One to watch: Contec Innovations Inc.

One to watch is a series that profiles young technology companies. It is not an endorsement, but an exploration of the firm’s potential.



The downsizing of his international paging division at Glenayre Technologies gave Perry Quan the push he needed.

He formed his own

company, Contec Innovations Inc., in 1999 to go after the mobile Internet carrier space. Joining him were Craig Townsend — whom he calls his “”right-hand man”” at Glenayre — and Roland Schmidt, who ran a software consulting firm in Germany and Quan met during his business travels.

Since that time Contec has successfully raised capital, grown to 20 employees, gone public on the TSX venture exchange and developed a product to take to market. Quan says Contec’s seeds were planted in the massive Glenayre downsizing of the late 1990s, when the company’s Vancouver presence shrunk from about 900 employees to 25. In the summer of 1999, Quan’s international paging products team faced the axe.

The paging business, in which Glenayre was a leader, was on the decline. But on the upswing was data over the cellular network, short message service (SMS) and the WAP protocol.

“”It was the early beginnings of what we today would call the mobile Internet,”” says Quan. “”Glenayre really wasn’t making the transition to move into this new market space, but I certainly saw an opportunity to build products for that market, with the experience and the contacts of myself, my partners and the people we recruited.””

The product they built and completed this summer is Hornet, which Quan describes as an open-carrier grade mobile application server. It allows mobile service providers to run applications to deliver on mobile devices, from cell phones to PDAs.

“”Hornet has been designed for the carrier environment, with attributes like high availability, there’s virtually no downtime with our system,”” says Quan. “”The standards here are higher than say a server targeted to the enterprise market. Carriers demand pretty much 99.999 per cent availability.””

Hornet is also scaleable to potentially tens of millions of users, hooks directly the carriers’ infrastructure, and is built on open architecture to facilitate software development. With potential customers including companies like Telus Mobility and Deutsche Telekom, Quan says the sales cycle is typically quite long, often six to 12 months. However, he says Contec has been working with carriers throughout product development and feedback has been quite good. Currently, Contec is focused on building up its sales team to focus on the European and Asian markets.

“”The mobile Internet technology is more advanced in Europe and Asia and consumer adoption rates are much higher,”” says Quan. “”The carriers there are much more ready for a product like Hornet.””

One Degree Capital, a Vancouver-based venture capital firm, invested in Contec and principal Don Lay says a good part of the decision was based on Quan’s experience.

“”It was clear to me Perry was an engineer of substance who had executed in the past with Glenayre, building a business unit from zero to significant,”” says Lay. “”He also has built a strong team around him, with lots of his old team from Glenayre.””

Quan will need that experience. Lawrence Surtees, director of telecommunications research for IDC Canada Ltd., says Contec will be going up against industry giants like IBM, Microsoft and Oracle.

“”It’s going to be a market populated by a lot of big players, and I think a server maker or provider isn’t going to be able to go it alone, they’ll have to get married up and come to market with the wireless carrier and perhaps much bigger systems integrators,”” says Surtees.

Surtees says the recent launch of 2.5G wireless networks in Canada and the coming 3G networks will help create the need for mobile applications, especially as wireless LANs gain popularity in the enterprise market. However, it will be tough for a small player with one piece of the puzzle to capitalize on its own.

“”You’re going to have all these big, giant established people bringing their respective expertise and all looking for a piece of the action, so a small niche player is going to have to figure some clever strategy, not just to get to market but to not get creamed by these big guys,”” he says.

That sentiment is echoed by Chris Langdon, director of product marketing at Telus Mobility. Langdon says a smaller player like Contec would be well advised to partner up with a more established player to offer a wider solution.

“”Most clients today are saying they want to use their own existing IT infrastructures,”” says Langdon. “”Most of their competitors are likely well entrenched with broad product lines, they’d have an easier time riding out the current economic times.””

Langdon says the wide scale need for a mobile application server isn’t there yet. Right now the predominant device on the back-end of wireless LANs are laptops, and there are a number of technology solutions available to do that.

“”The issue will become whether the technology that these wireless ASPs are delivering can be met with a different technology solution,”” says Langdon.

If a company is going to make the jump and install a solution, Langdon says the vendor will have to show a very definite competitive advantage with a strong ROI that their competitors can’t.

Jeff Jedras is ItBusiness.ca’sB.C. correspondent

Comment: info@itbusiness.ca


Previously in “”One to Watch””:

Seaway Networks Inc.
Analog Design Automation Inc.
Gavagai Technology Inc.

 

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