Net Insight - addressing an evolving market with high quality video delivery
July 6, 2010		Email this page

Interview with Per Lindgren, founder and VP Business Development

Introduction

Net Insight, a publicly listed company founded in 1997 and based in Stockholm, Sweden, is a supplier of optical transport solutions for broadcast, IP, media and cable networks. The company has approximately 120 staff based at locations in the U.S., Singapore and Dubai, as well as Sweden.

The company's major customers include Telenor unit Norkring of Norway, India's Tata Communications, MediaXstream in the U.S. and ZTV in Japan.

Q: Could you begin by outlining what Net Insight does?

Net Insight aims to enable network operators to address the challenges presented by the growing need to reliably transport video traffic over their networks.

The delivery of video over networks is becoming a larger and ever more important requirement for service providers; this presents challenges relating to building infrastructure, particularly maintaining quality of service (QoS) and network utilisation.

Basically, video traffic clogs networks and demands over provisioning by the operator to ensure QoS. In addition the need to support features such as multi-casting increases the complexity of the network.

These are the challenges Net Insight seeks to address via its Nimbra platform. Nimbra can operate over any public network and can either utilise IP/MPLS technology or run directly over optical wavelengths.

The platform ensures QoS for video traffic and frees up capacity on routers in data networks, which allows the operator to over-subscribe the network rather than having to over-provision capacity as would be required on a traditional network.

Q: Net Insight originally offered solutions for broadband networks, why did the company change course?

Net Insight began to focus on addressing media network operators and content providers around ten years ago following the dot com crash. Prior to this the company concentrated on providing solutions for broadband networks, designed to enable the shift to delivery of triple play service. This market was clearly not going to take off for some time after the crash so the company refocused on a new opportunity.

The change in strategy was based on the view that content providers would eventually seek to develop a direct relationship with the end user and be more involved with the delivery of their content.

An interesting point raised by this scenario is where it leaves the broadband service providers with respect to video services - do they gradually become the 'pipe' and nothing more?

Ten years on this vision has come to pass to a degree, although video traffic is not yet at the level then anticipated by Net Insight. However, video traffic is increasing and now accounts for around 40% of all traffic carried on the network, even if much of it still derives from file-based streaming.

For Net Insight, an important factor is that once video traffic reaches the 30% to 40% level it begins to create problems for the network operators that affect service quality. At this point content owners start to take an interest and to impose service level requirements on their network providers.

Q: Do you believe the crash helped Net Insight insofar as it forced the company to focus on content providers and media networks?

Probably yes, although the company had already started to move in that direction prior to the crash. But the downturn meant that Net Insight was compelled to completely change its market focus in order to survive.

In fact, the company is now shifting its focus back to network providers as they develop their service offerings to the media sector. Around five years ago, 80% of Net Insight's sales derived from selling equipment for private networks operated by media companies; now, approximately 80% of sales are to service providers addressing the media industry.

This recent shift is partly due to media companies outsourcing the delivery side of their operation to network operators in order to concentrate on their core business of producing and managing content.

Q: Have content providers become more a part of the end user experience rather than simply a source of content?

Yes, this is happening, although as yet it is still rather ad hoc as content providers generally do not want to become involved with functions such as Class of Service (CoS) and QoS relating to the delivery of their content over a network. However, I believe that ultimately they will have to take an interest in this area.

This is where Net Insight can help both content and service providers and network operators, by simplifying the process of ensuring that content is delivered reliably and with guaranteed QoS over the network.

Q: What are the main incentives for service providers to adopt Net Insight's equipment?

There are a number of factors that lead to service providers seeking the capabilities a platform such as Nimbra delivers.

A big factor is advertising. If a television advert does not go through as scheduled the service provider and broadcaster will not get paid by the client. Therefore, for the network operator, problems that affect the service it delivers can result in lost revenue. If there is a problem the broadcaster will probably initially take the blame, but it will feed back to the service provider.

Another element is the reliable delivery of premium content such as high definition (HD) programming - for example, coverage of the World Cup is currently being broadcast in HD worldwide.

The bottom line is that service providers need to be able to offer reliable and high quality delivery for video content without impacting other services.

Q: Despite being a small vendor Net Insight has some large customers, how did it gain this business?

Primarily by offering a product that customers need and being flexible and customer focused. An advantage of being a small company is that it allows Net Insight to move faster and to be more responsive than larger vendors.

That said, Net Insight does not generally engage in customising its products for a specific customer, rather it concentrates on developing its solution in line with market trends and the requirements of its existing and potential customers.

A key objective for Net Insight is being highly responsive with regards to the sales process and after sales support.

Q: Has Net Insight considered moving into the business of managing private networks for media companies?

Yes, although an important consideration regarding such a strategy is that the company would be likely to end up competing with potential customers. Nevertheless, such a move is a possibility and other equipment vendors offer network management services.

Q: From a geographic perspective, how does Net Insight select and address its target markets?

The company has progressively expanded its geographic presence over the past few years.

Up until 2008 the focus was almost exclusively Western Europe and the U.S., with those regions together accounting for 90-95% of sales. The company then began to address Asia-Pacific, having established an office in Singapore in 2007.

Subsequently, Net Insight has opened an office in Dubai, is building up its business in Eastern Europe and is recently beginning to win sales in Latin America.

This expansion is being achieved primarily using local people, via partners with professional services capabilities that can install and support Net Insight's products. These partners are mostly small value-added resellers and systems integrator companies, plus a few global equipment vendors.

At present 60% of sales are still handled direct by the company, with the remainder gained via its numerous partners. Net Insight does not rule out partnering with a large vendor and such a move would certainly simplify its channel partner operation.

Although working through numerous partners spread across the world is demanding it is much less so than if Net Insight were to handle all of its business direct. Usually the partner will deal with support issues and maintain direct contact with the customer.

Setting up a partnership is initially demanding in terms of resources, but once up and running and generating sales the arrangement starts to pay off.

Q: Do OEMs offer Net Insight products under their own brand name?

Currently Net Insight equipment supplied by third party vendors is generally not re-badged - as a relatively small supplier entering new market this is good from a marketing perspective. However, the company is currently engaged in ongoing discussions on this topic so the situation could change.

Q: Net Insight generates very high GPMs - most recently 65.7% - suggesting it is dominant in its niche, do you believe this could be extended into other market sectors?

Net Insight is an established player in the professional media market and has built a strong position through supplying both private networks and service providers addressing the segment, and the company's GPM reflects this.

During the past two years particularly the company has been very successful in digital terrestrial television (DTT) networks, specifically providing wireless links from transmitters as TV networks transition from analogue to digital technology. In the last two years Net Insight has won 20 national build-out projects in this area, including six so far in 2010 after a slow 2009.

Net Insight is now aiming to expand its presence within the sector by building a position in the access and distribution network segments.

Q: Net Insight is listed in Stockholm, do you consider public listing an advantage for the company?

Overall I believe public status to be a benefit as it gives the company added credibility and visibility from the customers' perspective. Another important advantage is that it provides the company with a way to raise cash.

Public listing was certainly a big advantage for Net Insight in the past when it was a smaller company and helped it to acquire some perhaps surprisingly large customers given its size. Even though Net Insight offers what it considers to be a unique product in the market, it is still very difficult to gain the first reference account, and being a public company definitely helped it to do this.

The downside is the requirement for quarterly reports and pressure from the market, but I think the benefits outweigh any negative factors.

Q: What are Net Insight's goals for the next few years and what do you see as the challenges?

In the media market currently there are two big trends - the move to IP and growth in web-based content.

Regarding the shift to IP networks, whether this means transporting IP traffic, MPEG packets or native video streams, it is effectively all the same to Net Insight as its Nimbra platform can handle any of these requirements. All of these services demand QoS, multicast capability and protection switching in the network, which is what the company's products offer.

As far as web-based content, both media companies and end-users are increasingly putting material straight onto the web for viewing and download by consumers. Net Insight aims to support this process and to build a position in the distribution network space.

In addition, as noted earlier Net Insight has had significant success in the DTT sector and aims to build on this, while another growth area is the cable TV market.

Over the past nine months the company has won three or four medium size contracts with cable companies and this sector is seen as a growth opportunity. However, as a new market establishing a presence there means effectively starting as a new supplier and winning a reference customer.

Regarding geographic expansion, the company will seek to continue to grow in its core market segments and to selectively build a presence in new market segments.

On the product side, the company is engaged in integrating monitoring capabilities into its systems so that customers do not need to buy a separate box, and more generally to simplify operation of its systems for customers.

Market growth is expected in video and media traffic carried over all network types, whether private, public, broadband or professional media, driven by emerging applications such as telepresence. As the market develops, Net Insight will need to be flexible and responsive to changes in terms of both technology and customer's business models.

Along with the opportunities there is increasing competition as the big players such as Alcatel-Lucent and Cisco begin to seriously focus on media and content delivery. I believe the key factor here is the ability of Net Insight, as a small/medium-size company, to move fast as the market evolves.

Ultimately Net Insight is in the right place currently and it is down to the company to take advantage of market trends, read where the market is heading and grow its business.

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