By Ronald Gruia, Program Leader - Enterprise Solutions, Frost & Sullivan

Owen Matthews

NewHeights Software is a privately held company founded in Victoria (British Columbia), Canada in 1998. NewHeights delivers Personal Communications Management (PCM) software that delivers productivity gains to IP telephony equipment and hosted telephony services. The company has gained quite a lot of acclaim over the past year, including a deal with Bell Canada, acclaim from the VC industry and partnerships with vendors such as Ubiquity and Marconi. Frost & Sullivan recognized NewHeights’ successes in the form of the 2005 Enterprise Applications Entrepreneurial Company of the Year Award. This M&S interview with Owen Matthews (the CEO) serves to provide more insight behind the NewHeights story.

Owen, on behalf of Frost & Sullivan, I would like to congratulate you on the achievements of NewHeights Software and also to thank you for spending some time to tell us a bit more about your company.

To kick off our interview, I believe it would be great to first tell our readers a bit more about what NewHeights is all about. What is the best way to describe the space that NewHeights plays in?

We are in an emerging space – so it doesn’t have an industry-defined term yet. I read a recent trade article that referred to our space as "client convergence". I typically describe what we do as "desktop communication management" or "personal communications management". But at the end of the day, we focus on the usability of converged communications on the desktop. You see it. You use it. It isn’t some nebulous, intangible thing with a complex use on the network. It is a personal desktop application that manages your communications. Communications is deliberately a broad term, because we do a lot more than just managing your voice. We manage voice, presence, Instant Messaging, contact directories and all the documents related to communications.

That’s what’s new and exciting about this space. Users can see immediate value in managing all these forms of communications in one, well-organized application.

So the space that we are in, as broadly as possible is desktop communications management or personal communications management. More specifically, it is about making your communications simpler to manage and making it as easy as possible for you to take the four or five different ways in which we communicate (e.g. video conferencing, data collaboration, managing your voice call, your conference call) and move beyond the twelve button interface of the phone. We provide a rich user interface that interacts with the phone as well as several applications that you have on your desktop and pull them together into a single communication management interface. So that’s the space we are in.

Aside from defining the specific space we are in, I would add that the most important element of what we do is usability, because as a desktop application, our value is immediately apparent to the user – it needs to be easy. We get people to jump modes a little bit between forms of communication. For example, if you call me, and I am currently on the phone, I might instant message you back because I know that you are available via IM – we put this information right in the incoming call screen pop. So getting people to jump modes a little bit is an important new value that gets created. Giving users an increased likelihood of successfully communicating.

Sounds good. I am definitely intrigued by the jumping modes concept, and that is a good starting point for my next question. Do you think that perhaps another key goal of PCMs is to increase the probability of people connecting or contacting each other faster, from a strict pragmatic perspective?

From a value perspective, we have some well-defined value propositions associated with the product. Certainly increasing the likelihood of successfully communicating is a very important element of what we do. That does mean we are connecting people faster. You are a lot more likely to get them on your first try, so you get through faster. With presence tools, I can see who is available and get information from your team member if I see you are busy. I get what I need faster instead of waiting for you to complete your conference call and return my message. By virtue of presence you might say what meeting room you are in, or you might say how you can be reached, or you might set your forwarding rules. Generally it’s valuable to keep communication and important ad hoc information flowing.

Another goal is also simplifying complex communications. It is one thing to say you are increasing the likelihood because you know where I am and because it finds me and follows me, but it is another thing to actually make it simple. If I want to setup a conference call, I don’t want to hit three buttons and guess who is on the phone, or worse, embarrassingly hand up on someone. I want a nice, rich user interface that allows me to select your name, drag it into the call, see that it setup the call with you and see that you are connected. Or if I am on a call with you, I press one button and it automatically setups a videoconference or automatically sets up a collaboration session with you. It just simplifies complex communications, so that’s another big value proposition.

Less frustrating for the user and a far more professional experience for any partner or customer you might be interacting with. Another value is multiple communications handling. You appear a lot more professional when you are managing multiple incoming calls calmly, as opposed to awkwardly trying to work out who is on the line and if it is a new caller or a person on hold.

Another important element is immediate access to information relevant to an incoming communication request. So if you call me, the information associated with you (the e-mails that you sent me, the documents that have your name embedded in them) automatically pop up as associated with you. We talked about this last time we met, our product provides an impressive desktop search knowledge management tool that allows us to automatically pop up information that is relevant to the communication event, and also through PIM integrations and CRM integrations, it also automatically pops up the customer record or the contact record associated with the communication event. So immediate access to information relevant to the communication is an important aspect of the product as well.

Those value propositions were very well put – thank you. Changing gears a little bit, I was just curious about how the idea behind NewHeights Software come about. Could you tell us a little more about that?

We actually started out controlling devices in the digital imaging space – that was really just a function of following the money. We had a company that did web work, and basically, professional services oriented graphic design and HTML because it was the easiest way to get clients. And then, at a venture forum, someone decided to give us some money. We formed NewHeights and got into the digital imaging space–controlling cameras, automatically talking to PC connected cameras and pulling images off the cameras to send to an online print service. We were doing it based on the advice of the firm that was financing us. So we were chasing the opportunity to build a real company, and did not really necessarily believe in the imaging space, but we made a go of it, and ended up making a couple of million dollars in revenue doing it. And then the whole thing melted down with the dot com crash. All of our customers evaporated, so we said "we’ve got some money in the bank, we tried the VC’s idea, so now let’s go and do what we want to do".

At about this time my family bought the Mitel PBX division and the name from what is now Zarlink. We were involved in a lot of strategic discussions and saw an opportunity. We took our experience in controlling devices and we applied it to telephony devices. We had a big potential channel and a new investment to bolster up with application strategies. So we started out with the vision that I just described to you – simplifying complicated communications and getting people to use multiple forms of communications very easily. We have presentations that date back 5 years to our first product strategies with the vision of multiple forms of back-end communications – video conferencing, audio bridges, the switch itself, ACD features, data collaboration, and converge their user interfaces into one easy-to-use application. Bringing an application perspective to the telecoms space.

We always had the vision of taking all these multiple forms of communications and putting them together into one desktop. It was fundamentally different from the approach that a lot of people were taking where they were trying to converge it all into just one server, so you’d have a video conferencing server, a PBX, an audio bridge, all in just one infrastructure. In reality, that is nearly impossible to do – it’s such a big project. Nobody does it all well and they weren’t changing the user experience. Where is the value? So we thought we’d put them together on the desktop and make it look like it’s just one infrastructure, and that’s what we did and it went really well. Actually it took us until now – 4 or 5 years later – to actually deliver on that vision, to finally have a product that has one touch from a phone call to video conferencing, one touch to launch a full web collaboration, have presence and IM, and all those capabilities wrapped up in one really easy-to-use desktop, and we are really happy with that. And that’s actually the latest release with Mitel.

I found it very interesting how you later changed your company’s mission. Do you believe it was easier to raise capital with the new objective, even though the market conditions changed in an adverse way?

Well, it was a little different for us. One: obviously, we had money in the bank to kick things off, and two: at that point, I had lost my faith in VCs a little bit. They were saying "Go down this road, go down this road" and we did, and then the whole thing just turned into a mess. And the entire business that we were told to chase – and were given money to chase – evaporated. I did learn that we could run a successful business. That we could take an idea, build an application, run a development team, go through the quality assurance/bug fixes cycles, get a product out and generate revenue from it, but it wasn’t the strategic direction that we believed in. So we just trusted our own instincts at that point. I was confident in the direction and funded it myself. It was easy to justify funding something that played so well into so many of our other investments – even in a downtime.

Wow, that was quite interesting. On a separate note, your relationship with Bell Canada represents quite a milestone, as the carrier made a commitment to jointly develop VoIP products with NewHeights and Nortel. I believe that is the first time that Bell Canada invested in a Terry Matthews company. Could you elaborate a bit more on that?

I think the most significant thing about that was that Nortel had a product that from an outside perspective is comparable and Bell Canada still decided to work with a small company. It would be really easy for Bell to decide to carry the Nortel product and it is really hard for them to decide to carry ours, and I think that speaks volumes to the flexibility that we bring to the table and the quality of the product. And not only that, we now need to partner with Nortel to make it work because it is on Nortel infrastructure. So I am impressed with Bell’s vision in choosing to work with a company like ours and I am impressed with our little company to take on a huge company like Nortel and win, and then still have to manage a partner relationship with them. I think it really is significant. And it’s not only that Bell Canada decided to carry to product, but they even provided a couple of million dollars in funding to make it come to fruition. They could have made the easy choice and work with Nortel and instead they decided to work with us, because they see the quality in what we do and the flexibility of our product. Bell Canada has been a pleasure to work with. They are decisive and reasonable. We thought we would get swallowed up – but they respected our size.

Since we are already on the topic, can you tell us about some of your other success stories thus far besides Bell Canada?

The first one was Mitel, of course, which was a huge success. It sounds like it would have been easy, seeing that the chairman is my father and an investor in both companies. But it is actually quite difficult. It is easy to get meetings, but it is hard to get consistent answers. Like every company associated with the telecom industry – there has been restructuring and people felt threatened to assert a strong position. They do not want to upset the chairman by having a relationship with me that starts and then fails. So it was awkward to get the relationship with Mitel and to go through the whole commercial process with them, with every possible barrier and everybody covering their ass along the way. But Mitel was a very important first relationship – it made the product a reality, it was well worth it for both companies.

The next one that was really significant was the Marconi relationship. Marconi also faced uncertainty during the telecom meltdown and had learned the lesson that they can’t do it all – a lesson that I think Nortel hasn’t quite learned. So they killed their internal program. They did a prototype product that was in trials with their customers, and they chose to end that product and carry ours. I thought it was a great move on their part and a huge win for us, and they represent a very large channel. I think it was important to land a partner like Marconi. This speaks volumes about the opportunities beyond Mitel, which a naysayer could point to the fact that we are related companies. It didn’t actually make my life easier. But a naysayer can point to that, whereas Marconi is totally independent. It s a much larger company, has a great installed base and a huge channel for us. And more importantly, they were the first company that was not family related to stand up and say "we will carry your product and kill our internal product for it".

And the other one, of course, is Ubiquity. Ubiquity is somewhat related to us, in that Wesley Clover – our family’s investment firm – has an investment in them. Ubiquity has a massive carrier channel for applications on next generation networks and we are very excited about that. They are the leading SIP application server or service creation environment. We fit together beautifully and we see them as a massive potential channel for us around the world.

You have been quite successful thus far in leveraging your work in the enterprise space with products such as YA from Mitel. How do you plan to leverage your PCM expertise on the carrier market, considering the differences in scalability, requirements and other factors?

It’s actually quite an easy jump for us. Although a PBX and a carrier-hosted system might be incredibly different, the user interface is essentially the same. The improvements we bring to the PBX world apply just as easily to the hosted environment. The APIs might be different but the core value is the same. In fact, even more so, because Centrex typically has fewer features – so there is so much more we can add to it. As a desktop application, the value is in what the user perceives. It is not hard to get that concept across. It’s an easy sell, but from a technical perspective, it is a little bit harder. Different interfaces, stricter security and handling a much greater scale. All of this is a fair amount simpler when you are an end point –not a core piece of equipment. And of course the channels are bigger, so it made sense for us to do it. So the transition was easy to go from the enterprise space and leverage that into the carrier market, but then you have to deliver on it. The difficulty is in the execution. Unlike a PBX vendor, carrier infrastructures are multi-vendor and require interfaces to more than one company’s APIs – some of which compete directly with us. So they aren’t particularly open to working with us. There will be open standards to support and a host of other issues in commercialization and rollout – not the least of which are tariff issues, billing, sales training, etcetera. None of which are really set up for application sales.

It is a matter of managing the expectations and understanding how much we can do in the carrier environment. We took the approach that features and functions are really important and that’s what will make us all money, carrier included. So we had to do the little proprietary hooks and functions that add extra value to be more like the Your Assistant product we did with Mitel. The low functionality softphone with simple features is what our competitors do and we don’t see a future in that. They already give their products away for free, so I have a tough time understanding how they are going to build a strong business out of that. So managing expectations, doing proprietary extensions, and doing a lot of the back-end integration to make it work is where the hard part is – and all of the commercial rollout complexity. Those are the hard issues of the transition. The application and the value that the customer sees in the application – that was easy.

While we are on the topic of features and functions, aren’t some vendors out there forgetting about the most basic stuff? In other words, do you feel some human factors are often overlooked by some vendors in the PCM arena?

Absolutely. You have hardware vendors that make terrible interfaces in the first place, going from terrible phone physical interfaces to terrible PC interfaces. How many softphones in the marketplace were pictures of phones on the screen? What a totally ridiculous interface for such a powerful medium as the PC. When you have drop-down menus, right-click, configuration panels, efficient use of real estate in standard applications available to you and these hardware vendors take this very unusable hunk of hardware, take a huge picture of it, and put it on the screen. I have even seen some recent press releases from two major vendors that literally took a screen shot of video from Polycom and a picture of an Avaya phone on the screen and said, "look at our innovative and exciting next generation application". Yes, absolutely, human factors are totally overlooked, certainly from the platform vendors, the network equipment vendors, and even from the people that tend to be leading. For instance, from a Siemens OpenScape perspective, they took a web application approach, but this requires constant browser refreshing. A real-time application requires desktop components that respond in real time and don’t require web refreshes to update the screen. I think the human factors has been a total failure and totally overlooked by most of the vendors in this space, and that is a huge strong point of our product.

Besides usability, what other factors do you believe are critical in order to be successful in this space?

Well, there are a lot of smaller companies working on applications like ours, and I think you can never underestimate channels. Channels are everything. Being a small player that has a lot of free downloads with a very open standards product I think is a dead end, because right now, a lot of those really straightforward things such as SIP softphones are baked right into the operating system, and it won’t be too long before Microsoft tightens their messaging and carriers and platform vendors clue into that. So at that point, there is no value in a simple SIP softphone. So the value is definitely in the advanced features, the high margin applications with enterprise features – things like call accounting (matter codes and account codes), supporting caller line-ID based forwarding rules, PIM integrations and CRM integrations, hooks into audio bridges, collaboration platforms and knowledge management systems. That way, you can get your margins up and actually add real value to the users and as a result, get the channels, because the channels need more than a simple, low-end, low-margin application. They need to have a portfolio of products and charge for the additional features and functions that they provide. So definitely channels are critical, as are high-end features.

OK, now let’s shift back to NewHeights. Could you share your company's near and intermediate term objectives?

Well, near-term objectives are pretty straightforward for us. We have some excellent channels and we have to get quality product selling through those channels; we have great products, but we have to customize them and make sure that they work in the specific customer environments. And more importantly get through all of the complexity involved in getting carriers like Bell selling our products successfully. So to sum up, get the products into the channels and then get those channels up and running and selling (do a lot of overlay sales and overlay marketing to get those channels really moving). Then bring more channels in and deliver more and more features to keep getting closer to the full set of features that we deliver on the Your Assistant product. So, try and get them setup with more advanced features and charge higher margins. From a longer-term perspective, by supporting more open standards and getting more features and functions into our existing channels, we hope to attract large enterprise application vendors as channel partners. They concentrate on application value – they don’t try to sell the applications as an add-on to their main product. They are the best endplay for us. Large application vendors will never partner with us until we have support for most telephony environments. So we need to succeed with the channels we have first.

There is another question that is perhaps on the minds of our readers. On a personal note, can you tell us about your experience being the son of such a remarkable person as Sir Terry Matthews? How is that like? Does it open a lot of doors for you? And how do you manage the expectations, given the great person that your dad is?

Like any situation, there is good and bad to it. He is very demanding. The good news is that I can get an audience with just about anyone in the industry when I am with him. But then you are fighting to get points across because people are there to hear him, not me – and he is not really a quiet guy. The greatest advantage is his influence. If I can convince him I have something good, then he will create attention for it on a global scale. However, my father is a very pragmatic guy, and if he thinks something doesn’t make sense and is unreasonable, he will quickly shut it down. It provides some great guidance, because you’ve got a guy who has an enormous amount of experience in the industry to leverage, and it provides great contacts to get us through the door, as well as great resources to fund things. But at the end of the day, he is not a guy who micromanages what I do. So it’s great guidance, but the reality is that you can’t sell bad products to people and expect to be a long-term player in the industry. And he won’t use his social credit with the industry by promoting bad products. The fundamentals of the business (good product, good revenue and good channels) are essentially my responsibility. So how does it affect me day-to-day from a business perspective? He is a good board member and a great promoter, but we are still stuck on our own with the fundamentals of getting good product out and getting revenues from our products.

From a personal perspective, it can be quite hard, because there is an enormous amount of expectation. He has a key strategic influence over many companies we have ownership in. I participate in that strategic management across our portfolio. I do a lot of work positioning the portfolio into large potential channels. It is a tough job to coordinate over 20 companies while still trying to manage NewHeights full time. But with a vested interest in all of them – it is important work. And it is all beneficial to me, so I am in the shadows doing a lot of the work that he leverages. He has some great people that work for him that way. So I feel privileged by that – not slighted.

He is also a very powerful sales force and I think I’ve inherited that gift. I definitely have the ability to go in and generate customer excitement and listen to the customer and understand what they really need at the same time. I rarely get to do that with him in the room though. So it has its advantages and disadvantages, definitely.

Sounds very interesting, indeed. Thank you for sharing that with us. So last, but not least, here is the final question. Since this award acknowledges your entrepreneurial spirit, and taking all of the combined experience that you have, what in your view are the key ingredients to be a successful entrepreneur in the telecom space?

The most important behavior that will create success in any venture, of course, is persistence. It’s been a very long fight for us – operating on a shoestring at the worst possible time in the telecom industry. We were very, very persistent. We believed that what we were doing was valuable. We paid close attention to what other people were doing, making sure that it wasn’t something that was already out there and we were wasting our time trying to catch up.

So more than anything else, be persistent. And remember that your channels (in particular the carrier channels) are very large and often very slow, but they are certainly not dumb. Senior executives at Bell Canada and British Telecom aren’t there because they are lazy. You typically get to deal with very bright people, including suppliers, carriers and large enterprise customers, so you definitely can’t fool people. And if it seems too slow, don’t disrespect the people. It’s big business and as a result, they move carefully and slowly – especially in down times.

So, definitely be persistent, and definitely respect the people in the industry, because you will learn a lot from them. And more than anything else focus on the value to the customer. If you present something valuable to a customer, the carrier, the IT department, or whoever it is that you are selling to, they will appreciate that you are not just focused on the technology, but the useful application of it. The more you focus on something that is really valuable, the more it will drive all the piece parts and that will drive the business. Whether it is a media server, a session controller, an application development environment, whatever it is, at the end of the day, it has to translate into products that get charged for, that generate money and are valuable to customers. And provided that you take that perspective, you are always more likely to be successful.

It’s not always just what you do – luck has a lot to do with it. You can’t beat yourself up if it doesn’t work out. Sometimes, you are just in the wrong time with a great idea, and you have to stick with it for a while and adjust it a little bit and turn it into the right idea at the right time.

Owen, it has been a pleasure to talk to you, and I wanted to thank you for the opportunity. Your insights were quite valuable, and are really appreciated. I wish you a lot of success with NewHeights and all the other high-tech ventures that you are involved with.