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.com For more information on OFC 2002, please visit: www.nottheofc.com

DCITDave 12/4/2012 | 10:49:33 PM
re: VPIsystems Gets a Makeover Some perspective: The sales memo said that VPI had lost a sale (or sales) to Zepton and it listed "funds" (presumably low) as the reason. That might not mean that Zepton is really low on funds. It might just be what Zepton told VPI or it might just be what VPI's sales folk told their managers. We'll, of course, let you know when we find out more.
LightMan 12/4/2012 | 10:49:33 PM
re: VPIsystems Gets a Makeover Interviewed with these folks a couple of months ago. While they have a interesting pitch focusing on aggregating service (L3) access demand onto L2 and L1 networks, they seem to be lacking vision and execution as to how to get their product out of the engineering organization into day to day operations. This is where their token-based subscription model will drive revenue.

From what I understood is that all of the modeling engines are disparate and are really bridged together via a "collaboration shell".

Wasn't really interested in the role, which I guess they saw, because I didn't get the offer... The next 6 months should be telling, I hope they pull through as I enjoyed talking with Chuck.

edgecore 12/4/2012 | 10:49:33 PM
re: VPIsystems Gets a Makeover Also in 3Q01, VPI lost some $250,000 in orders from customers that were running low on cash, such as Zepton Networks Inc. and Network Photonics Inc., the email states.


I thought Zepton had $88M and the mangament team + the board of directors to be successful in these trying times?

What is the scoop on Zepton and why are they not paying VPI?

ptpt 12/4/2012 | 10:49:23 PM
re: VPIsystems Gets a Makeover The better wording (not preferred by VPI for obvious reasons) would be "no funding for expensive outside software". The same goes for the competitors of VPI, -a mere reality of the industry's current situation. Who will buy software for DWDM when nobody can sell DWDM system itself?
VinceW 12/4/2012 | 10:49:16 PM
re: VPIsystems Gets a Makeover How did you get that a company is low on cash from a sales memo/loss report that listed "funds" as the reason. Sounds more like "wild speculation" than "news analysis". I suggest you correct the article before one of their investors has a cardiac arrest...
Sign In