XciTel: Emphasizing the here and now

When Yoav Shaked and Zvi Rosenmann resigned from Netology, Comverse Technology (Nasdaq: CMVT)'s SMS arm, which they managed for five years, they decided that they made a good team, so they searched for a venture they could work on together.

They sat and thought for a year. In the most natural way possible, they decided that their field of expertise was unified messaging, so after a year of hesitation, they set up XciTel. After several months, they recruited Uzi Shneor, former VP marketing in the data division of Lucent Israel, which was called Avaya at the time, and appointed him VP of marketing and business development.

XciTel was founded in April 2000, and initial financing was obtained from investors in August 2000. The company integrates various media in one system, which, for now, works exclusively with current generation technology.

"Our start-up has telecommunications, not Internet, features, which is an advantage for a company that provides value-added cellular services," Shneor says, describing the background of the company founders and employees, while being careful to disassociate XciTel from the unpopular Internet field.

XciTel's system enables cellular operators to launch multimedia services that utilize existing voice and SMS technologies. For example, through the system, subscribers are able to send integrated voice and (short) text messages to each other.

In the content distribution field, the company has a central system that distributes messages on various subjects, such as news, music, and sports, to customers. Shneor even cites an example of an information service that combines text and voice. If a subscriber wants information about his favorite soccer team, XciTel  provides real time announcements about goals scored, as well as a voice segment that includes the portion of the radio broadcast describing the goal.

The company's third service is voice chat, which brings a number of people with a common denominator together in chat rooms.

All these services already exist in one way or another, and are offered by a large number of content and multimedia providers, but XciTel says its system has clear advantages over the mass of competing service providers. Shaked: "Some of our services can be found elsewhere, but by integrating all the services into one system, open to developers, we have gained an advantage."

XciTel believes that multimedia represents the future of telephony messaging  The company aspires to soften the transition to the coming cellular generations by accustoming consumers to using basic multimedia services in the current generation. Cellular operators will be able to introduce customers using the current generation to more advanced services, thereby producing revenue from value-added services even from customers who have not transferred to the coming cellular generations.

"What’s good about our services," Shaked says, "is that they're based on two media with which end-users are already familiar: SMS and telephone calls. Cellular operators will immediately profit from increased use of both SMS and phone calls.”

"Our concept is to offer a package of services on an infrastructure enabler. All of our services can be offered on the same system, so if the operator later wishes to add services, he can easily do so."

XciTel says the portfolio of services that can be offered on its system changes almost every month, based on the needs of operators, as expressed during discussions with XciTel.

Where the content the operators offer to subscribers is concerned, XciTel works according to two models. The first is working with providers that already have some content services that can be integrated into XciTel's system. Under the second model, for operators who do not have content, XciTel tries to conclude cooperation agreements with various content providers (greeting card providers, for example) in order to include their offerings as part of the system.

We’re always looking for services that take advantage of the success of text, but we also include other services, with the aim of improving the user's experience," Shneor says.

The company is now able to cite a cellular operator as a reference. The first version of its system has been successfully installed with Italian company Wind, which launched the service last October, using it for messaging services. The system is currently undergoing further improvements, slated to be added to the system in December.

XciTel works according to two pricing models: licenses and revenue sharing. Under the license model, the initial price is in the hundreds of thousands of dollars. Under revenue sharing, basic prices are lower. XciTel works with Wind of Italy according to a mixed model.

Shneor says that while the operator feels that the service is still new and needs to be tested, he will prefer the revenue sharing model, which requires a smaller investment, and will also prefer to share the risk with XciTel. Besides the agreement with the Italian company, XciTel is in the process of closing two other pilots.

XciTel is not worried that major companies, such as Logica and Comverse, will chase it from the market within a few days if they develop a similar system. Shaked: "We believe that we have at least a ten-month head start on a major company like Logica, before they can develop a mature product."

What about competition from the many multimedia service providers? Shaked says there is no need to regard every service as a separate competitor. "Keep in mind the flexibility of the infrastructure we’re offering," he stresses. "It greatly simplifies the development of a service."

Published by Israel's Business Arena on November 8, 2001