch the program here." "In Israel, everyone knows who we are, and in general, everybody knows everybody here,"adds Givoly, "There is also a huge amount of entrepreneurship in Israel. There's no other environment quite so fertile anywhere else in the world."
Five matches so far
Despite the refreshing approach, Engage! is the not first such scheme Amdocs has launched. Its previous start-up partnership scheme, Ascend!, was launched a year ago, but while Ascend paired Amdocs' solutions with start-ups' products and services, Engage! is wider in scope and does not depend on a direct interface between the two components. Ascend is still operating and so far five companies have become Ascend! members: Eglue, Pontis, Enure Networks Ltd., EdenBase Ltd., and 1st2c.
Published by Globes [online], Israel business news - www.globes.co.il - on January 21, 2008
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