Merger Moves Toward A Simpler Back Office

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The merger of automated systems-support provider Motive Communications Inc. and broadband provisioning specialist BroadJump Inc., disclosed earlier this month, is a move toward unifying the fragmented picture broadband service providers face these days, officials with both companies said.

Though no estimates of the deal's value have been disclosed, Motive would acquire BroadJump in a stock transaction expected to close in December.

The combined company will generate more than $100 million in revenue this year and holds over $100 million in assets. Motive will gain BroadJump's 70 percent share of the broadband service-activation market and a customer list that includes the former AT&T Broadband, Charter Communications Inc., Cox Communications Inc. and Time Warner Cable.

Gaining a greater link in the back-office food chain — which runs the gamut from customer activation to service support, network management, transactions management and billing — was a primary motivator for the deal, according to Kenny Van Zant, BroadJump's founding partner and chief operating officer.

"Providers are definitely looking for a top-five list or a list of strategic partners that they are going to bet more and more functionality on," Van Zant said. "We've heard from customers over and over again in the last 12 months, that they want their strategic vendors to do more, not less, and that there is not enough room in their overall expense structure for the number of companies that are coming at them with a piece of the solution."

Motive co-founder and chief strategist Mike Maples agreed. "The customer doesn't want to be an integrator between multiple products," he said. "A lot of times what costs more than the products themselves is making them work together."

Combining BroadJump's service activation and Motive's automated customer-service systems is one step toward meeting that demand. It essentially covers the first half of subscribers' service life cycle, after they sign on and occasionally require customer support to solve problems or change service information.

"If you go talk to the global cable companies and the DSL and telco service providers, we are finding that worldwide, they are extremely energized to solve both the activation and support problem end-to-end with a solution," said Maples. "We thought, 'Rather than compete against each other and have our respective strengths, let's combine and try to run the table in that market as quick as we can.' "

For now, that consolidation will have its limits. While Motive and BroadJump have combined activation and automated customer service, moves into other territory — particularly billing — are not on the agenda, Van Zant said.

"From that point of view, I think you will really see us stake out our claim in that space and try to dominate it," he said. "There are some areas of a provider's infrastructure that I think are difficult at best, and in some cases even dangerous, from an [return-on-investment] perspective, to focus on, and I would probably put billing at the top of that list."

Nevertheless, with the combined company's size and customer base, it will be able to explore other aspects of the back office that are not as well-defined.

"You get to a point with a customer like a service provider where you have the critical mass that you get right of first refusal on new [product] categories," Maples said. "So you kind of pass this phase where you sort of cross this line over into being kind of part of the in club of vendors that these customers work with.

"And that gives us a huge advantage, because now we can go and build new products knowing that we have a sugar daddy for the original investment that we make."

While it may be too early to say the BroadJump-Motive merger is part of a trend toward back-office consolidation, the two companies' product lines will offer broadband providers a simpler option, according to Jupiter Research broadband analyst Joe Laszlo.

"It does seem like especially in this kind of environment, having a broader value proposition that you can bring to potential clients certainly will help to win them over and will hopefully help them to open their wallets a little bit wider than they would have otherwise," Laszlo said. "That's really going to be the ultimate sign that this is a really good idea — if companies make that move towards actively pursuing the integrated product, as opposed to continuing to seek out à la carte or best-of-breed solutions, which really are more of a headache in a lot of ways."