Tazz Shrinks, Shifts Strategy

Carrier delays take their toll on policy control specialist Tazz Networks, which has shrunk down to just 10 staff

September 17, 2007

6 Min Read
Tazz Shrinks, Shifts Strategy

Policy control specialist Tazz Networks Inc. has been forced to cut its headcount by about 80 percent and draw up a new strategy after failing to land some Tier 1 carrier deals it had been targeting for years.

The move shows how vulnerable specialist vendors are when they're relying on business from the market's biggest operators, which can take years to make their procurement decisions.

Tazz has been one of the leading specialists in the policy control sector during the past few years, and scored something of a coup by announcing an OEM deal with Cisco Systems Inc. (Nasdaq: CSCO) early in 2006. (See Cisco Tangos With Tazz, Tazz Pockets Another $6M, and Tazz Expands in Europe.)

But even that relationship and the emergence of policy management as a key element of major operators' plans haven't been enough to sustain Tazz.

Policy control is regarded as a vital component in the management and provisioning of services in converged next generation networks, with most major carriers either known to be, or believed to be, testing and trialing various policy control solutions. (See Policy Control Heats Up, Policy Control Is Key, and Broadband Policy Servers.)

It's also a vital piece of the puzzle for smaller carriers, mobile service providers, and cable operators: Other policy control specialists such as Camiant Inc. have thrived in markets where the deals might be smaller but the decisions are made more quickly. (See Camiant Wins Deal, Camiant Puts Video Policy Gear Into Play , and Startup Company Profile #4: Camiant Inc..)

But Tier 1 operator policy control procurement decisions have been pushed back, with many in the sector saying that policy control's role in carriers' IMS (IP Multimedia Subsystem) plans is the cause of many delays: IMS has proven something of a headache for carriers looking to implement converged service management and delivery platforms as they migrate to IP-based networks. (See Report: IMS Goes From Hero to Zero and The IMS Two-Step.)

Tazz CEO Gerry Goodman believes that the complex task of managing the migration from multiple networks to a converged architecture has slowed the market down. "Policy control decisions have taken longer in the Tier 1 carrier market... Carriers prefer a single solution not only for their various products [voice, video data], but also for their various access technologies [DSL, FTTx, wireless]. These factors have combined to slow down the decision making process since all of these functions must ultimately work together," notes Goodman.

Such delays hit small, specialist technology providers harder than the large, more diversified systems vendors.

Tazz is still operational, but has retained just 10 of its near 50 staff, and is now banking on licensing its technology to large equipment vendors and systems integrators.

New strategy
CEO Gerry Goodman says the major carriers "only seem to be buying from a small number of major vendors and major systems integrators these days, so it's tough for small independent companies. We are looking to build relationships with the companies that the carriers are working with," and license Tazz's intellectual property to the big hitters.

"It's a different focus but it's one that's appropriate for the state of the market and our financial backing," says the CEO.

So "our new strategy dictates a channel expansion beyond our Cisco single channel approach. This being the case we will offer our IP and core product support to any and all of the companies interested in taking policy control to the next generation network space."

The Cisco relationship continues, though. "Our relationship with Cisco remains positive -- they have been a good partner. Much of our effort during the past two years has been conducted in concert with Cisco," though Goodman rejects rumors that Cisco turned down the chance to buy Tazz. "There haven't been any serious discussions about any acquisition."

To Page 2

The new licensing strategy means the company no longer needs staff to support "professional service projects or carrier pre-sales and sales support activity," so staff levels have been reduced.

"We have 10 staff, and we may add one or two in the near term. The bulk are in Providence, Rhode Island, primarily technical staff including some of the founding engineers, and two are in the U.K. office. We had 45 to 50 staff until recently. The board took this decision and it was a tough one to take but it was necessary" to help cut operating costs.

Which brings us to Tazz's finances. Goodman says the company still has some cash and expects support from its existing investors. "Funding is not really an issue at our new size," he says.

He also says the company has some ongoing business in Europe, "mostly through the Cisco relationship, but we can't name them. We also have a few active accounts in Asia that we can support and which are being managed by local systems integrators."

But those active accounts don't include a relationship with BT Group plc (NYSE: BT; London: BTA), says Goodman, despite previous development work. (See BT Claims VPN Breakthrough and BT, Tazz Tackle VPNs.)

Other policy victims?
So if Tazz has been forced to shrink and refocus because of market conditions, are any other policy players in the same boat?

The other policy control specialist that has focused in Tier 1 carrier accounts is Swedish outfit Operax AB . Its current salvation appears to be a recent round of funding -- it raised $15 million about a year ago, and believes it has the resources to make it through to purchase orders from its carrier engagements. (See Operax Scores $15 Million.)

The company's chief marketing officer Chris Merrick believes there are "signs" that large operators will make policy control technology "commitments in 2008. It would have been nice to have seen some big deals sooner -- it would be better if the market was hooter sooner," but he maintains that Operax's business plan doesn't require any major contracts just yet.

Merrick says the company is still working with BT, Orange (NYSE: FTE) and Telecom Italia (TIM) as they figure out their NGN requirements, and claims also to be working with Tier 1 operators in North America and Japan. (See Sources: Operax Scores With Tier 1 Carriers.)

Operax has also been targeting the needs of the defense sector, and has picked up some business there too. "We're generating revenues, though we're not self-sufficient yet," says the marketing man. (See Dutch Army Deploys Operax.)

The company's funding and ongoing business engagements mean it has maintained its staffing levels at around 60, and today announced the appointment of two new staff -- a general manager, and a business development director -- focused on business in the Americas. (See Operax Names New GM.)

Not that Operax has been immune from market pressures, though. The company replaced its CEO earlier this year as part of an overhaul of senior positions, and has been forced to diversify its product development in an effort to generate additional market activity. (See Operax Names New CEO, Operax Appoints New Execs, and Operax Adds Exec.)

Merrick says the market delay is linked to "how quickly IMS is being deployed, so we're making sure our solutions are good for pre-IMS deployments as well as for IMS," with product launch activity being planned for next month's Broadband World Forum Europe event in Berlin.

— Ray Le Maistre, International News Editor, Light Reading

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