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four perspectives on international business
going global: challenges & opportunities

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                On the international side, we worked hard at the Economic Summit in Okinawa this July to establish something called the Digital Opportunities Task Force (DOTF) with the idea to galvanize and catalogue, on an international basis, a framework for dealing with international electronic commerce and bridging the digital divide. We felt strongly that for this type of approach to work, there needed to be private sector participation, so we have assisted and successfully negotiated a framework that allows businesses and non-governmental organizations to be participants in this task force. In most of the G7 countries, there are groups that provide a role for synthesizing and integrating business input for that effort. This is very important because there are a lot of potential players, in this field. The World Bank is trying to do things, and the entire United Nations system is trying to make itself relevant for developing countries that would like to be part of the New Economy. It's important for them to understand the right things to do, and, for that matter, the things they should avoid doing. This Digital Opportunities Task Force is going to provide a good opportunity for that type of dialogue.

                The last thing I want to mention is that the State Department views itself as an advocate for US business and economic interests around the globe. That's one of the most important reasons why we have embassies all over the world, and we want to be of service to businesses large and small. That doesn't mean we'll know every answer, but it does mean, in most instances, that we can perhaps steer you in a direction where you can get the answers you need quickly. We understand that for small companies it can be very costly getting information, and that's why groups like Netpreneur.org are very important. We hope that we can be a resource for you in that way.

                In conclusion, I just want to say that we have a good opportunity in the year ahead to concretize the partnership we've been developing through our various working groups. I'm very pleased to be invited here, and I look forward to trying to answer some of your questions.

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Mr. LeBlanc: Thank you, Ambassador Larson. It's my pleasure now to introduce Maurice Tosé, Chairman, CEO and President of TeleCommunications Systems. Mr. Tosé founded TCS in 1987 and has led its growth to a run-rate of $40+ million in annual revenue today. Mr. Tosé has over 20 years of experience in providing technical solutions to operations research techniques in engineering, telecommunications and complex data processing systems.

maurice tosé: one company spreads its wings

Good morning. Thank you very much for the opportunity to be here. Let me start by describing what TeleCommunications Systems is today, how we got there and how international business has factored into the process.

                We are a publicly traded company, having gone public August 8, 2000. We made it through one of the windows when the IPO market was open. Because of that, I can say that the analysts’ forecast for our revenue this year is in the mid-50s, so we're at more than $40 million in revenue. We began as an 8(a) company. I mention that because, as an entrepreneur, you have to be thick skinned and not take “no” to mean no. People said that you could never move from an 8(a) company to become a publicly traded one, but we graduated from the 8(a) program a couple of years ago.

                Going into the 8(a) program, our approach was that we would learn from the experience, then go into other things. Our game plan was voice/video/data all coming over one media, and that was going to be over wire line. The only thing that's changed is that now it's voice/video/data over wireless or wire line, celestial or terrestrial. Today, as a publicly traded company, we are a leader in the area called “intelligent messaging.”

                Short messaging is where we began, such as when you use your phone to get your voice mail or to get information or content sent from the Web. Our products are in over 25 different carrier networks around the world. Here in North America, our customers include VoiceStream and Verizon, and we have customers in the Caribbean, Latin America, Australia and New Zealand. We bring anything from the Internet through a wireless Internet gateway, if need be, to a phone, pager or palm device, and we format it for that device. We don't care if it's HTML, XML or CHTML as long as it's structured data so we can query it and bring it through to your device. In Europe, short messaging is a phenomenon that represents almost 15 billion messages today. It hasn't caught on here, because in Europe there's one standard called GSM which has the built-in ability to originate messages from your phone. In the US, however, we have four different standards: GSM, CDMA, TDMA and cellular MPS. With the exception of GSM, they don't have the ability to originate messaging, although that's coming now. VoiceStream, Verizon and AT&T are in the process of launching or have launched the ability to originate messaging from your phone.

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                With the acquisition we announced on November 15 of a company in Seattle called Xypoint, we become the leader in location-based information with their service called Enhanced 911. If you originate a distress call, we handle the call and route it to the nearest public safety facility to handle. What does that mean? Some of it addresses some privacy issues because, when you turn on your phone, you're connected to a network and we know where you are within a certain radius. We know what tower you're talking to and what sector you're in. Phase two, which is mandated by the FCC, is going to bring it even closer so we're going to know within a much smaller radius, and some networks are choosing GPS, so it's going to get even closer.

                We'll provide intelligent messaging with opt-in eCommerce and mobile commerce. You won't be spammed, but let’s say that you're a shopper near a Nordstrom's. If you opt in, you can get a message on your cell phone saying, “There's a sale going on. Here's a coupon.” Or you can send a message asking, “Where's the nearest ATM or gas station?” On and on and on, putting intelligence in messaging. Our products reside deep within the carrier's networks where all that intelligence is housed.

                That’s a bit of a commercial, but it provides some understanding of where we are today. We began by doing federal government contracting. The plan was to begin by integrating other folks’ products, then move into building our own products. The plan was to start with the Department of Defense (DOD), go to other federal agencies, then go commercial and to the home. That's what we've been executing on.

                We learned a lot working with the government. The federal government is a great incubator of technology. Lest we forget¾and we had to explain this to investors when we were out on the road¾this whole thing called the Internet came from DARPA and a federally-funded program process. Lest we forget, a company called Qualcomm is all about spread spectrum technology which came from work with the DoD. And, lest we forget, a company called Network Solutions used to be an 8(a) company. The CEO didn't know what he had and sold it to SAIC, I believe, for something between $4 million and $6 million. We know the rest of the story about what SAIC did with Network Solutions. In the Washington area especially, the federal government is a good place to spur leading edge technology.

                From day one, our customers have been the special operations and intelligence communities. There are things we learned there, such as the security that goes into the handset, etc., that goes into our products. What I'm getting at is that you can leverage what you have to better your position.

                In doing business overseas, we began with some of our DoD customers by installing secure networks throughout the Middle East for the central command and a host of other things. That led us, in 1999, to AT&T and its largest customer, Citibank, which wanted to have a Y2K continuity of operations network in case there were failures in some of the foreign countries they operated in throughout the Asian-Pacific region, Africa and some of Europe. AT&T and Citibank tried to get the big companies to do this, but no one would accept the task of getting it done in the specified timeframe.

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                As an entrepreneur, and being a small company, you sometimes look at an opportunity and say, “This is one we can't pass up, even if we kill ourselves trying to execute.” In five months we performed a monumental task. I believe it was about 23 different countries throughout Asia-Pacific region, from Vietnam to Indonesia, Malaysia and India¾I think we touched almost every country in the Asia-Pacific, as well as countries in the Middle East, Africa and into Europe. Five months of negotiating landing rights to be able to transmit. It's not an easy thing to do, especially in that timeframe. There was a clock ticking at the back end that said you have to get this done by December 31.

                We took the experience we had from the federal government, leveraged it with AT&T and Citibank and convinced them that we could do this; then, we did it. When we completed it, it was the largest private satellite network in the Asia-Pacific region. The things we learned helped us on subsequent trips to Africa and elsewhere. The Department of Commerce has regional offices that are there to help US companies. They can often be a good source of resources to validate the right people to talk to, and who are the wrong people to talk to. There are a lot of wrong people to talk to who can cause you to spin a lot of cycles without getting very far for your efforts.

                We have since further levered that satellite experience. As I mentioned, our business model hasn't changed much from voice/video/data over wire line. The only thing that's changed is that now it’s voice/video/data over wire line and wireless, celestial or terrestrial. We began as an integrator of other people’s products and moved into our own products. When President Clinton went to Nigeria several months ago, I accompanied him¾not on Air Force One which I had hoped for, but through a very circuitous route. We were there for the signing of a contract with the state of Jigawa in Nigeria in which we are providing broadband satellite Internet access. One of the important aspects of this was that it involved one of the first loans that had recently been guaranteed by the Export/Import Bank into Nigeria. This opens phenomenal opportunities for us with satellite to do wireless local loop, then to bring our products to carriers in this market. In addition, we'll soon be going into Equatorial Guinea doing similar satellite work to provide Internet access, wireless local loop and a host of things that we learned from the federal government side.

                Now, for those of you selling commodities, I can't say too much about getting commodities sold into different countries, other than it's not an easy thing to do. It's a lot of block and tackling, and a lot of it is the same things we do here in the US. We tried to locate near our customers, which is difficult, and you need to leverage partnerships. We leveraged AT&T to get Citibank on the terrestrial side and on the cellular PCS side. We leveraged a relationship with Lucent Technologies in which we co-own code, but we own the intellectual property that makes short messaging and some other things happen. You can't cut that kind of deal with Lucent today because they want to be their own software powerhouse. We began a process in 1995 in which we were able to strike a relationship that I call “Lucent detachment” of sorts. Our plan was to be very close with Lucent. They invited us to events they normally wouldn't invite outsiders to. Our plan was always to focus on more than Lucent, however, and now we are branching out. Lucent continues to be a good partner. Without them and their sales force around the world, we wouldn't have exposure to some of these foreign countries. When Lucent goes in to sell infrastructure, they ask the carrier what they want. Short messaging? Wireless Internet Gateway? Over the air activation? Prepaid? Those are our products. Lucent then brings us in because we know these products better than they do, so we're there to close the deal. The customer begins to get a relationship with us, and we use that to go to the next step.

                One other thing is important, and I'm not going to tell you anything you don't know, but foreign cultures are different from US and Western culture. For example, “yes” is not always yes, and “tomorrow” is not always tomorrow. We looked at Nigeria and said that it's one of the most corrupt countries for doing business. We said that there were some things we weren't going to do. One, we didn't use agents. It’s one of those things that you want to avoid. We also said that the deal needed to be guaranteed, and that's the reason for the involvement of the Export/Import Bank deal. It was very important for us to get that guarantee. We told the governor that we'd love to do these other things with them, but, first, we've got to have a track record established of responsible and prompt payments. In some cases, “tomorrow” took several months. It takes patience, and some of the same things that apply here. I tell people it usually takes twice as long and three times as much money to do what you hope to accomplish.

                In closing, I'll just say that there is a lot of opportunity out there. It's a brave new world, and we're going to have to look beyond the US. Globalization is a fact of our offerings. It is an opportunity because many countries want to deal with the US, but you will not always deal with a level playing field. We've been to China for a number of years with our products running in trials in Gwango province, but some Europeans don't play by the same rules that we play by. They do things a little differently, so they've had a little bit more acceptance. In places like Singapore, which we affectionately call Singapore, Inc., there's an intertwining of businesses that are really owned by a few controlling families. It’s not a level playing field, but you can't avoid it because globalization is occurring. Thank you.

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