"We Are Also Putting Quite a Lot of Emphasis on Developing Markets. Lots of Things Are Happening in The Middle East And Africa at Present"

Interview with Carsten Brinkschulte, CEO of Synchronica plc, About His Strategy in the Rapidly Growing Market of Mobile Synchronization and Device Management

Interview led by Abraham Joseph of Device Management Forum on October 10, 2007

What are the advantages and challenges of being a public company in a segment that is dominated by privately funded companies?

One possible disadvantage is the overhead of running a public company. You can have a much leaner operation as a private company.

There are, however, some very significant advantages to being a public company. The most obvious one is access to institutional investors.

Another advantage is that shareholders do not have direct influence on company strategy. In contrast, for many private companies VCs have very strong influence on strategy. Many VC-funded companies are focused on a strategy that involves an IPO or a trade sale. A trade sale can mean uncertainty for customers. As a public company there is transparency in our numbers and we do not have a VC on our board encouraging or directing us to sell the company to a buyer that is not in our customers' interest. As a customer, you do not know how long a VC-funded company will be around.

What does the recent deal with Sun Microsystems to license your technology mean for Synchronica?

Clearly, this is a major endorsement of the strength of our technology, and obviously, this is very important news for Synchronica because Sun has a very significant presence in both service provider and enterprise markets.

Sun plans to integrate Synchronica's synchronization engine SyncML Gateway into its Sun Java System Communications Suite, enabling over-the-air synchronization with any device supporting the SyncML (OMA DS) industry standard.

In the service provider market alone, there are some 240 million mailboxes running on Java and this agreement will lift Synchronica's profile significantly in the service provider market.

You raised USD 7 million recently. Can you give some insight into why that was necessary and what the funds are being used for?

We did this to accelerate product development and to scale our sales and engineering operations. We have been expanding in rapidly evolving and emerging markets in the Middle East, Africa, Asia, Latin America and Eastern Europe. Lots of things are happening in the Middle East and Africa at present, for instance, especially with backup and restore and mobile email for the mass market.

In many emerging countries, the mass market for mobile email will take off first and will outstrip other services. This is because in many of these markets people do not have PCs at home and therefore the phone will be the primary terminal for email. Many of these markets are likely to experience very high penetration and growth [of mobile phones]. The next one billion subscribers will come predominantly from developing countries.

What are the business drivers for mobile device management?

With more and more complex phones being deployed in enterprises more and more problems are being deployed as well. This increasing complexity means having to deal with an increasing number and array of issues. For example, when configuring a smartphone you are likely to have more bugs than when configuring a feature phone, although even feature phones are now increasingly complex, particularly for regular consumer users.

From an enterprise perspective, smartphones are like small PCs and need to be managed accordingly. However whilst enterprises tend to have some form of PC management in place, currently most have no way to manage applications or standardize security policy for mobile devices.

Most operators are looking for ways to reduce customer care costs and increase customer satisfaction. Some have found that rather than enable new revenue streams, smartphones have introduced spiralling customer care costs and reduced customer satisfaction. Many operators now see mobile device management (MDM) as a way to combat this trend.

Further, for manufacturers, recalls are very expensive and MDM helps by enabling devices to be updated after they have been sold to consumers and enterprises.

For enterprises, operators and handset vendors the case for mobile device management is driven by complexity and the need to manage settings and applications, reduce customer care costs and deploy firmware updates over the air. All of this is driven by the need to increase productivity and, indeed, enhance the end user experience.

How much do you believe the mobile device management market is worth, and where is the greatest value?

I have seen estimates like USD 2,5 billion for the carrier market in 2008, but I think that this is too high. The value of the market can be seen through recent acquisitions. In 2005, Sybase bought Extended Systems for USD 71,3 million, and last year Nokia bought Intellisync for USD 430 million. In the latter case, Intellisync had mobile email and PIM synchronization, as well as device management. So clearly, the device management portion was worth less than USD 430 million. But it is difficult to measure "worth".

I think that the best value today and in the near future is probably to be found in enterprise device management (EDM). This is because enterprises are experiencing pain now. In contrast, the firmware update over-the-air market (FOTA) will be slower to take off. It will probably take another two years for the device base to change sufficiently. Currently, it is device manufacturers rather than operators that are driving the market for FOTA, but some recent examples suggest this is changing.

Backup and restore is another market that is taking off now because the installed base of data synchronization-capable devices has grown to about 1,5 billion. This is an immediately applicable technology that has instant appeal to customers who are wary of the dangers of a lost or stolen device. Even upgrading is sometimes avoided because of the inherent hassles of re-inputting data that a backup and restorer service can re-create over the air in minutes.

What are the key components of Synchronica's device management solution?

We have three solutions:

• Synchronica Mobile Manager Suite, a modular set of tools for complete device life cycle management by enterprises, operators and handset manufacturers
• Synchronica Mobile Gateway, which provides mass-market push email and data synchronization, and
• Synchronica Mobile Manager Enterprise (part of the Suite), a powerful, yet easy to use set of tools for managing a broad range of enterprise devices including those based on Windows Mobile and Symbian operating systems

The Mobile Manager Suite consists of:

• Client Provisioning
• FOTA
• Automated Hotline
• Mobile Manager Enterprise (for EDM)
• Backup and Restore, and
• Sydemas, a complete server-side XML scripting engine for solving device management issues based on OMA DM standards

Which markets is Synchronica targeting?

Our solutions address the needs of device vendors, operators, and enterprises. For manufacturers we offer the Mobile Manager Suite and for enterprises we offer Mobile Manager Enterprise. For operators, we offer Mobile Manager Enterprise, the Mobile Manager Suite and Mobile Gateway.

We have not been targeting selling FOTA to operators for the reasons I mentioned earlier. However we have sold it to device and chipset manufacturers, such as HTC and Qualcomm, and we have also implemented a solution for a major global auto manufacturer and we are confident of growth I this area.

In terms of geography, we have offices, customers and partners in the developed markets of the USA, Europe and Asia, but we are also putting quite a lot of emphasis on developing markets. In fact, we just opened an office in Dubai from which we plan to address the Middle East and Africa and we have not lost sight of Latin America as an area of tremendous potential.

What are Synchronica's channel strategies for the various markets it is addressing?

We sell directly to manufacturers and operators but typically take an indirect route to enterprises. We do, however, also have another recent instance of a direct route to the enterprise: Deloitte and Touche, who are using Mobile Manager Enterprise to manage their fleet of smartphones. Additionally, device manufacturers are now showing more interest in applications as a service. For example, IXI Mobile has licensed Mobile Gateway our mobile email and synchronization product. Increasingly, manufacturers too are looking to enhance the value of their devices with services, such as enterprise device management and backup and restore.

How important do you think the managed services segment of the market is?

It is very important for enterprise device management (EDM), backup and restore and mobile email. All have good use cases.

What is Synchronica's strategy for mobile device security?

A comprehensive range of security features including device lock, device wipe and alarm are already included in Mobile Manager Enterprise and encryption is handled with partners.

Do you think the device management market can sustain the number of players it has currently, and if not, when and how do you expect consolidation to occur. Might we see, for example, smaller players joining forces to achieve broader solution footprints?

Consolidation is already happening and will continue.

I do not see the financial logic for the merger of small companies. I think acquisition by a larger company is more likely than two private players merging.

Larger companies that do not already have it will want to enhance their offerings with MDM.

In which areas would you like to see further or faster standardization?

Standards are essential for MDM, but they are moving too slowly. Also, there is no real standard for EDM.

What are most needed are standards in EDM. OMA DM covers basic device management but other areas, such as application installation and management, policy management, and device customization, still need to be addressed.

Nokia moved ahead with its E Series devices. They extended E Series beyond OMA DM and this is very good, but it is limited to Nokia. The industry needs this across all devices. OMA has a process underway, working on similar capabilities and we welcome those standardization efforts.

Why do operators appear to be so slow in deploying device management systems?

Operators are slow because the installed base of compatible phones is still small. They quite rightly look at the number of devices they can address. The financial effect depends on the installed base of OMA DM devices and the capabilities these devices are exposing. Only a percentage of smartphones have OMA DM and the features that operators want to introduce aren't being supported. The feature phone market has appeared worse, but is rapidly improving. So, operators are simply waiting until the capabilities they want from devices are supported.

In which ways do the Synchronica solutions stand out from other mobile device management solutions in the market?

Firstly, our Mobile Manager Suite offers an Automated Hotline. This has been launched with Siemens Mobile and Good. It produces excellent ROI by reducing customer care costs and replacing manual help desks. Customers are projecting significant reduction in customer care costs.

Secondly, our Mobile Manager Enterprise solution is designed to be hosted and multi-domain. It is therefore optimised for manufacturers wanting to offer EDM as a service.

Thirdly, Synchronica's Mobile Gateway is the only solution that I am aware of that can deliver mobile email into the mass market without a client having to be installed on consumer handsets. Almost all phones are shipping with an email client and Synchronica's solution can use this native email client directly. This means that you can now deliver push email and synchronise calendars and contacts with feature phones.

What applications do you see for DM and MDM technologies outside telecoms and IT?

Automotive is a very interesting field, especially for FOTA, diagnostics and repair and our Automated Hotline. Some cars are already equipped with GSM and GPS systems. The next level is to use the phone in combination with, for example, the GPS data in the car. Then, central intelligence can provide monitoring and repairing cars with software updates. Imagine the impacts of car recalls. Not only are the costs involved huge, but such events are very damaging to manufacturers' brands.

Machine-to-machine applications also offer important opportunities for FOTA and DM solutions.

How do you see the mobile device management industry developing over the next three years?

The EDM market will take off first and that is happening now. Also, manufacturers are beginning to introduce FOTA, remote diagnostics and automated hotlines. I see this gathering momentum.

In one to two years, operators will be launching generic MDM services for the enterprise market. This will give enterprises the option of managed services instead of having to implement and maintain solutions themselves.

But, if service providers also want related services now, to increase revenues and maintain ARPU, we are happy to offer no-nonsense backup and restore solutions and mobile email to address those hugely expanding needs.

About Device Management Forum

The Device Management Forum brings together major stakeholders in the development, distribution, and management of communication devices and services. Its major objectives are to promote knowledge and understanding of device management and associated issues, and to help stakeholders maximise the benefits from their investments. Management and security of mobile devices, particularly smartphones, is one of the DM Forum's key focuses. However, DM Forum recognizes that fixed and mobile applications and devices are converging, that device capabilities and form factors are changing rapidly, and that technologies originally developed for the communication market are being applied in other sectors. For these and other reasons, the DM Forum defines its focus simply as device management. More information is available at www.devicemanagementforum.org

About Synchronica

Synchronica plc develops and markets synchronization and device management solutions for mobile operators, device manufacturers, and enterprises. Its product portfolio ranges from data synchronization (DS) to device management (DM), and firmware updates over the air (FOTA). Products include the mobile device management product set Mobile Manager Suite and the push email and synchronization solution Mobile Gateway. Headquartered in the U.K., with a development center in Germany and presences in the USA, Hong Kong, and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.LN). More information is available at www.synchronica.com

For more information, please contact:

Nicole Meissner
Chief Marketing Officer
Tel.: +44 1892 552 780
Mobile: +44 7977 256 412
Fax: +44 1892 552 721
nicole.meissner@synchronica.com

Device Management Forum:

Abraham Joseph
Mobile: +44 7801 309 751
abraham.joseph@devicemanagement.org