Speaking With David Mandelstam, Founder, President and CEO, Sangoma Technologies

By: Greg Galitzine

Founded in 1984, Sangoma Technologies (News - Alert) got its start by offering data communications products based on the PC platform. In May 2000, through a reverse takeover, Sangoma Technologies became a publicly traded company on the Toronto Venture Exchange (TSXV:STC), and since 2005, when Sangoma began to address the needs of the voice market, the company has enjoyed a period of growth, doubling in size.

Sangoma offerings address a wide variety of industries including telecommunications, finance, aerospace as well as other industry vertical markets such as government, retail, hospitality, and education.

David Mandelstam (News - Alert) is Sangoma’s Founder, President and CEO. I had the opportunity to speak with Mandelstam, who earned a degree in Mechanical Engineering from the University of Witwatersrand in South Africa, and a Master of Science in Aerodynamics from the Cranfield Institute of Technology in the United Kingdom. Currently residing in Toronto, Mandelstam is passionate when it comes to discussing his company and the open source telephony market.

I asked Mandelstam to step back in time a bit and describe what it was like to be a part of the pioneering days of open source telephony.

GG: Did you ever imagine open source telephony would have such a disruptive impact on the market at large? Please describe those early efforts.

DM: I had known Mark Spencer (News - Alert) for some time before he began work on Asterisk, as his first job with Adtran was related to a Frame Relay application that used Sangoma cards. When Mark Spencer first contacted me and invited us to support his early Asterisk (News - Alert) initiatives, we were in the middle of the telecom recession with a little engineering time on our hands. This allowed us to experiment with our original rather unsuitable T1/E1 cards to the extent we could hear voices from the PC speaker.

At the time, we were captivated by the technology and hugely impressed by Mark’s achievement. It was certainly a neat trick, but surely had very little value beyond a hobbyist’s toy. To me it seemed to be a non-starter that anyone would replace their telephone system, which is any company’s first gateway to the world, with some white box PC running an open source telephony project above an open source operating system, neither of which came with any kind of support.

I am very pleased to admit myself totally wrong in that judgment. Right now Sangoma, together with countless thousands of other companies are doing exactly that. We run the Fonality PBXtra, in our office, a great example of a successful, stable, full featured PBX (News - Alert) built on Asterisk.

At the time of our first experiments, our range of cards was not well suited for telephony, but we were in the process of redesigning our product line based on the Advanced, Flexible Telecom (AFT) architecture used in all our current product line. Notwithstanding our opinions of the OST market potential, it was easy at that time to adjust the AFT design so that in addition to handling traditional IP or X.25 or Frame Relay or HDLC streams, it would also handle voice traffic in a highly efficient manner. We expected an eventual return on our investment, but not much more.

We have been highly gratified by the reception of both Asterisk, and Sangoma AFT cards in the marketplace. While many of our products are dual use, in that they can be used for both voice and data (both voice and data at the same time in many cases!) we rapidly found ourselves developing voice-only products like analog FXO/FXS cards and ISDN BRI cards. So Sangoma has enthusiastically embraced the whole OST movement, participating as supplier, of course, but also as a significant sponsor and advocate wherever we can.

GG: When did you realize you could make a business out of this?

DM: Well it kind of grew on us. Like most businesses, we have many initiatives; some of which work and some of which don’t. We expected that this would add a nice little five or 10 percent fillip to our revenues.

GG: How would you describe the market today?

DM: I would say it’s at the stage where there is a great sea of small integrators that work with Asterisk and install a few hand-engineered systems a month. They’re great customers, but they are virtually all individuals. What’s beginning to happen is that these people are beginning to coalesce into real businesses with multiple employees, proper infrastructure, decent funding… all the things which make the difference between a really small business and something that is much more successful. Fonality (News - Alert) is a great example of that, of a company that has funding, management expertise, a good business plan... all the things that are required to have a proper, real, focused growing business, where every quarter is better than the quarter before.

Of course, they’re not alone in this business. As other professionals begin to emerge from this group, that’s very good for us, because we have a reputation for producing cards that work and if you’re really in the business, you can’t afford to have failures in the field — failures are very expensive.

GG: Are there any other exciting deployments or developments?

DM: We’re not only working with voice in the open source community, we’re working on proprietary systems too, and one of the companies that’s working with us on integration is Aastra (News - Alert), a branch called Aastra DTV in Germany, who make a soft PBX, which needs a gateway. That looks like a very interesting one.

Then, there’s a deployment with Open Wave in South Africa, which features a capacity of 1,000 simultaneous calls for the Internal Revenue Service of that nation.

And, we’re also working with Microsoft (News - Alert) on the company’s new unified communications initiatives. We have a gateway product that works in conjunction with Microsoft’s Office Communications Server and that looks like a very interesting opportunity as well.

GG: What’s the nature of that opportunity?

DM: We use our cards, but with gateway software, which connects the Office Communications Server and does two things: it provides it with a PSTN gateway and it also provides mediation services. Because Microsoft’s SIP and other SIP applications are not necessarily the same, one needs to use a mediation gateway to do that translation. We do those two functions. The solution is part of the Microsoft server — it doesn’t require external boxes — and it’s very much less expensive than buying a gateway device from some other vendors.

We even have some high-profile deployments, including one with Consolidated Edison who have quite a large number of installations of this type.

GG: Would you characterize the opportunity as a global one?

DM: For the last few quarters our sales outside of North America have exceeded our U.S. sales. The market is growing faster outside of North America, and as we add more distribution and as we add more products we’re seeing that part of the industry growing quite fast.

GG: Please tell me a bit about the current state of Sangoma’s distribution network and your plans to expand the channel.

DM: Sangoma’s marketing model is based on the recruitment and support of best-of-breed distributors in each region. All our distributors are characterized by an in-depth technical knowledge, the distribution of complementary products allowing for one-stop shopping, and an enthusiastic and energetic approach to handling Sangoma products. We do not demand any kind of exclusivity, being confident that our superior products are able to compete extremely effectively on their own merits against anything in the marketplace. But we do insist on organized marketing, ethical behavior and a willingness to go the extra mile for their customers. Because we do not guarantee regional monopolies, the distribution system is self governing in that the more successful distributors in a region will expand at the expense of less successful ones. It is in our customer’s interests that they have a choice of source at all times. Our distribution system is healthy and growing, with two new distributors having been added in South America and the United States in the past two months.

We are actively recruiting new channel partners in certain key parts of the world where our distribution network needs strengthening. However, we are very selective and we feel that it is better to be without adequate distribution in a region rather than deal with an organization that is sub-optimal.

GG: Do you have any plans to move into other markets beyond telecom?

DM: As you know, our genesis as a company was originally in data transport, some of which did not involve any form of telecom. Much of our business today still involves data communications. Some of Sangoma’s current data communications business would be characterized as being part of the telecom infrastructure, but some of our largest markets definitely fall outside of what is conventionally considered to be telecom.

Sangoma has grown by leveraging its strengths. We constantly watch trends and should an opportunity present itself, the company wouldn’t be opposed to pursuing it. Our focus is however on remaining the best at what we do. Therefore, we would only look at opportunities that would allow us to maintain an engineering leadership position.

GG: What about your product roadmap? What new offerings might we expect to see from Sangoma in the months ahead?

DM: In general terms you can expect to see new hardware and software products for both voice and data that expand on and enhance current product offerings. The release of the A500 BRI card last year rounded out our conventional line-driven telephony offerings so that all modern telephony technologies are properly supported; from simple two-line analog cards through to 240-channel eight-port E1 cards. There are obviously gaps in higher speed interfaces such as T3/E3 and beyond, but the demand has not been there for those types of products to run on current PC platforms. We do provide T3/E3 cards for data only, as data is a less demanding application than voice.

The new products to be released this year will have larger software components and will combine technologies in novel ways. We are looking at expanding our driver support to work with more operating systems and applications.

GG: What else would you like our readers to know about Sangoma?

DM: We continually try to raise the bar. We work very hard from an engineering and a marketing point of view to be the leader in whatever we do, and that’s a trend that we are going to continue. Life is very exciting at Sangoma.

Our business is not to make the end user products. Our business is to empower our customers by providing them with the right building blocks. Our customers are really the beneficiaries of what it is that we do, and we work to make our customers lives easy, and they in turn do all the clever stuff in order to provide the end user products to their customers.

At press time, Sangoma announced it was offering a lifetime warranty on their Advanced Flexible Telecommunications (AFT) product line. Sangoma, which previously offered a five-year warranty, has raised the bar by upgrading to a lifetime warrantee. The program includes a no questions asked 30-day money back guarantee, free technical support, and free replacement in the unlikely event of a defect.

Addressing that announcement, Mandelstam said, “We believe this move will send a message to potential customers, users and partners, that when it comes to reliability, we will not be outdone.” IT

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