Sept/Oct 2009 | Volume 1/Number 5
The Acme Packet Success Story
By Rich Terhani
Andy Ory has helped lead Acme Packet, an IP communications company
focusing primarily on session border control solutions, to greatness.
I first became aware of the company during the post-telecom bubble days earlier this decade and from that time Acme Packet has not ever ceased to impress me. The company prospered in a crowded field while most competitors were forced to close down or sell in a distressed fashion to others.
are gone. Considering the company's headquarters is located a stone's throw from where many of the mini computer companies such as DEC and Prime were based, this was a good example of how disruption does not favor incumbents. And it explains why Ory is happy to have launched the company at a time when there was no need to rely on legacy technology. The following important comments he made are certainly worth sharing: "Disruption favors the weak – [it] favors the least amount of embedded assets." "People, money and materials – work against you." "A disruptive event – [whether it is] technology or new market regulation – has to be just right [if it is] too big or small [it presents] a problem."
To explain market inefficiency and how disruptive technology changes this, Ory uses a simple example. He explains that if a company has a supplier relationship with another company it keeps innovation from taking place. For example if a company sells me staplers and a new supplier comes into the market with a cheaper stapler I may just ask my existing supplier for a price break. This works fine until the new supplier comes to you with a new invention – tape. At this point the new supplier becomes the preferred vendor.
And this explains why Acme Packet has reached critical mass – a point where a carrier understands that Acme has become a crucial cog in their network.
Interestingly in our meeting, Ory explained that the reason the company purchased low-end, software-based SBC vendor Covergence (News - Alert) was because they determined they needed a more "innovative" brand as that seemed to be what the enterprise market was telling them they wanted. In other words Acme had become the established player – the incumbent.
Since my conversation the company announced earnings which were up 6 percent sequentially. Company officials said that there were two other "never achieved as much" categories, cash provided
by operating activities of $14 million and cash and equivalents of more than $155 million.
In terms of opportunity, Acme Packet is now the dominant standalone SBC provider and seems to have become more synonymous with the category by the day. As a larger portion of carriers and companies adopt IP networks it seems obvious the necessity for them to consider purchasing an SBC will only grow. And in such a situation and market, it is good to be the leader.