|Azure founder John Cronin
Subash Menon, CEO of Subex Azure
The process of consolidation in the OSS industry continues. In
April fraud management specialist Subex Systems took over Azure
Solutions, which specialises in revenue assurance. The combined
operation, plain and simple Subex Azure, will focus on
developing revenue operations centres.
Subex is the older of the two, founded in Bangalore 14 years
ago, which is ancient in telecoms software terms. Azure was
spun out of BT only three years ago, and had its head office in
central London, with shareholders including New Venture
Partners, Doughty Hanson Technology Ventures and Intel
Subex went public with an IPO in 1999 and today its shares
are listed on three Indian stock exchanges, and in Europe its
global depositary receipts are listed on the Luxembourg Stock
Exchange. Intel Capital took a stake of around 10% in 2002,
though no longer lists Subex Solutions as an investment on its
Subash Menon, chairman and CEO of Subex Systems, will head
the new operation, but former Azure CEO John Cronin appears set
to stay on, as do most of Azure's staff.
Both partners have been acquisitive. Subex took over the
London-based fraud management operations of Alcatel in July
2004 for $3 million, the Fraud Centurion fraud operations of
Lightbridge in Denver the following month and Herndon,
Virginia, fraud management and CRM company Mantas as recently
as March 2006, for $2 million. Last year Azure acquired
US-based cost and revenue-assurance company, Connexn
Technologies, and it acquired a UK company, Anite Calculus, in
November 2004. As an unlisted company, Azure did not reveal the
terms of its deals.
The combined company claims 23 of the world's 40 largest
operators as its customers, with a total customer base of 150
installations in more than 60 countries. Tier-one customers
include BT, Telenor, Cable & Wireless, Vodafone, Orange,
O2, TeliaSonera, Rogers Wireless, T-Mobile USA, Verizon, Bharti
Televentures and AT&T.
Days after the merger was announced, but before the deal had
been legally completed, Menon came to London to meet his new
team. Global Telecoms Business interviewed him, with Cronin
sitting alongside and taking part.
Had this been something the two had been cooking up some
time? The two laughed: "Things of this nature don't happen
overnight," says Menon. "We felt that there is tremendous
opportunity for a merged entity here. Really it's a question of
going after the opportunity that's emerged in the telco world
for a vendor that is really strong, with a tremendous
The two companies first encountered each other in the market
two or three years ago, says Cronin. "When we first came out of
BT we realised who our competitors were, and that's when we
came across Subex."
The serious proposal was made 12 months before the merger.
"We first got together at the 2005 Billing & OSS World show
in Philadelphia," he says. Discussions continued in London.
"That's when we started to get to know each other."
The two recognised the opportunity to merge, says Menon. "We
looked at the strengths of the two organisations and we saw
they were very complementary." They saw that "that creates a
very powerful organisation, which is why we thought it made
Why? "Subex is that largest player in fraud management for
telcos," says Menon. "We have the largest installed base. And
Azure is the largest player in the revenue assurance space. It
makes eminent sense for telcos to go to a vendor that has the
products that are the best out there and are used by the
maximum number of telcos."
They looked at the customers: "Subex has 85-90 telcos as
customers and Azure has 50-60 of them, but the overlap was only
Is that because of a geographical difference in the two
companies? No, says Menon, looking at Cronin. "Both of us seem
to be present in every geography, but serving different
customers." That clearly indicates a potential for upselling
the 150 or so customers the merged company will have.
"On the Subex side we saw a great execution capability, and
substantial profitability in the company. On the Azure side we
saw a very deep domain expertise — having its roots in
Put them all together and "that's a world-beating
proposition", says Menon. "It makes eminent sense to come
Had each of them been looking at alternative partners. "I
guess we always look at alternatives and different
opportunities. But we've been actively in discussions for about
six months. During this time we were looking at each other much
more closely than at anybody else."
Cronin says: "We looked at everybody in the market before we
got serious in the last six months. For us, what came up best
was Subex's number one in fraud and the capabilities they've
got — the product management and the product skills.
That's really important in this area. That's what customers
want: off-the-shelf products which Subex has."
Azure "evaluated everybody you can think of in the
industry", says Cronin, "and they are the best".
Customers may not overlap, but what about the product range?
Is there a synergy there? Menon answers: "A few months ago,
November 2005, during a conference in the US we launched our
new concept called revenue operations centre."
This "makes tremendous sense for telcos", he says. "We're
still in the process of looking at the different products and
how to integrate them. There is further clarity required on
that front. But all these products will strengthen revenue
operations centres for telcos. We think that's a winning
Concept of the revenue centre
Menon wants to clarify that "the revenue operations centre
is not a product: it's a concept where different software
solutions come together along with people, processes and
hardware, to form a facility for the telcos".
He compares it with the NOC, the network operations centre.
"That's for the CTO. This is a facility for the CFO."
That means "their key performance indicators will be there
on screens", says Cronin. "They can all focus on leakages. We
have visualisation tools, with traffic lights coming up red,
green and amber. It's real time dynamics."
Because Subex is a publicly traded company "that was another
positive thing for Azure and its shareholders", says Menon, as
a way of evaluating their investment "at some point in time, if
they would like to". They don't want "to exit tomorrow".
Azure's investors will take GDRs in the combined company via
its Luxembourg listing. "Underlying shares will be Indian
shares and we will issue global depositary receipts that will
be listed in Luxembourg."
Why Luxembourg? Subex earlier had convertible bonds listed
there, a couple of years ago, he says. "They knew us and we
Are all the Azure investors staying? "Yes they are," says
Cronin. "New Venture Partners, the largest shareholder, really
sees the huge benefit in the longer term and the value this
The Azure shareholders will have a "34 odd percent" stake in
the combined company, says Menon. "A little over 34%." And they
will have two board seats plus three observers. The merger
itself is due to be completed in mid-June, says Cronin, with a
head office in Bangalore.
Subex employs about 340 people: "We call them Subexians,"
says Menon. "We don't like to use the word 'employee'. I don't
like that word. Most of them are in India, with about 50 in
other countries, the US, the UK, China and Canada."
The London office, until then the head office of Azure, will
become the regional office for Europe, the Middle East and
Africa. Connexn's former headquarters, just outside Denver,
will become the combined company's base for the Americas.
Subex's people in London and Denver will move into the former
Azure offices. Azure currently has 200 people, including a
large R&D centre alongside BT's research centre near
Ipswich in the east of England.
Rationalisation and consolidation
Anyone going as a result of the merger? "Rationalisation and
consolidation are natural fallouts of anything of this nature,"
says Menon. "As regards the extent, we don't know at this time.
We are starting to look at those aspects through an integration
committee. I don't have answers."
So, once the company is combined and it can start marketing
to all 150 companies, there will be cross-selling, confirms
Menon, on happier ground.
Cronin steps in: "An additional product set that we know
will be of benefit to us is risk management and credit
management." Subex has that in its portfolio "and more and more
customers are looking for additional risk and credit management
facilities and services", he adds.
"And we offer bureau and managed services, and as the
combined powerhouse that we are now we will be able to offer
outsourcing to the tier ones, as we've done with BT. We can
offer that, which huge benefits to our customers."
Does the merger change the image of Azure in the market? It
will no longer be seen as a spin-off from BT, and will that
make it easier to sell to, say, France Telecom in Paris or
Deutsche Telekom in Bonn?"
Cronin agrees. "And as we've moved out of BT from 2003 more
and more we've grown our international customer base, with less
reliance on BT for our revenue stream." But BT still accounted
for "roughly 50%" of Azure's revenue, he says. From the
completion of the merger "it will drop to about 25% in the
current financial year", says Menon.
Subex doesn't have any similarly dominant relationship, he
adds. "Some of our biggest customers are Rogers in Canada,
Vodafone in Romania and Saudi Telecom in Saudi Arabia."
BT has shown its confidence by extending Azure's previous
five-year contract by a further two years, adds Cronin.
We turn briefly to the background of Subex itself. The
Indian telecommunications carrier business has not, until the
past few years, been particularly competitive and enterprising,
so how did it get established?
The answer is that it has changed significantly. In 1992 it
was a hardware systems integrator for telcos, says Menon. "We
were importing different pieces of hardware from around the
world and integrating them, and integrating support, and so on.
It was exclusively for domestic application." That phase lasted
until 1999-2000, by which the annual revenue had got to $2
"We realised that wasn't going to take us too far and we had
to do something else. We always wanted to provide solutions of
Hardware manufacturing "is a bit difficult to do in India",
he says. "The infrastructure is really not there, but software
is easier in that sense, so we looked at software solutions for
Fraud management was the first sector the company
identified. "We launched the product in early 2000." The
company started selling in India and expanded from there
— so in five years "we went from zero installed base
to 85-90 customers and we've gone from being a nonentity in the
space to being the largest player in fraud management
The company has since added more products, including revenue
assurance and subscriber risk management, he says. Total
revenue is about $25 million a year, with "30% profitability on
a net basis after taxes", says Menon. "We've been rewarded well
by the market, with the result that we've god a market cap of
about $300 million."
Once the merger is complete, what about product overlaps
between the two companies? "We have to come up with a road map
that takes care of all the customers," he says, "ensuring that
none of the functionalities of the products are lost. As long
as the customers are happy and we don't lose any of the
benefits of the products, it's a straightforward technical
Both companies have a global culture, says Menon. "We need
to look at the coming together of the cultures of the two
Cronin says that the merged company "will be closer to
customers in their geographic areas". He points out that, while
Azure has many customers in south-east Asia, "our customer
support centre has been in the UK," but now it gets "customer
support in North America, in EMEA, in south-east Asia as well
as in India". Azure's customers in India will now be supported
from their own time zone: "local presence, serving those
customers as they want to be served".
What are the gaps in coverage and products, now that the new
company has brought together two strong product sets?
"Let me put it this way," says Menon. "Revenue maximisation,
the space we operate in, is an evolving space. If you ask a
telco what it is looking for in revenue maximisation today, it
will not exactly have a straight answer."
That is the case for vendors as well, he adds. "We are
trying to understand what the customer really needs. The
opportunity is not the low-hanging fruit. It is going deep down
into the operations of the telcos and understanding what they
need and coming out with products that they have not even
thought about, and helping them improve their
Cronin points out that not only are telcos trying to improve
their profitability, but they are also moving into "the wild
west of the IP networks". Menon adds: "We will go where our
customers go, but we will try to go there before them."
Subex products "are already IP enabled", he notes, "as the
Azure products are". Cronin adds: "There's not that huge demand
yet. There's a lot of talk but deployment is another thing.
We're involved with 21CN in BT."
Subex, like Azure, is an active supporter of the
TeleManagement Forum as well as its catalyst programmes, says
Menon. "This year I have taken on a position as one of the
advisers to the board. It's an intensive relationship."