NEXGE Pvt. Ltd.: The VoIP Revolution · NEXGE Pvt. Ltd.: The VoIP Revolution Founding of NEXGE NEXGE was founded by Mahesh Dayaram and Nitin Raj Gupta in August 2001 in the city of

This casestudy has been prepared by Prageet Aeron, Doctoral student at Indian Institute of

Management, Ahmedabad, under the guidance of Prof. Rekha Jain, Indian Institute of Management,

Ahmedabad for academic discussion only and does not represent appropriate or inappropriate handling

of a business situation.

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NEXGE Pvt. Ltd.: The VoIP Revolution

Founding of NEXGE

NEXGE was founded by Mahesh Dayaram and Nitin Raj Gupta in August 2001 in the

city of Chennai in India.

Background of the Founders:

Mahesh graduated from IIT Bombay in 1992 with a B.Tech in Chemical Engineering and

then joined Reliance Industries Ltd. He was with RIL from 1992 to 1994 where he was a

member of the team that was conceptualizing the Jamnagar refinery. He then joined IIM

Calcutta to pursue a degree in Management in 1994. During his IIM Calcutta days he

summer interned for Calsoft, a company based in US with operations in Chennai. Later,

he received a pre placement offer from Calsoft which he subsequently joined in 1996 as a

Project Manager and stayed with them till 1998. From 1998 to 2000 he worked for SIFY

(Satyam Infoway), the first private Internet service providers (ISP) in India, where he

headed the web services division.

Nitin Gupta graduated with a degree in Mathematics (Honors) from Delhi University and

then completed his MBA (Marketing and Finance) from IMI, New Delhi under the aegis

of Institute of Management Development (IMD), Lausanne, Switzerland. He then joined

SIFY in 1998, for a sales and marketing role and was posted at Hyderabad and it is here





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that he came in contact with Mahesh. Mahesh those days was based in Hyderabad and

was looking into the development of web services for SIFY while Nitin was responsible

for selling of SIFY services like bandwidth etc. in the Hyderabad region. In 2000, Nitin

and Mahesh quit SIFY to start on their own.

Motivation:

The period beginning 1996 had a profound effect on the entrepreneurial climate across

the globe and India too followed suite. This was the time that saw proliferation of

dotcoms throughout the world. It was still early days when Internet was just starting to

spread its wings. There were huge expectations about the way Internet could change the

existing business models and this encouraged several technologists to conceive new ideas

of doing business via the Internet. This was also a time when markets across the globe

were showing a significant growth trend. All of the above led to easy availability of

capital furthering the existing entrepreneurial climate. And then the dotcom bubble burst

in 2000 leaving the market bruised and shaken with investors and VC’s suddenly loosing

interest in technology ventures.

While Mahesh and Nitin were at SIFY many of their colleagues quit jobs to start on their

own, with most trying to set up a new portal or a new website for some service. This had

some effect on both Mahesh and Nitin and they too started thinking about starting out on

their own. However, Mahesh had mostly been involved in real time networking kind of

work during his career both during his stint at Calsoft and SIFY. At SIFY he was

involved in planning various web services for SIFY across different domains and was





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also involved in developing some real time data services for Citibank. Somehow starting

a web portal was not something that came across as interesting to Mahesh and Nitin. Both

of them with their experience increasingly started thinking about voice as data packets

and wanted to enter the market through some related product but were not sure about the

actual product during the early days. However, they were keen to start a product company

based out of India and this was one of the most important motivating forces behind the

effort.

Product Strategy:

Early days:

Although “convergence” was a term relatively unheard of in the year 1999, both Mahesh

and Nitin were convinced about convergence between telecom and Internet in near future

and so they wanted to come up with a product that could operate in this space. So, they

began by setting up a company and formally registering it in Hyderabad by the name of

JoinCom in early 2000. At the time only Mahesh and Nitin were a part of the company

and they neither had funds of their own to further their ideas nor did they know any

investors very closely. However, they were extremely motivated and thus began the

development of the prototype of the product that they had conceptualized. The product

was to be able to download the e-mail messages and read them using the text to speech

conversion software, thus making the e-mail accessible on the ordinary phone line. The

business model that Mahesh and Nitin had in mind was to develop this service and then

to sell it to the subscribers. They wanted to raise funds for development purpose and so





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they also developed a business plan with this product in mind that included earning

projections and other details with expected revenue of over 100 million USD in just two

year time with an investment of some 4-5 million USD. They met several investors

during the next year and a half but could not solicit any funding due to the unfriendly

economic conditions although their idea was very far removed from dotcoms. During this

period, while they were struggling for funding they kept up the single handed effort of

prototype development.

Idea maturation and seed investment:

However, all this interaction with the investors enabled them to bring about sharpness in

their product strategy and they slowly started to become more focused. They also realized

that the idea that they were pursuing was too ambitious as the kind of infrastructure that

was required for launching such services did not exist. They realized that they could

neither develop everything on their own nor put up the infrastructure. In June 2001 they

met T. R. Shyam Sunder who was closely related to the PSG Group, an educational group

based out of Coimbatore with several schools and colleges across the state of Tamilnadu.

Shyam has been a serial entrepreneur in the Financial Services space and his ventures

were later merged with Enlist Ltd. which has over 700 professionals and 70 branches

across south India. Shyam was impressed by the idea and readily invested INR 16 lakhs

as the seed capital for the venture in his personal capacity. Shyam already had a company

named NEXGE registered under his name. So, both Mahesh and Nitin decided to wind up

operations of JoinCom and shifted their base to Chennai to begin a new chapter with

NEXGE.





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Choice of location:

Mahesh and Nitin were very clear that if they wanted to start a company it had to be one

based with in the “golden triangle” constituting Bangalore, Hyderabad and Chennai. But

Mahesh had earlier worked in Chennai while he was with Calsoft as well as when he was

with SIFY. So, he already had a well established network with in the city and this could

prove to be useful for the company in the future. This made the decision easier and they

started their operations from a rented apartment based out of Mylapore in Chennai.

Regulatory change:

While Nitin and Mahesh were in the process of working out the modalities of how to

scale up their ideas, almost during this time Telecom Regulatory Authority of India

(TRAI) in April 2002 announced opening up of the voice over internet protocol (VoIP)

albeit in a restricted manner. The regulation allowed ISPs to provide communication

services from PC’s in India to PC’s abroad. However they could not connect to regular

phones (wireline or wireless) abroad and could not connect to local phone numbers as

well1

. With this announcement Mahesh and Nitin decided to concentrate on this

opportunity by developing the required applications to enable VoIP services from India to

abroad. They decided to target the ISP’s by developing this application and since ISPs

already had an established infrastructure as well as subscribers, they could further their

original business model in this new environment.

1 The restriction on connecting to phone numbers abroad was modified in 2007 but restriction on

connecting to phone numbers within the country still remains.





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Early product architecture:

With a clear focus as to develop a VoIP infrastructure for ISP’s Mahesh and Nitin set to

work to develop a working prototype. The development philosophy followed was very

simple and that was to do all the things that were important for the call to be successfully

made. The basic ingredients of the application were a front end soft phone, a switch that

was the heart of the application, and an application server together with protocols that

could make the application talk to the server on the other side of the circuit terminating in

countries abroad. It was decided to keep the switch decoupled from the rest of the

application. The entire product was to be a software product and had no hardware

component in it. The protocol being used across the world for similar development was

H.323 and this was something totally new for both the founders. H.323 is an umbrella

recommendation from the ITU Telecommunication Standardization Sector (ITU-T) that

defines the protocols to provide audio-visual communication sessions on any packet

network. The H.323 standard addresses call signaling and control, multimedia transport

and control, and bandwidth control for point-to-point and multi-point conferences. It is

widely implemented within various Internet real-time applications and is widely deployed

worldwide by service providers and enterprises for both voice and video services over

Internet Protocol (IP) networks.

According to Mahesh, “I had already done certain things [technology], that as well as

based on similar things [technology], I was actually going through the VoIP things

[material], how to fit this in to that, you can say that the Internet was the only source for

me, and enough things were available for example IBM was doing their own





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development on H.323 in their lab in Europe, they were working on something similar,

Sun Microsystems was working on JTAPI, java telephony, they were actually trying to

build certain frameworks for that, so there was enough activity going through out the

world, and I hooked myself on that, followed it and thus updated my knowledge about all

this”.

They had Internet as the only source for the details and they went through the standard

very rigorously using their past experience to understand the issues involved in

development and implementation of the protocol.

Structure of the Development Team:

The development team was headed by Mahesh right from the early days while the

marketing and sales were taken care of by Nitin. With in the development team there

were two divisions the protocol division and the application division. Luckily for Mahesh

and Nitin, the downturn in the industry had rendered many high skilled professionals

jobless and they were ready to take up the development work for NEXGE at a fraction of

the salary that they would have commanded. So, they were able to hire an expert with

prior experience in H.323 to aid them in the development. Later towards end of 2002 a

support division too was added to the development team, while during early 2003 the

protocol division was expanded to accommodate a H.323 team and a SIP team. However,

at no time the entire team exceeded 30 members and even with attrition it has remained





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stable due to the joining of new recruits in the company. Exhibit-2 presents a detailed

organizational structure of NEXGE during 2005-06.

Development Cycle:

First prototype development:

One of the most prominent issues that cropped up during the beginning of the

development was the choice of platform and the choice of high level language to be used

for development purpose. It was decided to take up Linux as the OS (Operating System)

for development purpose as it was open source and enabled quicker development due to a

huge library of open source components readily available. Since the product had to go in

to the network of the ISP’s it needed to fulfill several interoperability concerns and load

that it could take was very important as any glitches could bring a bad name to the ISP

and disrupt services. Although software engineers working at NEXGE were well versed

with both java and C++, it was decided to develop the application in Java as it enabled

much better scalability, quicker development and did not require any specific machine in

the ISP network. JBOSS from Java family was adopted as the application server as it

would not bound the customer to get any specific web server from a specific vendor. For

database management PostgreSQL was chosen as it was a very robust open source

RDBMS (Relational Database Management System) with several in built features like

row level locking which were present only in Oracle based systems at the time.





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With above platform issues finalized the development team set to work with an aim to

develop the softswitch as it formed the most important part of the application. Softswitch

was developed as a core Java application. Another very important decision was taken

regarding the architecture of the overall product. It was decided to keep the switch

completely decoupled from the application logic of the product. So the softswitch was to

only work towards protocol and then the application would take over. The advantage of

this product architecture was that it enabled the platform to support newer services which

could be built on top of the existing application as well as was much easier to implement

newer protocols as it involved only rewriting the code for connecting modules.

Another very important product innovation happened during the development work. It

was the unique blending of application development thinking and core switch based

thinking. Usually developers who write softswitch follow a procedural or finite state

machine approach. But with application developers getting into writing the softswitch the

approach was altered leading to a very scalable product with several enhanced features

such as parallel thread execution capability. This was made possible by the coming

together of different skill sets being held by the employees of the NEXGE team.

Once the switch related development was completed it was decided to work on soft

phone interface which could talk to the switch from the dialer side. This needed a media

gateway and this required some specialized handling of audio codecs. At this point

NEXGE came into contact with Hellosoft, a Hyderabad based company working on

chipsets for mobile phones. Shyam happened to know the promoters of Hellosoft and





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they too were planning a foray in VoIP like services. This interaction brought out that

they had some experience in softphone development. This led to a commercial

arrangement between the two and the soft phone development was expedited as a result

of this deal.

With one side of application done with, now H.323 which is itself an umbrella protocol

with several sub protocols needed to be completely implemented to enable the switch to

talk to other network terminators across the globe. Although H.323 is a well defined

protocol but its implementation and different versions did create a lot of interoperability

issues and this could be tackled only by real time monitoring of the network in operation,

as and when they could find the glitches with respect to a particular implementation.

However, as both the founders had little experience with H.323 implementation they

hired a person who was an expert in H.323 especially for this purpose.

One of the important achievements of company C2 was to overcome the problems of

NAT (Network Address Translation) traversal. NAT traversal is of utmost importance in

VoIP services for the large networks that sit behind the firewalls. Although STUN

(Simple Traversal of UDP through NAT) is a protocol that is available for assisting

devices behind a NAT firewall or router with their packet routing but even STUN does

not work with symmetric NAT. So company C2 developed their own proprietary way of

dealing with symmetric NAT which was developed independently of ICE (Interactive

Connectivity Establishment) or newer version of STUN (RFC 5389 redefines the term

STUN as Session Traversal Utilities for NAT) that enable this kind of NAT traversal.





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As a result within 5-6 months NEXGE were able to create the first prototype with

softswitch, softphone and call sever based on the H.323 protocol.

Going to Market:

Development of robust product:

But developing a prototype was not sufficient to sell a product. NEXGE needed to

implement and test its product in a real life network to assess its performance and make

the necessary changes. While making their customary sales call NEXGE team met

Sharad Shanghvi, an IIT Bombay alumnus and CEO of Netmagic, which was a Mumbai,

based data centric company. Netmagic was actually a registered ISP and so it owned its

own network. The NEXGE team demonstrated their product to Netmagic. Sharad was

impressed on two counts, one by the future prospects of the product and second by the

sincerity and devotion of the development team. He agreed to implement the solution on

Netmagic’s network. However it was on an experimental basis and did not involve any

payment from any party and NEXGE was also required to provide complete support for

the solution implemented. The solution was implemented in February 2002 within the

network of Netmagic.

Once the solution was implemented and support services started, regular feedback was

made available to NEXGE development team through the customer support team which

during the early days consisted of Mahesh himself. Apart from several smaller





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modifications suggested by Netmagic, one of the major feedbacks that NEXGE got was

that it needed to have a billing module in place to complete the solution. Without the

billing module any ISP would not be able to implement the solution and would have to

engage a separate development team for developing a billing module to be able to charge

their customers for the usage of the service. Prepaid billing was a very important

component of the strategy of ISPs and it required a billing module to be implemented

within the application. The NEXGE team quickly took to work and by the end of 2002

had a billing module up and running as well along with a robust and well proven product.

Acquiring first customer:

By the end of 2002, NEXGE had already had the product ready with some very clearly

identifiable components like softswitch, billing module, softphone and application server

and Mahesh and Nitin were on a look out for possible customers. Although regulations

were put in place but still there were not many ventures/companies who were showing

any interest in using VoIP.

According to Mahesh, “It is one thing to establish a regulation but another thing to get its

acceptability in the market”.

It is at this time that Videsh Sanchar Nigam Limited (VSNL) was looking to launch its

VoIP services and they needed a software based platform to do that. Sharad had seen the

product do well in Netmagic and knew many people in VSNL. So, he put in a word with

VSNL about the availability of this software from NEXGE which led to a meeting

between the two in late 2002. After the product demo VSNL agreed in principle to buy





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the soft phone and the switch but wanted their own billing module to be integrated in to

the final solution. However, this required an entirely new protocol called Radius to be

implemented between the switch and the sophisticated billing module of VSNL. This

required NEXGE to learn about Radius and incorporate the changes in to the architecture.

In the meantime another ISP called Iqara (now YOU Telecom) bought the NEXGE

solution and thus became the first revenue generating customer for them. There were

some people from SIFY in Iqara who knew both Mahesh and Nitin and they helped

NEXGE team to link up with Iqara. Although the discussion with VSNL started earlier

but Iqara became the first customer due to customization and other issues involved with

VSNL.

Financial turmoil:

The seed capital that was infused in NEXGE was soon consumed during the development

process. Shyam, who was the major investor till 2002 in NEXGE, also introduced some

of his friends to the company and they too invested in NEXGE in their personal

capacities. One of his close friends who became a major investor in NEXGE was H. R.

Srinivasan, commonly referred to as HRS within the industry circles. HRS had earlier

worked for Syntel as the country manager for India and he had his own company called

Take Solutions. Take solutions was a successful software company based in Chennai and

was involved in developing supply chain solutions for the industry.

Finally the entire fund that was invested was almost exhausted by the beginning of 2003

and NEXGE had only two- three small customer as a source of revenue. This put a huge





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strain on development work as the largest component of expenditure was constituted by

the salaries being paid to the team. Up till this time NEXGE had been able to attract and

retain extremely talented people given the downturn in the technology market, however,

as the conditions of the market improved, the compensation packages that the team could

command underwent changes and matching those was not possible given the financial

condition of NEXGE. This led to a considerable exodus from the development team,

which in turn put more pressure on the ongoing development work as the same set of

people were required for both support services and development. Also the employees

who left were responsible in playing a critical role in the development of NEXGE

product and with them they also carried away the technical know how required in the

development and the experience gained during the development. In the absence of any

documentation this was a challenge for NEXGE team as the previous product

characteristics and details needed to be explained to the new incoming development team.

Change in standard from H.323 to SIP 2:

Another important development that started to make its impact felt beginning March

2003 across the world was a shift from H.323 based protocol to session initiation protocol

(SIP). SIP was touted as much more flexible, scalable and easy to use for IP based

communication. Initially the entire development team at NEXGE was against the

implementation of SIP. According to Mahesh, “Every body in the team was against SIP.

Additional work, additional headache and no one was actually asking for it”. However to

2 For more details refer http://www.packetizer.com/ipmc/h323_vs_sip retrieved as on 26/11/2008 and also

refer http://www.ip-voip.com/VOIP-protocols-h323-vs-SIP.htm retrieved on 26/11/2008

http://www.packetizer.com/ipmc/h323_vs_sip%20retrieved%20as%20on%2026/11/2008

http://www.ip-voip.com/VOIP-protocols-h323-vs-SIP.htm





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the founding members it was clear that it was the future. NEXGE team, after having long

debates and discussions among themselves decided to be ready for SIP. This again

required NEXGE to learn in order to understand the protocol and its implementation with

in their existing application. As the interaction with VSNL was still in progress, VSNL

too expressed their desire to have a SIP compatible solution from NEXGE. Again they

went to work with the only source of information being the Internet. However, the fund

crunch was a serious dampener to the pace of the development that plagued NEXGE

during this time.

TeNeT Group and Shifting to IIT Madras Campus:

During mid June-July 2003 Mahesh met Prof. Ashok Jhunjhunwala, one of the most

respected names with in the Indian telecom sector. Prof. Jhunjhunwala was with the

Electrical Engineering department at Indian Institute of Technology (IIT) Madras, a

premiere technology institute of India. He had been instrumental in setting up the famous

Telecommunication and Networking (TeNeT) group at IIT Madras. Established in early

nineties, the TeNeT group is a coalition of fourteen faculty members from the Electrical

Engineering and Computer Science & Engineering departments of IIT Madras who work

together towards a few common goals in research and product development. TeNeT

group has been engaged in developing telecom technologies for India with a special focus

on rural connectivity. Several of technology initiatives had been converted in to

successful companies like Midas Communication Ltd., Banyan networks etc. and some

companies were being incubated with in the TeNeT group.





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The Tenet group had no offering in the VoIP space and Prof. Jhunjhunwala felt that it

fitted well with in the portfolio of the center. Moreover, NEXGE could strategically

combine with Midas Communications in the future to develop broadband based

applications. So, Venture East the venture capital arm of TeNeT and Midas

Communications Ltd. jointly invested INR 2.1 Crores (21 million) in NEXGE. Prof.

Jhunjhunwala also advised Mahesh and Nitin to shift their operations in to the TeNet

center within the Electrical Engineering department at IIT Madras. By late 2003, NEXGE

started functioning from a laboratory within the department which was converted into

company office as well as the development center. The movement to IIT Madras enabled

access to a lot of infrastructure inside IIT for a meager royalty. The most important

advantage that the founders had in their mind was the easy access to Professors at IIT

Madras, they could advise NEXGE on technology related bottlenecks and gain access to

several other telecom companies inside and outside the TeNeT incubator through the

Professors and their contacts.

Acquiring VSNL as customer:

While the above activities were being planned, simultaneously development work related

to support for SIP was being undertaken. First NEXGE team had to recruit a completely

new team and train them about the existing product. According to Mahesh, “We picked

up a different team when we came to IIT and I trained them again on what ever kinds of

product that we had”. Again NEXGE development team could borrow from its earlier

experience of H.323 based development and it planned to implement a SIP support within





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the same architecture. The reason was that SIP and H.323 both needed to be present as

H.323 was not completely done away with and was still operational in certain parts of the

world. So, a separate SIP team was created with mostly newly recruited employees.

NEXGE team successfully created a SIP container which could connect to the switch via

a J2EE framework within the existing architecture (see figure 1). Apart from this work

the new team also worked for other functionalities to be introduced into the product such

as interactive voice response (IVR), caller ring back tone (CRBT), etc. Once the product

reached an advanced state of completion, VSNL by this time was ready to launch its

services and placed an order for the NEXGE VoIP platform, thus becoming the first

major client of NEXGE.

Figure 1, Architecture of the NEXGE VoIP Product

(Source: www.nexge.com)





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Marketing Activities:

The marketing activities were started by NEXGE from the very beginning and were led

by Nitin. In the beginning the focus was very clear that ISPs were the target customers

and so Nitin would individually meet the prospective clients and pitch for the product.

Most data centric activity (presence of ISPs) was focused in Delhi and Mumbai and so

Nitin would travel to these places to meet the clients. Once the product was stabilized

under the aegis of Netmagic, the actual selling activities started and the first commercial

deal was sealed with Iqara (now YOU Telecom) which was an ISP based in states of

Gujarat and Maharashtra.

Market information acquisition:

Regular contact with customers and regular subscription of various relevant newsletters,

sector reports and groups via the Internet were the only sources of market information

gathering. According to one of the founders,” Unfortunately there is no structured way of

doing it, even now we are not doing that in a structured way, it is purely internet driven, it

is the only source for us, whether something is happening internationally or something is

happening nationally internet is the source, we subscribe to various things and that is

how”.

Also regular interaction with TENET group helped NEXGE team in getting insights

about changes taking place in technology as well as the regulatory environment. NEXGE

team regularly engaged with ISPs to understand the impact of various upcoming





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regulations on the business of ISPs in order for them to understand their customers better

and be ready for any potential changes.

Promotional activities and positioning:

There were no formal promotional activities undertaken by NEXGE apart from word of

mouth publicity. In mid 2004 they decided to put a website with basic product offerings

and features to enable their customers to reach them via the Internet. It was only during

late 2004 that they decided to participate in various exhibitions to showcase their

products with the basic objective of meeting prospective clients. NEXGE attended

exhibitions in Germany and Sweden to begin with and this enabled NEXGE to secure

new customers abroad for its product.

In terms of positioning, NEXGE product was a complete product with billing module,

calling card facility as well as other services like IVR etc. which could be used by an ISP

to be up and running within a short time span of a few days and minimum requirement of

resources given the architecture of the product. Given its minimum requirements of

specific resources the solution was also cost effective. Although the initial solution was

aimed at only the ISPs but with inquiries and demand from terminators and calling card

operators picking up NEXGE quickly offered its solution aimed at these new but related

segments.

Ability to differentiate products:





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The key source of differentiation from the big players was that being a small company

and the only company of its kind in India at the time NEXGE could be much more

flexible with respect to the customer needs. NEXGE could work closely with Indian

companies given its nearness vis-à-vis other large players in the industry and enable the

Indian customers to offer a solution suited and customized to the Indian conditions in

terms of scale and cost.

Pricing:

In the beginning NEXGE team had no clues about pricing their product. The product was

completely new to the Indian market and no existing benchmarks were present to help in

pricing. There were several other complexities with pricing as firstly it was a software

product and secondly different components of the product such as the billing module or

the IVR could not be sold separately as they could work only with the NEXGE switch.

Mahesh and Nitin looked at the price points offered by similar companies across the

world but they realized that those prices could not directly be applied in India. Adaptation

of the international price to the Indian context was a process which was aided by the

customers of the product. By engaging in negotiation with the customers NEXGE team

was finally able to decide upon an appropriate price, which also included customer

service as a part of it. As they went forward, they tried two different business models, one

based on revenue sharing and the other based on licensing but the one based on revenue

sharing could not materialize. The revenue share model was overtly dependent on the

service provider and NEXGE team felt it was not appropriate for them at that point of

time. They finally went in for the licensing model which was dependent upon either the





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number of subscribers or the aggregate calling being done. Once they stated getting

international clients they had to make corresponding changes in the price for international

customers which again were based on the price points of other similar products in the

market.

Customer service:

Given the nature of product which had to be installed in the network of the service

provider, it was required that a support system be put in place for the customers to be able

to run the services smoothly. Based on their experience of Netmagic, where extensive

support was required, Mahesh and Nitin set up a separate support group within the

company.

Sales team and distribution network:

The early sales team consisted of Nitin only who would at times be assisted by Mahesh in

their attempts to make sales to ISPs. All the sales were made directly so there was no

thought process about the establishment of any distribution network or any channel

partner presence. However, several terminating partners became NEXGE customers.

Terminating partners are the players who are on the other side of the call and connect the

calls made from India in to a PSTN or mobile network. Word of mouth and referral based

publicity made many of such operators aware of NEXGE products and this again resulted

in new customers. In early 2005 Madhu Nair was added to the sales team who had a long

experience of selling technology based products to the customers. This was the first

addition to the sales team.





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Routinization and Formalization:

NEXGE has mostly maintained its entrepreneurial environment with minimum routines

in place but some problems that they faced during development process has led to certain

thumb rules.

Codec handling:

In IVR (Interactive Voice Response) codec has to play an announcements or some

prompt for the customer. Now these are playing files in various file formats like wav files

etc. But to be played, it has to be dynamically adjusted to the codec that is coming in. So

in H.323 or in SIP call in the beginning codec gets negotiated during the call setting, this

information is exchanged and after this on the negotiated codec one is supposed to send

the message, say, G723 gets negotiated, once it is negotiated the file needs to play in

G723. In order to communicate either one has to change the file format in to one another

dynamically, which is a resource intensive process. So what NEXGE have done is stored

them as G723 or G729 and all other possible files from the beginning itself rather than

changing them dynamically as per requirements. Although this has meant some more

amount of storage space but there could be much faster response because no processing is

required at that point.

Another issue related to codecs was that across the globe different equipment is used for

gateways manufactured by different network equipment companies including big names

like Cisco, Juniper, Nortel etc. The equipments have slightly different characteristics, for





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example when one sends a choice of five different codecs and even after you specify your

first preference, second preference and all still certain equipment would pick up only

G729 if it is present whatever may be the preferred sequence. Now G729 is a better

algorithm but takes much more media resources. That at times creates various

interoperability issues as some of operators may not have resources to allow G729. In

order to handle such problems NEXGE employed a very innovative solution. They mask

out G729, when some one goes through their switch only two preferences are shown and

when he does not find its codec then it has to pick one of them. However, if it has the

required support for G729 then it is rightfully negotiated.

NEXGE team has even been able to connect to certain equipment that had ill defined

protocol but was cheaply available and some of their smaller customers wanted to use the

given equipment in their network. This too involved a lot of tweaking around and only

because the entire solution stack was developed in house and complete control of each

component was with NEXGE, they could support such equipment as well by bringing in

customization on specific customer request.

Testing:

When NEXGE team began its development work they did not have any formal testing

team that was looking in to rigorous tool based or automatic testing of the product.

However, the customer support team which was interacting with customers was

conducting some preliminary testing of the solution but even that was not formalized or

completely specified in the form of a document or something. However, when VSNL





24

gave its specifications for the product the specifications contained detailed documentation

about the various features and their functionalities and how they should respond to a

request.

According to the CTO, “However when VSNL placed an order they had given us 5-6

different excel sheets each containing some 100 items, that was a virtual test case given

to us in some way, it was not that that were the real test cases or some thing but it was

more of a feature list but we had to ensure that all the things passed, so all the features are

working, whether they were tested to test specification it wasn’t that but that many

features were working. We had received that and that was a bench mark for us”.

This document helped NEXGE team in establishing a basic testing routine for the product

and also helped in making the product robust. However, testing was still in its infancy

and establishing a formal and robust testing infrastructure in the future was a major

challenge before NEXGE.

Re-design of the entire solution:

The development model followed by NEXGE started with a fast and at times even dirty

prototype which was then re-written by incorporating the feedback from the customer site.

For example the call server that was written during early development days had problems

specially when exposed to a high load within the real network. So, that was re-written

much more neatly along with session maintainance which made the product robust

enough to be delivered to VSNL. Many other smaller components were also re-written by





25

the NEXGE team in order to make the product better and more robust. This was also

facilitated by the fact that the new team that they had recruited after moving over to IIT

Madras campus looked at the architecture afresh without any previous bias.

Concluding Thoughts:

By mid-2005 NEXGE had established itself as a dependable player in the VoIP

infrastructure space (refer Exhibit-1 for financials) but several new challenges lay ahead

of Mahesh and Nitin. One of the greatest issues was lack of documentation. Every time

employees left NEXGE for greener pastures it was a loss that NEXGE had to deal with.

Fortunately for them Mahesh had been involved in the actual development work right

from the beginning and he was the only link between the earlier development team and

the team that joined in the aftermath of the exodus that plagued NEXGE during its

financial turmoil. There was a need to put in place appropriate documentation procedure

for the existing and ensuing development work. On the process side there was a need for

setting up a separate team for the testing and development of test cases to ensure the

quality of the software being produced. Similarly, NEXGE needed to implement an

encryption based license key in order to be able to secure its intellectual property (IP)

completely for its revenue model to succeed as the present system did not ensure

complete safety from using the product on more machines than laid down in the contract.

NEXGE had mainly the Indian ISP market on its radar at the time of its inception but it

had gained some international customers too and it had to decide its future product





26

strategy keeping in mind whether it wanted to concentrate only on the Indian market or

only the international market or it wanted to cater to both the markets within the VoIP

space. In either case it needed a bigger and effective sales team in the coming days to be

able to push its products as Nitin alone could not handle all the activities.

NEXGE was also required to look at its product portfolio for the future because if it

wanted to increase its customer base it needed to bring the telecom companies too in to

its fold. But the present solution was not interesting enough for the existing telecom

companies. The product needed some amount of modification to be able to reposition it

as a platform that could help the telecom service providers to introduce value added

services (VAS) for wireline and wireless telecom service providers. This was a large and

emerging market and held a lot of potential for the future. Another parallel path that

NEXGE could take was to move completely in to developing various value added service

content for the telecom service providers. However, this would require Mahesh and Nitin

to abandon their product based philosophy and would be more like their moving in to

services business. Both the above possibilities were technically feasible given the

experience and ability of the NEXGE team.

Moreover, Midas Communications Ltd. was in the process of developing its broadband

product and as envisaged by Prof. Jhunjhunwala there was a possibility of collaboration

between NEXGE and Midas in developing a broadband product that could be offered to

Midas’ customers. Similarly, there was this new upcoming technology called WiMAX

which had the potential of providing wireless broadband at a very low cost and the voice





27

transfer in WiMAX had to be handled similar to the way VoIP was handled. But it was

too early to speculate as it was still on an experimental level. Nevertheless, if it was to be

deployed in future, NEXGE team would have to understand the modalities of WiMAX

within their solution as well and it would require both time and resources. Other very

important issues were the decisions regarding when to move out of the incubation center

at IIT Madras and the right time for a possible Indian Public Offer or possibility of

getting acquired by some firm in order unlock the value of the investors and generate

funding for subsequent expansion.





28

Exhibit-1

Balance Sheet of NEXGE from 2002 to 2005

All figures in INR

As on

March 31,

2005

As on

March 31,

2004

As on

March 31,

2003

As on

March 31,

2002

Sources of

Funds

Share Capital 10,000,000 10,000,000 10,000,000 1,000,000

Share Application Money 17,233,000 5,733,000 - -

Unsecured Loans - 5,150,796 4,804,170 5,200,000

Deferred Tax Liability 1,539,873 1,975,873 - -

Total 28,772,873 22,859,669 14,804,170 6,200,000

Application of

Funds

Fixed Assets

Gross Block 21,515,716 21,620,298 20,091,546 1,502,675

Less: Depreciation 10,763,948 5,534,691 316,813 99,079

Net Block 10,751,768 16,085,607 19,774,733 1,403,596

Current Assets, Loans and

Advances 8,803,036 3,102,100 404,762 5,596,017

Less: Current Liabilities and

Provisions 1,171,745 3,339,056 5,414,025 838,313

Net Current Assets 7,631,291 -236,957 -5,009,263 4,757,704

Preliminary Expenses (to the

extent not written off or

adjusted) 23,220 30,960 38,700 38,700

Misc Expenditure - - - -

Profit and Loss Account 10,366,593 6,980,058 - -

Total 28,772,873 22,859,669 14,804,170 6,200,000





29

Exhibit-2

Organizational Structure of NEXGE (2005)

(Source: Company Documents)

Nitin Gupta

(CMO)

Mahesh Dayaram

(CTO)

Protocol

Team

Application

Team

Support

Team

H.323

Team

SIP

Team

Media, IVR,

vXML Team

Sales

Team

Madhu Nair

Marketing Head