VPIsystems Gets a Makeover

New tools and subscription system should get the network design software firm back on track UPDATED

March 8, 2002

3 Min Read
VPIsystems Gets a Makeover

A tuck here, a trim there. Pretty soon VPIsystems Inc. will look like a new company.

The network software maker says it will unveil a new licensing scheme for its software at the upcoming Optical Fiber Communication Conference and Exhibit (OFC). It will also unveil a new configuration tool designed to cut down the time needed to plan and deploy DWDM links.

VPI sells software that helps network operators and equipment vendors design and plan networks. However, rather than relying strictly on expensive software licenses, VPI is hoping its customers would rather buy into a subscription-based plan that would allow several people in each company to access to its entire catalog of software tools.

"We think this provides a huge economic advantage to the industry," says Kay Iversen, VPI's CEO and president. "Especially now, when upfront costs are an issue [to service providers and equipment vendors], this model is very appealing."

The new business model is designed to supplant slower software license sales with recurring revenues from a subscription model, but the plan is not without its drawbacks. "The downside of the subscription model is that if VPI goes under, their software stops working and [the customers] have lost their investment," says one former sales employee, who spoke on the condition of anonymity.

The company is also adding a new software tool, called VPIlinkConfigurator. This tool helps a service provider deploying a WDM system to properly configure a new installation, based on rules for fiber type, equipment manufacturer, and network conditions. "Now the person in the field, who is not a WDM expert, can have easy access to all the knowledge of a WDM expert," Iversen says.

In the past year, the telecom slowdown tripped up both VPI and its customers. The company has retooled its management team since early 2001, adding Christian Ungureanu as COO, Charles Farrell as head of sales, and Paul Commons as CFO. It also added consonant-rich telecom veterans Cas Skrzypczak and Hagen Hultzsch to its board.

The company has shrunk in size by at least 28 percent in the past year. It had 250 employees in eight locations as of July 2001. That number had dropped to 170 as of February 2002, according to information VPI provided to Dun & Bradstreet. Iversen says VPI now has 180 employees.

According to an internal email obtained by Light Reading, VPI cut its sales goal down to $1.34 million from $1.7 million during 3Q01. As of late September 2001, Chuck Farrell, VPI's head of sales for North and South America, reported that the company had $720,000 in deferred sales, due to customers whose budgets had been cut. Some $297,000 of that was pushed all the way out into 1Q02. Also in 3Q01, VPI lost some $250,000 in orders from customers that the memo alleged were running low on cash, such as Zepton Networks Inc. and Network Photonics Inc., the email states.

(In a statement issued on Friday, the company said: "VPI was pleased to sell software licenses to both Network Photonics and Zepton Networks that were paid in full upon receipt in 2001.")

VPI has not announced a round of funding since it closed a $20 million third round in July 2000. Iversen says VPI's investors -- including TVM Techno Venture Management, Weiss Peck & Greer, Siemens ICN, T-Venture, NIB Capital, and Star Ventures -- are in the process of closing another round.

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.comFor more information on OFC 2002, please visit: www.nottheofc.com

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