Meltdown? There's still liquid gold! -- II

Bharat Kumar

IT'S a quaint building. It looks the same as its neighbour's from across the road on a rainy day in Bangalore. But once inside, you notice the difference. The hallway has a sprinkling of computers with software engineers at work. In between, a stairway - with wooden empanelling - runs up. You notice - this is probably a first for a software company - a broad, wooden swing! Just like the ones you see in old South Indian homes. The one on which Grandma rests after her meal and you snuggle upto her, waiting for her to belt out story after story on long hot afternoons!

Had S. Baskar, the Chief Technology Officer of Impulsesoft, not dragged us inside the conference room, we might have stood and stared on, expecting to be served filter coffee in silver ''tumblers.''

Impulsesoft, a two-year old kid on the block, makes a convincing case for itself. If you were looking for a company whose niche focus might just help it duck the slowdown effect, Impulsesoft might be it. It is in the short-range wireless solutions marketspace. It caters to software requirements of end systems -- essentially boxes that have hardware, software and silicon. Excerpts from a chat with Baskar:

How does your business work?

We are in the wired-to-wireless connectivity solutions. These are Customer Premises Equipment (CPE). They connect the wired to a wireless network. They aren't really technology-specific. Though we started out focussing on Bluetooth, we have grown beyond that.

We take the customer from concept through to manufacturing. Our systems team builds the PCB system, our software team builds software portions that go into this box. Our manufacturing relationships team talks to manufacturers, second sourcing and the like. We have a small silicon team - in other words, the VLSI (very large scale integration team) - that designs chipsets that gets into these boxes. That's our gamut.

Our business model is that we are a B2B kind of solution provider. We don't sell to end-consumers but speak to OEMs. The likes of Panasonic, Sony, Siemens and Acer could be our customers. Our customers license the complete box, slap their names on and sell. They used to buy our software solution, integrate it into their box and sell it. We are moving to a larger model where we do the complete solution.

Why can't they do all this themselves? Where do you add value?

It is tough for these large companies to grapple with all the technologies around themselves. They are better off buying a complete box and shipping it.

Let us take the example of ISDN modem connectivity in Japan. In a home, a laptop user wants to remotely connect to the telephone line so that he can move about unhindered. One of the customers sells the box which has two components. One that connects to the laptop and wirelessly speaks to the second box, which is the wall unit. This unit - also called the dongle, since it dangles on the wall - is connected to the telephone line.

These are the initial products that you see in the marketplace. With one of our clients, we did the software components for both the boxes. In other words, our software helps this piece of hardware talk with the other piece of hardware and interact with the modem.

What are your options in this market?

Wireless is really picking up and will be ubiquitous in two years. We are looking at home networking. The opportunities here are multiple. One is the access point. Anything that sits in the periphery of a wired-to-wireless network is an access point. This simple box I just explained will soon transform into a residential gateway kind of solution. The market penetration will increase as the box cost decreases.

NTT DoCoMo in Japan offers a cordless service much like our own WLL. They have covered 90 per cent of Japan through putting a wireless box on all electrical poles. Thesehave ISDN connectivity. At home, you have a wireless handset that dials into the nearest box. Next, all you have to do is to update that connectivity to broadband. People won't invest in equipment boxes but will spend for hand-helds. That's the kind of issues we look at. So short-range wireless solutions will be in demand.

But, the US is going through a slowdown. Japan is said to be going through a recession for some 10 years now. How do you expect to make the best of these two markets, said to be the best in consumerism?

Due to the economic scenario, we have had to do a downward revision for revenue estimates. We were pretty upbeat in December last. But post-January, the market dampened.

The difference in perception between Japan and the US has helped us. Typically, when consumer buying goes down, companies don't invest. They focus on core products and ship them. In Japan, they release more new products with the view that these will help them beat the slowdown. This year, most of our customers are from Japan. The attitude is, ''If I sell 1,000 products, 10 will click.'' For them the rate of new product introduction is the metric for success.

What you see in the US is a lot of market research that tries to find what customers want. In Japan, they push a lot of products, see what customers want. Even if two click, they have made their money. Investments are steep. R&D investments are high, especially when the market mood is gloomy. Having gone into the ''belly of the beast'' so to say, we are able to see how Japanese companies work.

The Japanese have disrespect for technology. For them, complexity of a technology is not an issue. For them, if there is a problem, they look for solutions. They are not worried about complications.

Hype is very less. For example, in the US, optical technology is very hyped up, because it's complex. In Tokyo today, you have 100 Mb hitting your home on fibre-optic cables.

Another thing that works to the benefit of sellers in Japan is that you cannot inherit property. So people don't want to save. Spending cycles are high and savings are much lesser.

Today, Japan is the market. US won't be up and running for the next 18 months. We do have silicon partners in the US - Semiconductor biggies such as BroadCom, Conexant etc. Our platforms will be built over their chipsets.

Do you manufacture in India?

No. We do it in Taiwan through partners. Software and hardware design is sent to them. They procure chips, top it through their assembly line and ship the product directly. Our forte, is identify and get into new technology. We have broadest silicon support strategy, for instance, Oracle runs on any OS. You can get any Bluetooth hardware - Ericsson etc. We will support you.

What is your revenue model?

Licensing fee plus royalty. We charge a reference fee, plus royalty per unit shipped.

What is the size of the markets that you want to address?

About $5-9 billion for home networking. Reference design boxes will form a significant chunk of the market place.

Given the market, do you see a round of funding now?

The first round of funding was through promoters' money. Six months ago, we had an angel-funding round.

We are comfortable for the next 15 months. We see operational cash-break even this year ending March 2002.

We have clamped down on expenditure pretty heavily. We thought we would be profitable but only break even this year.

Pic.: Mr S.Baskar, Chief Technology Officer, Impulsesoft.

Picture by G.R.N.Somashekar

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