What if? - Commentary

Telecommunications, June, 2002

"We are aware of multiple equipment companies that have been told either explicitly or implicitly that their prospects would be much better if they could get a larger, well-established company to sell and service their exciting new products, including an encouragement to sell out to a larger vendor if that's what it took."

--Lehman Brothers report

After reading this recent Lehman Brothers report, I posed a question to readers of Telecom Flash, our weekly e-mail newsletter: If RBOCs are the ones with the money and they're not buying from start-ups, and the quest to sell through a vendor channel is becoming increasingly difficult, where does this leave the start-up community? In recent months we've seen first-rate companies like ONI sell out to Ciena, and ADVA and Turin Networks develop OEM agreements with Fujitsu and Motorola, respectively, as a means to achieve market stability and penetration.

While this type of "security" sounds great, many readers reminded me that the start-up community has the ability to move extremely quickly in addressing market needs, and that many of the "next-gen" products that established vendors deliver quickly actually were the result of start-up acquisitions.

The problems is, many start-ups have a difficult time recognizing and quantifying "gaps" in carrier networks and existing vendor offerings early enough and we end up with a slew of upstarts going after the same market with few differentiators. A few months ago, columnist Chris Nicoll of Current Analysis wrote that start-ups need great answers to four basic questions. Those questions are worth repeating:

* To whom will you sell?

* Which of their problems are you solving?

* Why will they buy from you?

* When will they buy it?

We believe the companies we've picked this year as Hot Start-ups have great answers to those questions. The real challenge is always in execution, and many have shown that, contrary to the Lehman Brothers report cited above, RBOCs are buying from start-ups--and they are not the only ones buying. The start-ups that will survive and thrive aren't me-too players--they've identified a gap in carriers' networks and have a strong solution that meets a basic need. When reading over the write-ups that our editors put together on each company, one quote stood out and exemplifies the essence of start-ups: "A lot of people wrote them off because they were promising so much. The question that didn't get asked was: What if they actually delivered?"

Sue O'Keefe, Editor in Chief