Exiting Manhattan to New Jersey via the Lincoln Tunnel, one soon arrives at the sever farm of Exodus Communications, which owns a number of similar sites worldwide. IP communications services developed by the Israeli start-up Congruency are located on the site. Congruency provides services to its offices in Petach Tikva and in the US, and to two Internet service providers: Monmouth Internet in New Jersey and Manhattan-based Eagle Communications.
Monmouth Internet and Eagle Communications began using Congruency’s services last September in a beta test. Three weeks ago, Monmouth and Eagle started offering the services commercially. Congruency announced its arrangement with Eagle three weeks ago at the Comnet Exhibition in Washington. The Israeli company receives a fixed fee for each of the providers’ users, while the provider guarantees a minimum number of users.
Congruency is the first company to offer the CASP business model, which provides services for communications applications. The company offers IP services that can be adapted to meet the individual priorities of telephony and Internet companies’ end-users. CASP is a type of communications-oriented ASP that enables telephony and Internet companies to offer integrated telephony and Internet services on existing broadband data communications networks, eliminating the need for heavy investments in infrastructure.
Using Congruency’s services, telephony companies and Internet providers can very quickly provide VoIP telephony services, along with integrated value-added services such as voice mail, fax management and specialized content for each individual end user.
In order to provide these special services to end-users, Congruency developed an IP-based telephone called “i.Picasso”, which looks like a cross between a telephone and a Palm Pilot. The system, which can be operated using a telephone screen, enables the user to implement unique functions while the telephone screen is receiving content. Examples of these services include Yellow Pages directory information, phone number searches, ordering tickets for shows, updating inventories, etc. The online link enables the company to provide viewing services while the phone is in use.
Congruency did not start out as a CASP. The company was founded in 1998 by CEO Ralph (Yisrael) Hayoun, an American, and VP-Business Division Dror Schuchman, who permanently resides in the New York-Tel Aviv air corridor. Both men worked in development at the wireless communications company Geotek, which enjoyed a meteoric rise before crashing two years ago.
In the summer of ’98, Congruency held its seed financial round. Participants included Pioneer Management Corp., now known as 2BVentures. In December 1999, 2BVentures, along with several private investors, invested in the company in the course of another financing round. In May 2000, Vertex Capital Funds led a $12.2 million financing round, in which Giza Venture Capital, JAFCO and Matav participated. Since last October, Deutsche Bank has managed Congruency’s financial affairs and raised capital for the company.
At first, Congruency set a goal of developing an IP communications system for organizations, and then went on to develop the CASP model. While developing the model and its applications two months ago, the company decided not to be satisfied with meeting its initial expectations; it elected to sell its system to major manufacturers which would then integrate it into their solutions for large operators. Congruency also offered the systems directly to the large operators.
Congruency offers a complete IP infrastructure solution. The principle behind the product is that all voice and data services are transmitted via broadband, thereby eliminating the need for analog lines. The services include unified messaging, on-screen phone books, content via telephone and network management. The comprehensive solution naturally includes Congruency-developed IP telephony, as well as inclusive data communications. In principle, the system can be connected to ordinary IP telephones without screens.
The anticipated IP network breakthrough, after the widespread deployment of fiber optic lines and broadband communications networks, is naturally a factor in the company’s calculations. Surveys show IP services will become a $10 billion market in the US alone over the next four years. The wide availability of broadband, constantly falling prices for communications services and the large number of providers intensifies the competition between the providers. IP-based services meet the competitive criteria. The shortening of the time needed to develop infrastructure and the elimination of the need to invest huge sums of money ought to cause telephony companies and Internet providers to seek existing market solutions, and so they come knocking on Congruency’s doors.
“Globes”: Who are your competitors?
Schuchman: “No company now exists that offers a full complement of all services. Cisco has a gateway and telephone but no voice mail or unified messaging. There are two US start-ups making similar things, although at earlier stages than us: NetCentrix and Netergy Networks.”
How do you overcome the existing IP networks' quality of service problem?
“The main service problem arises when you try communicating from a computer to a telephone, and in order to reach a provider you have to go through a public Internet provider. This is a big problem. Our solution is for the last mile, between the service provider and the customer, and we are handling quality management in this section, both for the organization and on the network. We have a product called a “media accelerator” that gives priority to voice-over- data communications. If you’re talking on the phone at the office and simultaneously running a lot of data, including video, it won’t affect the conversation. Voice quality is unaffected. In addition, the pipeline between the provider and the end-user is monitored.”
How is the telecom market collapse affecting you?
“The collapse is playing into our hands. Companies can't invest in new infrastructures and prefer working with companies like us.”
It’s hard to raise money from the public now, which leaves only the option of being bought by one of the big companies.
“That's your view. I believe the market will stabilize. The communications market is very strong. Naturally it won’t reach the numbers of the past, but it will stabilize. I believe the numbers will be much better towards the middle of the year. People will continue to pay for telephony services, especially if you offer them more services at lower costs. IP communications is a less expensive world which offers more services. This combination will generate a quick recovery for the IP market.”
What is your new direction?
“In the past few months, we received responses from leading companies such as AT&T, and AG Communication, which belongs to Lucent, which want to buy our entire platform. They are very interested in buying and using it in their systems. They are talking about getting the initial service with an option to buy the system when they reach a certain customer mass. We therefore decided on a new strategy two months ago: to put the emphasis on system sales.”
What about the site you built at Exodus Communications?
“We are using it to provide services to small companies and as a sample site for large ones.”
What’s happening with the large companies that want to buy the system?
“We are now starting a pilot with AT&T in Denver. We also signed an agreement with AG Communication according to which Congruency’s system will be a part of AG’s solution. This, in turn, will result in large companies utilizing the system in pilot tests.
What about Europe?
“We are negotiating with Deutsche Telekom on a pilot test. These are preliminary talks about cooperation between us.”
Published by Israel's Business Arena on 5 March 2001