Gordon Smith talks to Cibenix about its recent deal with Bharti Airtel – one of Asia’s leading integrated telecom services providers with operations in India, Sri Lanka and Bangladesh.

As deals go, it might not rank with selling ice in the Antarctic or sand in the Sahara but Cibenix’s recent €2 million contract with Bharti Airtel still counts as a coup. Airtel’s home market of India is one of the primary global centres for low-cost, high-quality software development and the country’s biggest mobile provider could have had its pick of indigenous firms to build the software it needed. Instead, it chose a 2 5-man Dublin-based firm to provide a strategic piece of technology.

The significance of the deal is not lost on Cibenix chief executive Mike Brady, but his feeling is “an enormous sense of relief” at landing a deal that took 18 months to complete. The key to doing business in India is what was described to me as the ice cream effect. “It should be a simple transaction: ‘Here’s your ice cream’, but in India they ask you to explain the chemical composition of the ice cream. They want to know everything,” says Brady. He believes this may be related to India’s strong outsourcing business culture, where the success of such deals often lies in the fine details of a contract.

NEGOTIATIONS

The lengthy duration of contract negotiations were unusual and probably unique to Airtel, he believes. “The company are masters of outsourcing – they more or less wrote the book on it.” During the negotiations, Cibenix worked with three different systems integration firms and Infosys was the one that finally won the contract to provide the Dublin firm’s software. Unsurprisingly, Brady says good partner management is an essential part of doing business in India. “The partner was almost as important as the Cibenix product and technology,” he says.

The technology, in this case, is called on-device services (ODS) software. It runs directly on mobile phones, providing users with a portal for accessing services. Airtel is using the ODS to promote its music, apps and internet access services.

It’s a strategic technology for Airtel, because it offers the company the chance to gain extra revenue from customers. “Mobile operators are stuck between internet brands and device vendors. They are terrified of becoming a ‘bit pipe’ just like a broadband provider. Customers are asking what value is the operator adding, and that’s where we become strategic. They need to have a presence on the device, which is what we deliver,” Brady explains.

In India’s mobile market, people buy a phone in one shop and then visit another to buy the SIM card. Airtel provides the latter, and it gave Cibenix a list of the top 200 phones on its network. Of that number, Cibenix’s ODS could run on 160. This gave the Dublin company a vital edge. “Writing software for phones is bloody hard,” says Brady. “In India, the competition on the vendor side is so tough. Whatever the customer wants, they give it to him.”

Cibenix deliberately pursued a strategy aimed at gaining support for the project at the level where it would be implemented, rather than just concentrating on winning over Airtel’s senior management. “We did the reverse of what you’re supposed to do -1 put in all my effort at the ground level, although I also met the CFO, CTO and CMO during the talks,” says Brady. “We’re a technical organisation. Of our 25 people, there are only two of us who sell part-time. When we come to a customer, we can talk to them at all levels. That’s the benefit of being a small, focused company.”

In the early talks, Cibenix was keen to establish its credentials as a provider that could meet the demands of very large operators. Brady recalls a meeting with the chief technology officer’s team. “Someone hurled the question at me: ‘Can your software scale?’ I feigned insult and said we had deals with the likes of Vodafone in the UK, Germany, Spain and Italy, with more than 15 million customers. The guy just smiled at me and said: ‘In India, we don’t call that scale’.”

Airtel boasts more than 120 million customers and it is adding around three million more every month. The company is currently ranked as the third largest operator anywhere in the world. According to Brady, Cibenix made one adjustment to the ODS database to accommodate that extra scale but otherwise the product sold to Airtel was unchanged.

REVENUE MODEL

The Cibenix-Airtel deal is not based on a revenue-sharing model, whereby the operator pays no upfront fee and the software provider earns a percentage of the income generated through its product. This is unusual in India, says Brady, but it works to Cibenix’s advantage. The Dublin company received a significant upfront project fee and the overall value is expected to be more than €2 million over two years. The final amount could be higher still depending on how many customers use the on-device software. Brady says this is the type of deal he will try to negotiate with other firms, because upfront product licence fees are better suited to meet the company’s cash-flow requirements.

Airtel’s size is what makes Brady believe the deal was worth it – even though he isn’t sure he would have the stomach for such a drawn-out process again. Like many Irish software companies, over the years Cibenix has had to supplement income from product licensing with professional services, which offer the chance to make some recurring revenue. In a business where partners are key, it’s better for a company not to get involved in both, Brady says. “If you go to the market with partners, you’ve got to be prepared to give up your services work,” he reasons.

There will be other deals in Asia – of that Brady is certain. Airtel’s high profile has given Cibenix added credibility there, and, at press time, the Dublin firm was in the latter stages of negotiations with another Indian mobile provider. And this time, it knows all about the ice cream effect.

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