Sources inform “Globes” that Dror Sofer, who was VP international marketing and sales in XACCT Technologies, acquired by billing giant Amdocs (NYSE: DOX), is leaving Amdocs, together with other former XACCT employees. The sources added that the reason for the resignations is difficult problems in assimilating XACCT within Amdocs are causing discontent among XACCT employees, and are liable to jeopardize the success of the acquisition.
Telecommunications market sources warn that if the acquisition of XACCT fails, the development of Amdocs’s IP billing system will delayed, which will prevent Amdocs from closing its technological gap with Convergys (NYSE: CVG), Amdocs’s main competitor.
The telecommunications sources added that Sofer was responsible for 80% of XACCT’s sales in the past two years, and had been the effective leader of the company. His resignation, following disagreements over the management of XACCT, is now causing serious shocks, and affecting morale among XACCT employees. Some employees who worked on XACCT’s IP mediation system have already left Amdocs, and a few employees are now examining alternatives outside the company. Others are trying to transfer to other departments in Amdocs.
What is actually going on at Amdocs? When Amdocs acquired XACCT, it was agreed that XACCT would continue operating as an independent unit for a certain period, in order to allow it to complete projects begun before the acquisition. Amdocs being Amdocs, however, XACCT disappeared into Amdocs’s office buildings, without a separate unit or individual handling of the projects begun by XACCT. Chaos ensued.
A source familiar with Amdocs explains that the main problem is that the two companies have totally different organizational cultures. Amdocs met the XACCT employees halfway by letting them keep the same salaries they had before the acquisition, which were 30-40% higher than the usual salaries at Amdocs. The problem, however, appears to be more basic. Amdocs personnel have totally taken over XACCT’s projects, even though they have neither know-how, nor experience in IP mediation systems like that of XACCT. As of now, no one even consults the XACCT employees, who actually developed the product.
Without any transition or overlapping period, Amdocs personnel took over the IP mediation unit and all its projects, shunting XACCT employees aside in the process. In recent weeks, XACCT employees have found themselves excluded from the decision-making process for the IP mediation system, without any chance to influence what is happening there. Amdocs employees are in the driver’s seat for any matters pertaining to the IP mediation system, even though IP is not their field.
”There’s nothing wrong with Amdocs people take responsibility for XACCT’s system within a period of a year,” industry sources say, “but that can only happen after Amdocs has thoroughly assimilated the technology, and its personnel have studied it.”
Meanwhile, the first victims of the current situation are liable to be XACCT’s customers, whose project is under way. Before the acquisition, each project was handled by a team from XACCT, which was responsible for relations with the customer, and for customizing the system. Now, it is unclear what will happen with these projects, and with upgrades and maintenance services for these customers.
Sources familiar with XACCT’s customers say that it is illogical for people who are not IP specialists to become so deeply involved in the IP mediation system by working directly with the customers at such an early stage. In other words, Amdocs employees can be part of the IP mediation team, but they cannot lead it.
Furthermore since quite a few development personnel are among the XACCT employees who have left and those who are considering leaving, Amdocs could find itself in an extremely difficult situation. While Amdocs owns the software and the patents, if it loses the employees with the know-how for it, there will be no one able to customize the software for each customer and develop new versions. Amdocs’s employees may be able to learn about the system, but it will cost the company valuable time.
Telecommunications market sources believe that Amdocs will try to rectify the situation, because it certainly recalls what happened with the Solect Technology Group. Employees from Solect, which Amdocs acquired for approximately $1 billion during the boom, did not manage to fit in with Amdocs’s organizational culture, and the acquisition was wasted.
The price for XACCT was only $30 million, but its system could provide Amdocs with a reliable base for constructing an IP billing system, thereby security Amdocs’s future in telecommunications market competition in the coming years. If XACCT’s product vanishes, however, Amdocs’s future contracts for the advanced generation of wireless systems face an uncertain fate.
Another problem has arisen in the joining of Amdocs and XACCT. The manager responsible for assimilating XACCT, who was considered very talented, recently left the company, and was replaced by former Camelot CEO Yuval Baharav, the nephew of Amdocs president and CEO Dov Baharav.
Sources familiar with Amdocs said that although Yuval Baharav was not an IP expert, as a former CEO of a start-up, he knew start-up culture, and was likely to help bridge the cultural gap between Amdocs and XACCT.
Last week, Convergys announced that it had signed a contract with US wireless giant Verizon Wireless to supply the latter with an IP billing system. This deal is liable to block Amdocs’s access to Verizon’s wireless network, which currently has the greatest growth potential in the telecommunications market.
”Globes” reported in the past that Amdocs was negotiating with Verizon Wireless and Verizon Communications (NYSE: VZ) to supply classified directories, and that the contract could grow to $700 million if it includes billing systems. It appears that Amdocs will now have to settle for the smaller sum.
An Amdocs spokesperson declined to comment on the report.
Published by Globes [online] - www.globes.co.il - on April 1, 2004