Archive for the M&A Category

Last week I reported that Praesidium, formerly the consulting division of WeDo, has been transferred to Mainroad, WeDo’s sister company. Admittedly, talkRA dropped the ball, failing to notice the original press release, which was issued in February. The move raised questions about WeDo’s perception of the revenue assurance consulting market, so I was glad to speak with Sérgio Silvestre, WeDo’s Marketing Vice-President, about the reasons behind it. He identified two motives for the move: independence and fit.

When Praesidium was acquired by WeDo in 2007, the British firm already boasted a strong brand, punching above its weight in a specialized global consulting market. However, the feeling is that joining with WeDo critically altered customer perceptions about the independence and objectivity of Praesidium’s advice. Now that Praesidium has joined Mainroad, WeDo apparently have no plans to recruit or acquire a replacement consulting team. Customers who ask WeDo about consulting services will be referred to Mainroad and Praesidium. Praesidium is still scheduled to provide one of the training sessions at WeDo’s upcoming worldwide user group meeting.

The impartiality of consultants is a subject which provokes different responses from different telcos. Some telcos want their software providers to provide them with consulting services at the same time. Others want a separation between the two, to ensure consultants do not behave like salesmen in disguise. Though the amount of consulting work done by vendors has gone up and down over the years, some of WeDo’s competitors continue to earn a significant share of their revenues by providing consulting services in parallel to selling software licences. We will need to monitor the market to determine if the separation of Praesidium from WeDo is part of a trend towards accommodating stricter procurement expectations, or whether some of WeDo’s rivals will continue to prosper by offering a mix of solutions and services. For WeDo, it is clear they are streamlining one side of their business in anticipation of the growing diversity of software products they will offer, and of customers they will sell them to.

Sérgio also highlighted that demand for information security consulting will drive Praesidium’s future growth. Praesidium’s expertise covers the connected domains of fraud management and information security. If customers are spending more on security – which seems likely given current global priorities and risks – then Praesidium’s best sales pitch will more naturally fit with Mainroad’s IT-centric business offerings, than with WeDo’s assurance-centred value proposition.

Again, this may be an interesting indicator of trends. Over the years there have been many arguments about how to organize and coordinate various risk and control silos, and the extent to which these silos should be kept apart. Whilst one debate focuses on the pros and cons of linking revenue assurance to fraud management, there is a second debate which revolves around the relationship between fraud management and security. If spending on security rises, it becomes natural to order these debates so that a telco first decides if it will handle fraud management as a component of an overall security strategy. And if fraud is treated as a subset of security, this will have a knock-on impact on how the telco will divide responsibilities and coordinate work between its fraud management and revenue assurance teams.

For several years WeDo have explained their suite of products by reference to the umbrella concept of business assurance. Rising expenditure on security may create opportunities, but also challenges for WeDo and their rivals. Security is not amongst their core strengths, though the risk mitigation provided by their products has some overlap with the goals of security. And in the context of security, customers will be less forgiving towards any supplier who over-promises and under-delivers. Like telcos, suppliers will also need to develop a more sophisticated and consistent understanding of the telecoms risk universe, the relationships that exist within it, and which elements they are competent to deal with. In that respect, WeDo already does a better job than some of their peers. Having sister companies will help WeDo to perform a balancing act between refusing to do work outside their range of competence, whilst still being able to satisfy customers and draw incremental revenues into their corporate group. Rival vendors should consider the extent to which they have formal and informal partnerships that would help them to connect their areas of proficiency to other parts of a holistic risk universe.

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WeDo, vendors of business assurance software, have sold their Praesidium consulting unit to Mainroad, providers of managed IT and various continuity and security-related services. Mainroad’s press release can be found here.

WeDo and Mainroad are sister companies within the Portuguese Sonae group, so this move is more like an internal transfer than a conventional trade sale. WeDo CEO Rui Paiva also sits on the board of Mainroad. Nevertheless, no price was disclosed for the deal, a fact which was also picked up by Computerworld.com.pt. It is not known if the deal had any impact on WeDo’s reported 12% rise in revenues during FY13, though it would be reasonable to assume, based on the date of the announcement, that the transaction occurred after the FY13 year end. This still leaves an open question about how much Praesidium contributed to WeDo’s 2013 revenues, and if WeDo has any plans to compensate for the drop in revenues by building up or acquiring a replacement team of consultants.

Praesidium is now described as the ‘Information Security Division’ of Mainroad. WeDo originally acquired British-based Praesidium in 2007, also for an undisclosed sum. The transfer suggests that the core technical strengths of Praesidium’s consultants are best focused on giving advice about information security and business continuity. When Praesidium was a unit of WeDo, their consulting skills most naturally complemented WeDo’s product suite within the domain of fraud management and related risks.

On a final note, I want to apologize to readers for being unusually slow to report this story. The announcement was made in February, during the run-up to Mobile World Congress. It is unclear if the announcement was timed so Mainroad could feed into the usual pre-MWC rush of press releases, or whether the publicity was intentionally muted, to avoid drawing attention to the fact that WeDo has seemingly exited the consulting market. Either way, I failed to notice. I will follow-up, and report more as I learn more, but I did not want to further delay the sharing of this information. Though Praesidium is small, I believe this deal merits the attention of talkRA readers. Firstly, this may be another sign of declining demand for consultants working in the fields of revenue assurance and fraud management. Secondly, it reiterates a trend that some skills and services previously drawn into the scope of revenue assurance and fraud management may find a better home when teamed up with security and business continuity. Both of these observations are relevant to practitioners working in the field. They should be kept in mind when contemplating the pros and cons of a job in consulting versus being employed by a telco, and also when considering where certain jobs belong in the telco’s org chart. If I learn more about the motivation behind Praesidium’s transfer, I will pass it on.

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Keynote, California-headquartered suppliers of telecoms test equipment, have purchased Meucci, Belgian specialists in detecting bypass fraud. The price was not disclosed. You can read the press release here.

Meucci claims to have over 120 ‘active’ customers, making it the market leader in bypass detection. Meucci will become a subsidiary of the Keynote SIGOS division, which was itself created following Keynote’s 2006 purchase of SIGOS, German manufacturers of test call generators. Keynote SIGOS products are currently used by over 350 network operators.

In terms of technology and services, there is a strong overlap between Meucci and Keynote SIGOS, raising the possibility of cost synergies, though the press release states that Meucci customers will continue to be served by the company’s main office in Gent, Belgium. Meucci is the 18th acquisition made by Keynote since 2000. Keynote is owned by Thoma Bravo, a private equity firm, suggesting that the purchase of Meucci is part of a deliberate strategy of consolidating supply of telecoms test equipment. According to its website, the Thoma Bravo investment strategy is to build profitable market leaders by curtailing damaging over-competition:

Thoma Bravo has invested in many fragmented, consolidating industry sectors and has particular expertise in application software, infrastructure software and technology enabled services sectors.

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Atul Jain, CEO of TEOCO, modestly says his firm is not a player in the revenue assurance market. But TEOCO’s purchase of AIRCOM, experts in Radio Access Network optimization, highlights the way to connect assurance of the back office to the frontline of customer experience and revenue generation. To discover more, read my new post for Billing Views.

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Mara-Ison, the Dubai-headquartered IT services business, is rumoured to be in advanced talks to buy Connectiva, the troubled Indian RA vendor, according to the unofficial blog of disgruntled Connectiva employees. According to Mara-Ison’s website, they have a strong presence in Africa, but there is minimal information about their current telecoms offerings or customers. As such, there is little to say about the potential synergies between the businesses, except that there is unlikely to be any overlap between their products. What is certain is that existing Connectiva customers will be eager to hear some reliable news from their supplier. If the rumours are true, an official announcement may come soon.

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