Telchemy is the leading provider of technology for Voice and Video over IP performance monitoring. Many of the VoIP and IPTV test and measurement equipment vendors use Telchemy's VQmon software to provide media stream analysis and perceptual quality metrics, and increasingly this same software is being deployed in network equipment such as IP phones, residential gateways and routers. They are also been the leading developer of protocols and standards for VoIP/IPTV performance management. Telchemy is based in Atlanta, GA and was founded in 1999 by Dr Alan Clark.

Alan Clark (AC): There are two primary growth opportunities we see from our perspective in our industry. One is the ability to be able to manage highly distributed real time services - residential and voice and video services or enterprise IP telephony. This requires a new distributed model, which is taking hold in the industry, with sophisticated agent technology integrated directly into IP phones, residential gateways and IP set top boxes; service providers and enterprises are really beginning to understand the benefits of this approach so that’s definitely a high growth opportunity. The other major growth opportunity for us is IPTV. Voice over IP has moved from hype to being widely deployed whereas IPTV is still in its early stage.

 SS: In your opinion, what are some of the key technology trends in the industry? How do you think they will shape tomorrow’s testing industry?

AC: Focusing on the test & measurement industry, again one of the very fundamental shifts within the industry is this movement towards a distributed / embedded model. The traditional test & measurement industry is somewhat probe and analyzer oriented whereas the management of VoIP and IPTV services, particularly residential services, is not practical using probes and analyzers located at the customer premise. Hence to address this, you need to have an embedded monitoring model with software "probes" such as VQmon located in customer premise equipment.

Another key trend relates to the operation of services over interconnected networks. VoIP and IPTV services cross network boundaries and suffer from transient problems whereas traditional services are typically terminated at the edge of a service provider network. So, the whole issue of how you manage, monitor and troubleshoot services that span IP networks is a very interesting problem area and it is going to be a very fundamental issue for the test industry.

AC: Telchemy is a technology provider to both the test equipment industry and the network equipment industry. Within the test equipment industry, we have seen a move from pre-deployment to post-deployment testing for VoIP. Three to four years ago, people did not have any VoIP traffic to measure hence they were using pre-deployment tools to see if networks were capable of supporting VoIP. Today many people have deployed or are in the process of deploying VoIP, and have live traffic that can be measured. Hence there is a shift from pre-deployment to post-deployment. Also within the industry, we have seen a strong pick up in interest in the embedded monitoring model however Telchemy has been championing this approach since our inception in 1999. In terms of what Telchemy has done to address market changes, we actively track technology and market trends and participate in international standards activities in order to ensure we are moving in the right direction. We introduced our video monitoring technology last year and are updating this to reflect current trends in IPTV and we have also added active management and monitoring products to our portfolio.

AC: Because we are a technology company, the markets that we sell to are those where the equipment providers are located, although our products are used World-wide. And so the key international markets for us are US, Canada, Europe, Japan, Taiwan, Korea, India and potentially China.

AC: The biggest challenge that we face currently is simply managing growth. We have always worked hard to deliver reliable, well featured, good quality products and technology, and want continue to maintain these objectives while we are going through a period of high growth. From the market perspective things are also growing and evolving quickly; as a technology company, you need to look ahead and ensure that products are ahead of market trends. So we have to work hard to understand what is going on within the industry, to be good at forecasting industry and technology trends, in order that we can develop the right technology well in advance to allow our customers and partners can be early to market.

AC: We have a very fundamental understanding of the behavior of IP networks and the way these behaviors impact real time services, for example we developed the time series based IP impairment model used in the new ITU G.1050 Recommendation, which is an advanced network model for testing VoIP/ IPTV products. We also have a deep understanding of network management, and have extensive experience within the telecom, cable and enterprise networking industries. We have the ability to develop solutions that are very scalable, easy to use and efficient, that can be deployed in wide range of products. For example, exactly the same VQmon software is used in handheld test tools monitoring single VoIP calls and high capacity probes monitoring ten thousand calls. We have a proven ability to contribute to, and drive standardization, which is very helpful when used with our business model.

If you look at the end-user perspective - service provider or enterprise - they need performance management solutions that are device and vendor independent. We have the technical ability to reasonably predict market and technology trends, relationships with service providers and major enterprise that we can use to verify requirements, and the ability to be able to conceive and architect solutions that can be widely deployed. Our OEM business model allows us to deliver this consistent technology and functionality to broad range of the industry.

AC: 2005 was a very good year for us. By end of 2005 the installed base of our VQmon VoIP monitoring and analysis technology had exceeded two million units and this had doubled by June 2006 to four million units. We introduced our IPTV analysis technology in the middle of 2005 and achieved rapid market success, with eight equipment vendors using this technology by early 2006.

In 2006 we are extending our market position and technology base in IPTV, and building revenue growth from our new system level OEM products.

AC: Our users are test equipment vendors and network equipment vendors rather than the service provider and enterprise "end user". The concern of the end user seems to be - to ensure that the measurements (and diagnostic information) are reliable, robust and informative. Within the industry, there are over 70 equipment vendors using Telchemy technology and probes, analyzers and other product types, which represents a strong statement that the end-user has found that Telchemy’s technology does address these requirements. We have some very unique aspects of our measurement technology, which means our results are very stable and accurate in the presence of time varying IP network conditions.

In terms of after sales, we make sure that when our software is developed, we take great care to ensure it is reliable. Hence we have very few customer issues. Our after sales service tends to be more the provision of new functionality; we update our products features every six to nine months.

AC: We have been getting a huge level of interest in video, and have been asked for video support in all of our products. Also, we have been increasingly asked to provide support for data and network application performance monitoring. Even though initially we set our scope as the voice and video market, the industry sees us as being able to contribute good new ideas to the traditional application performance monitoring market.

AC: We have announced quite a few products which are seeing their initial sales. In the middle of last year, we introduced VQmon/SA-VM which is our IPTV analysis product. We introduced a new active test product DVQattest for pre-deployment testing and troubleshooting. We have seen initial sales of SQprobe, which is an OEM Gigabit Ethernet VoIP probe, and of SQmediator, which is a unique product designed to collect quality of service reports from end points. Later this year we will be shipping a very interesting product, Voyager, which is a sub-$500 active and passive VoIP probe with integral passive tap intended for Hosted PBX/ Enterprise Branch Office applications.

AC: We have very little competition in our primary markets. Our largest competition is internally developed solutions within potential customers. In terms of how we differentiate ourselves; essentially we work hard to develop the "best of breed" technology and to be the ideal OEM partner. This means that we need to have a clear understanding of market direction, actively participate in industry standards development, provide a reliable product or software component to our OEM customer, be our customer’s "product manager" within our specific area of expertise and be commercially realistic. Our technology is differentiated by our ability to measure time varying IP impairments and predict their impact on perceptual quality, which is the subject of considerable internal expertise and three granted patents.

AC: We don’t have any immediate plans to acquire anyone but we are interested in opportunities that would be complementary to our core business in terms of technology and revenue. The Company’s traditional strength is the real time monitoring and analysis of VoIP and IPTV streams. We would like to increase the depth of analysis and problem identification we do for VoIP and IPTV, and also to expand into distributed application performance analysis.

AC: I think there will be more consolidation. We see quite a lot of that happening both within the test and management industry and in the network equipment industry.

AC: I think in terms of 2005, the industry was growing very well. There was a lot of market interest with good growth rates and VoIP has moved from hype to being a solid technology with growing deployments. In 2006, IPTV is the hot topic. We see 2006 as being a year in which the VoIP market will experience solid growth and IPTV will start to pick up. We see good market conditions persisting through 2007 and 2008.

AC: I see the future as an interesting one for the test and measurement industry. We are dealing with growing complexity in several dimensions.

There is a strong desire within the industry to be able to run a wider range of real time and near real time services over any combination of IP networks. That brings us back to the problem of operating services over interconnected networks and the ability to troubleshoot and manage services with over different networks. This may require cooperative relationships between the management functions associated with interconnected networks and services, which is an area that has been little addressed within the industry.

There is a high level of interest within the networking industry in self-managing/ healing/ optimizing networks and it is going to be very interesting to see how the relationship develops between the "self-managing network" and the test and measurement industry. The test and measurement industry has to expand from being a provider of probe and analyzer products to encompass probe and analyzer technology integrated into the network infrastructure and IP endpoints. In order that networks can "self-heal" they need to understand what is affecting service quality, and the test and measurement industry has considerable expertise that can be brought to bear on this problem.

Telchemy is well placed to play a leading role within the industry in this exciting future, and we look forward to working closely with our customers and partners within the test and measurement, and network equipment industries to realize this vision.