CEO Interview – Dave Labuda, MATRIXX and why the Tier 1s?

Written by on February 8, 2016 in Billing & Payments, Features with 0 Comments

Screen Shot 2016-02-01 at 10.41.53Running a fast-growing software company makes for busy people, but DisruptiveViews (DV) was able to catch up with co-founder, CTO and CEO of MATRIXX Software Dave Labuda (DL) for an update.

DV: Dave, many thanks for making time for us to have a chat. Let’s start, perhaps, with some background. Where did MATRIXX come from and what makes it different?

DL: So, the core team at MATRIXX are steeped in the telecoms industry, with backgrounds in charging, billing and the whole control plane area. In fact, many were involved in a company that I founded in the 1990s called Portal Software. Portal, initially, was timed and aimed at the then-new internet players. We realised that the world had changed and flexibility and real-time responsiveness were the keys. Then, of course, it evolved and we targeted the telco market as it realised the new requirements.

Then, in 2007, the iPhone launched, and we launched MATRIXX in 2009 to address what we called the ‘smartphone effect.’ We knew that your phone was going to become your social environment, your bank, your shopping mall, your navigation system, your flashlight, everything. We knew there was a requirement for something different. We also realised it was both an opportunity and a threat for operators. An opportunity because it created the possibility of a much more interactive relationship between the operator and the customer. Up to that point the interaction was either a bill at the end of the month, or a balance at the end of the call. That was it and yet we saw in an arena like retail the interaction was constant, and constantly updated. We also knew that achieving this real-time, interactive capability would throw up a heap of technical challenges. If you are going to deliver something, then deliver it well. The traditional OSS and BSS approach simply was not good enough.

DV: So, the next question has to be, how do you think that operators are stepping up to the challenge? They know they are not as flexible and cool as Google, for example.

DL: I would say that in the last 12 months – 18 at the most – we have seen a huge shift in the urgency and political will to transform into digital operators. When we came to market it would be true to say that most operators were in a ‘let’s hope this goes away’ mode. We were lucky that we found some forward looking companies that wanted to work with us. Now, though, we see operators really understanding that they have to come out with a new approach, one that speaks to the Millennial crowd, the mobile first crowd, those who love Uber and so on. One problem was that it is fine for the CEO to go to the CIO and tell him to do it. The trouble was that the legacy infrastructure was so complex and so unable to adapt or be flexible that there was no clear understanding of how to do it.

Now, though, we see a new mentality emerging. McKinsey calls it two-speed IT, which is a reasonable description. Now we see quite large numbers of operators putting in a new generation of infrastructure that is designed to be digital-first, mobile-first and not trying to wire it back into the legacy. So they are undertaking Greenfield initiatives and rolling out a new brand, a new offering which takes advantage of the new infrastructure and then migrating the customers over, generally starting with the high value ones and working down. And because this means that you are not shackled with the morass of old systems, some of which no-one knows what they do anymore, you end up with a much more agile approach. This way you can get systems up and running in three to four months, customers can go live very quickly and the ROI figures are incredible. We have some figures from our customers on ROI, increase in NPS and reduction of calls to call centres that are really impressive.

The other thing is that this approach tends to generate momentum over time, whereas the multi-million dollar transformation tends to die because it is just too difficult. And, frankly, in the last few weeks we are seeing the number of conversations rising exponentially. We have never been busier.

DV: I am not quite clear how you can ignore the legacy infrastructure, nice as that would be. Presumably companies need to know what other services a customer has?

DL: So this approach recreates the infrastructure. Not the network and network gateways, obviously, but the business applications, charging, CRM and so on. What you typically find is that there are 10,000 products in the legacy systems, most of which are completely obsolete. So what you do is recreate the 200 that you really care about and then only migrate the old services that you need.

DV: One thing that I find curious about you is that given that you are a small company, you seem to be pitching the Tier One operators. I would have thought that you would be pitching the Tier Threes, the innovators and even the digital service providers themselves.

DL: I see your point, certainly. I would say that the problem that our software addresses is far more evident at scale. It is not that the operator with two million subscribers does not have the problem but at that level there are still things you can do with the legacy. Once you get up to 20, 50, even 100 million subscribers and you are introducing 4G and so on, then at that level the legacy systems effectively just fall apart. So, it is actually those operators who now have a clear realisation that they need to bet on someone like us.

DV: I would guess that dealing with Tier Ones brings its own problems though. Presumably you convince the CEO and CIO, and then you get thrown into Procurement where you sit for 18 months. Is that still a problem?

DL: I would say that the procurement process in telcos is, shall we say, interesting. It is not super-fast. We don’t see it as being 18 months, it is typically a few months though, in the large ones. The smaller ones are often quicker. What I would say is – now – if the business wants it, it happens. Of course there are processes and red ink involved but there has been a change in how operators spend their money. Traditionally, IT would go out and find some cool stuff and implement it. Now, if the business identifies the need, then budget is allocated and from there it is a downhill battle. So, if we can show the business what our software can enable, then it is definitely easier to get it through. Fundamentally the momentum is created by the business.

DV: I guess a lot has changed since your days at Portal. It must be like a walk in the park.

DL: Well, it is still a lot of work. One thing I would say is that in the Portal days we did not meet a CEO, we were working with CIOs and CTOs. Now, I have met the CEO of every single operator that we are having conversations with. The thing is that the executive team understand that what we enable is critical to the success of their company. It is no longer an IT project.

DV: So, where do you see ‘billing’ ending up in say five years’ time. It is obviously in the middle of a huge upheaval.

DL: So, our view is that billing is actually going to go away, at least in the traditional sense. The enterprise market is different but from a consumer standpoint the notion that I will get a bill at the end of the month when I am doing everything interactively and in real-time makes the notion a little out-dated. People want to view the interaction much more like a shopping experience. It becomes ‘pay now’ as you would in a marketplace. The behemoth billing engines, run by 50 people, are basically going to fade away because the value is all in the interactive, real-time subscriber experience.

DV: There are a lot of ‘bubbles’ in the marketplace right now, and the one that seems to getting a lot of attention is NFV. Where do you think we are with NFV?

DL: There are two aspects to NFV. One is that traditionally the Network Equipment Provider (NEP) would sell proprietary hardware and that, by definition, is horribly expensive, which is great for them. So, to me, the fundamental thing about NFV is that you get everything onto an ‘off the shelf’ Intel/Linux environment. Not only will this save a gazillion dollars, but we built MATRIXX in an Intel/Linux environment so we are already there. Why would we do it any other way?

The other aspect of NFV is the virtualisation piece. If you have applications running on the network that are not affecting the performance of the network you can get 50:1 efficiency increases with virtualisation. We support virtualisation, and think it’s great, but because our technology is architected to utilise the underlying machine very effectively to begin with – operators get those benefits right from the start.

DV: What do you think is going to be ‘the big issue’ for the industry over the next three to five years?

DL: I think from our perspective, the real issue will be how to create new revenue streams for operators. It is obviously not a new issue, but the decline of voice and text-based revenues will only accelerate so the issue will become more and more acute. What was a small problem will become a massive problem unless CPS figure out how to go digital and compete in the new world.

DV: There is a lot of consolidation of vendors going on at the moment, how do see this trend and how does it affect you?

DL: We love consolidation of vendors. There is nothing more disruptive and destructive to a vendor/customer relationship than merging two giants together. Every time it happens it makes it less likely that someone will come out with an interesting solution to compete with us. We still see the same legacy solutions that were around 10 years’ ago.

DV: So has Lucas Skoczkowski invited you out to dinner recently?

DL: Let us say we have a lot of friends in the industry and we are very happy just being friends.

DV: So, to finish, who do you really respect in the industry right now?

DL: A difficult question, because there are so many. I would say that Telstra has been a joy to work with, and David Thodey, who has retired now, did a brilliant job pushing agendas and going digital. They have a very co-operative attitude versus the procurement scenario you described. There are a lot of others that we are developing relationships with but Telstra definitely stands out.

DV: Dave, many thanks for your time, let’s stay in touch.

DL: A pleasure, thank you.

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Alex Leslie

About the Author

About the Author: Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet. He is publisher of DisruptiveViews and previously BillingViews. .

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