Interviews With Mobile Computing Vendors
- Extended Systems -

MobileInfo.com Interviews Steve Simpson, CEO Extended Systems

Extended Systems is a company based in Boise, Idaho and has research and development offices in Europe. It's core offerings are Bluetooth SDKs and mobile data management software for mobile applications. We interviewed Steve Simpson, CEO of Extended Systems in February 2001 to get an insight its their products strategy..  

Question #1.
Please give us a 5-minute introduction to Extended Systems – its mission statement and vision giving highlights of its progress during the past two years. Are you essentially on track from inception or has the economic climate slowed your progress?

• Extended Systems was formed in 1984 and went to the public market in 1998. We entered the mobile computing market with lots of experience very early in 1990 with our short-range infrared expertise. Soon after in 1991, we introduced software that allowed HP 95LX to communicate with printers. We have also supplied software for Palm and 3-Com devices in the past. Since our early days of mobile computing, we have learned a lot of the good, bad and ugly of this field. As such, we have extensive engineering experience in building robust solutions.
• Given our experience and background with infrared short-range communications experience, we entered the Bluetooth field with the acquisition of Counterpoint Foundry. In 1997, Extended Systems acquired Verta Software because it was complimentary to what we were doing. In 1998, we acquired Rand Software Data Systems and Van Bristol in the UK. We intend to continue this strategy by bringing other teams on board to build a strong base of engineering talent.
• The Mobile Data Management program evolved later and has now become our core offering. The result is that we offer solutions in short-range capability coupled with data management infrastructure software.

• Extended Systems is a strong viable vendor with $56 million in revenue and 400 employees (185 in Boise, Idaho, 25 in Corvallis, Oregon and 35 R&D team in the UK). We also have developed sales and marketing presence in France, Germany, UK, Singapore, Italy and Japan.
• Originally, all of Extended Systems founders were from HP.

• Our core competency is data management infrastructure software and application development. This is coupled with our expertise in short-range communications capability, especially in Bluetooth.
• We are network–agnostic. We are not hung up on wireless alone. We believe that all you need is an IP network to perform communications. It is for the wireless network providers to provide an airlink.
• Extended Systems supports all device platforms – PalmOS, Windows CE, WAP, EPOC, and RIM Blackberry.
• At the back-end, Extended Systems supports Microsoft Exchange and Lotus Notes for office collaborative applications. We also support various DBMS- based transaction systems, as long as there is ODBC support for these databases.
• We intend to provide an API (bridge set) to most popular application platforms.
• Extended Systems goal is to continue to meet the challenges of device reliability, security and application robustness, which represent the key concerns of IT management.

• We think that the ‘Future is Now!’ We want to enable mobile smart telephone devices a capability to get at the corporate information for sales force automation applications in both wireless and wireline mode. Sometimes, it is in a "periodically connected’ mode, whereby a salesperson could get updates in the morning on their Pocket PC, PalmOS device and then resynchronize in the evening. For other applications, it is in an "almost always connected" mode through wireless networks. We say, "Almost always connected" because no wireless network can guarantee always being connected.
• For PDA and handheld communication, Extended Systems not only allows communication from the smart phone through Bluetooth, but also facilitates device manageability.
• Our software restarts the synchronization process where we have left off in a wireless communication – allowing checkpoint restart capability.
• Extended Systems intends to develop a "persistent message recovery engine" which is a sophisticated functionality. IBM’s MQSeries did not meet our needs. On the other hand, IBM is using our XTNDConnect Server under the cover, in WebSphere application server.
• Our strategy has three points of focus – customer, enterprise IT and strategic relationships with OEM, e.g. IBM and strong relationships with application developers through the provision of SDKs, etc.

• The Bluetooth and XTNDConnect Server related markets are quite strong. Growth expectations suggest that there will be an increase from $480 Million today, to 2.2 billion in 2004, based on IDC data using corporate IT environments. We have already sold 60 Bluetooth licenses.
• As far as number of seats, it will increase from pilot implementations of hundreds of seats, to several thousand seats, in each enterprise. (Declined to give information on the total market size).
• We expect rollout orders from customers like Daimler Chrysler, British Airways and banking firms in thousands.
• Aether Systems, Pumatech, RiverRun, Waveware and Synchrologic are our competitors.

• Extended Systems’ customer and market focus.
• We are not in the portal business like our competition.
• Our technology sets us apart – that is why IBM selected our XTNDConnect Server, under the cover. Palm recommends our server software.
• We have extensive support of various device operating systems.
• We understand the needs and requirements of IT corporations.

• Adoption has been slow so far, but predict rapid increase in 2001and 2002.

• Against these estimates by IDC, rule of thumb costs for our software are in the $100 per seat range. These software costs will go down soon as the adoption rate increases.

• Remember that asset management is still a leading edge implementation. Consequently, it will take time for widespread adoption.

• It is true that the consumer market is bigger in numbers, however, the revenue potential is smaller. This creates one of the best opportunities for portals. We intend to supply to the portals.
• Although the B2B market is bigger in the short run, the real opportunity is in the Corporate Space.

No, we are not going after this market.

• We have sold 60 Bluetooth licenses. WindTunnel is our nearest competitor.
• We probably deploy more seats from direct sales and OEM sales.
• Our revenue is split between Bluetooth and XTNDConnect Server - 1/3 Bluetooth and 2/3 XTNDConnect Server Business.

• We have licensed XTNDConnect Server to a number of prominent OEM vendors.

• Bluetooth hardware costs are still too high. This is holding Bluetooth technology back. There are two critical factors - availability of radios and cost of these radios.
• Bluetooth costs will decrease. Silicone Wave expects much lower costs by the end of 2001. High volume shipment is close to the cost point; we expect our costs to be 10-15% of the total implementation cost.

• We entered the public market in March 1998. From 1984 we have been historically profitable. We are not profitable right now due to current R&D and acquisition costs.
• We do not need cash from the market. We have no debts; have $ 5 Million in cash and a $10 million line of credit. Therefore, we are self-sustaining.

• Yes, we recognize a wide variation in forecasts. But generally speaking, we do expect strong growth in this space.

• When choosing a vendor, pick one that you feel is competent, one that has longevity and a good track record.
• Choose a vendor with strong endorsements from major systems integrators e.g. IBM, Compaq and Microsoft who can legitimize the technology behind its products.
• Look at the vendor’s customer references to find out what their experience has been with the vendor.
• If you are multi-national, find out if your vendor can meet your needs on a multi-national level?

MobileInfo Comments and Advisory
We have watched Extended Systems with interest during the past two years as the company has been establishing a strong presence in the mobile management and information synchronization space. Lately, Extended Systems has announced a series of OEM relationships with several important players like IBM, Intel, HP, Ericsson, Microsoft, Motorola and Symbol. With Extended Systems’ engineering heritage beginning with a short-range infrared communication, it was very appropriate that it delved into Bluetooth, another ‘hot’ technology of 2000. Selling 60 software licenses in the first year is a pretty impressive record, even though there are over 1800 vendors in the Bluetooth market.

It appears to us, that Extended Systems has a wider product coverage and deeper engineering talent than many of its competitors. Extended Systems’ XTNDConnect Server series has a number of products. XTNDConnect Server is the core offering in this suite, providing synchronization and asset management functionality for operational applications. Its XTNDConnect View product allows secure real-time access to groupware information for both IBM/Lotus Domino and Microsoft Exchange from several wireless devices - RIM and Palm VII handhelds, WAP and HDML mobile phones and more. Extended Systems strategy to employ Certicom’s SSL security technology gives the company a strong 128-bit encryption over the Internet to the wireless network provider's access point. For those enterprises that have large development shops, Extended Systems offers XTNDConnect RPM (Remote Procedure Middleware) allowing developers the ability to create enterprise applications. Extended Systems’ Bluetooth and IrDA expertise provides a distinct advantage in developing SDKs, synchronization and device management products for short-range communication.

We would encourage Extended Systems to enhance its asset management products with problem diagnostic capability by building smart SNMP alerts in client devices and to also building interfaces for enterprise systems management tools like Tivoli, CA and HP. We see significant value in this in the future. Another opportunity would be in the device management of smart phones that wireless carriers and portals would need as m-commerce takes off in the future. One requires nimble in-expensive management and configuration information. It may come via SS signaling but it must serve a richer functionality that business PDAs need rather than simple voice handsets. The conceptual design for this technology should not come from telecommunications carriers – who have a handset mental block and do not understand PDA management requirements. From a software-engineering point of view, we believe that engineering companies like Extended Systems can do it.

Extended Systems prides itself as an ‘engineering company’, first and a ‘marketing company’, second. A company with software engineering as its core strength finds it easier to deal with companies like IBM who have more marketing expertise in terms of dealing with enterprise customers. It is, therefore, not surprising that they have struck a number of impressive OEM arrangements. Similarly, large systems integrators like EDS, and Anderson (Accenture now) will find them good partners. However, Extended Systems future success in selling directly to large enterprises is dependent on the strengthening of its marketing team for enterprise customers.

We feel that large enterprises with development staff, systems integrators and wireless portals should seriously evaluate Extended Systems products, especially when selecting products and tool kits for building business solutions.

Finally, our business intuition suggests that Extended Systems will become a very attractive acquisition target for its larger OEM customers. Extended Systems could fit in very nicely being a division of some of these companies. In the interest of the mobile computing industry at large, MobileInfo.Com would hate to see that happen because their engineering creativity would be utilized to the benefit of one company rather than the industry at large.

Acknowledgement:
MobileInfo.Com thanks Steve Simpson, CEO of Extended Systems for this interview.

For more information on Extended Systems solutions on this website,  click here.  To go to the vendor site, click here.

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