The SD-WAN space has lately attracted the focus of big players like Cisco and VMware. Martello, which has been in business for years, is about to go public through a reverse takeover, and believes that their differentiated solution gives them something that they can take to market successfully through the channel against the big boys.
Martello Technologies, a 64-person company headquartered in Ottawa, is about to go public. The company has had their plan to engineer a reverse takeover of a dormant company on the TSX Venture Exchange conditionally approved. They are looking to use their status as a public company to enable strategic acquisitions, and to drive global business as a more nimble player with a unique value proposition. While most of their sales go through channel partners today, they recognize that the channel will be even more critical to their success going forward as a public company.
Martello was founded in 2009 as a network performance analytics [NPM] player, and built up its original business in large part through an effective strategic partnership with Mitel Networks. Their real differentiation today though stems from their acquisition of Montreal-based SD-WAN company Elfiq Networks in January 2018, as the company has united the two legacy technologies to create something that is unique in the market.
“NPM, in some way, shape or form has always been part of the business of the Martello business,” said John Proctor, Martello’s CEO, who had been global systems integrator CGI’s vice-president of global cybersecurity before coming to Martello in December 2017 to shepherd it through its next phase of growth. “We focused on VoIP-specific metrics, and our partnership with Mitel, which was based on helping them understand the quality of their network performance, was a key thing. On the Elfiq side, they did link balancing, and were effectively doing software-defined networking before it was called software-defined networking.”
The acquisition of Elfiq gave Martello a solution that let Martello solve network problems, as well as diagnose them.
“It made sense to engage with Elfiq because they had a solution,” Proctor said. “It’s nice if you can tell people that they have a problem, but its even nicer to be able to tell them how to solve it, and have that solution at hand. So that’s how these pieces came together.”
Proctor stressed that Martello and Elfiq were a good cultural fit.
“The two companies were culturally very aligned and that’s very significant for me, because that’s often where acquisitions fail,” he said. “This really is a case of one plus one equals three. We really have a lot of experience with solving problems facing unified communications [UC] network, and we recognized what Elfig had done with SD-WAN. There isn’t another SD-WAN vendor out there with deep knowledge of UC. In other environments, the phone people are separate from the network people, whereas we can now deliver this from a single pane of glass, for the most sensitive traffic on networks. Being able to sub-second reroute voice traffic based on network performance is absolutely key, and we are unique in being able to do that with our sub-second failover. That’s one reason large hotel chains have picked us up. A service provider delivering Unified Communications-as-a-Service [UCaaS] will also be able to offer better call efficiency, better quality and fewer outages. We will save them money, because it means fewer calls and fewer tickets.”
Two key Ottawa technology figures, Sir Terry Matthews and Mitel Networks, figure prominently in Martello’s growth.
“Terry Matthews and his investment firm, Wesley Clover International, have been with us from the beginning and remain one of our largest investors,” Proctor said. “They bring in connectivity, talent, experience, advice and guidance, and have experts on a whole range of different topics. They have had a very positive impact on our growth.”
So has Martello’s long-term partnership with Mitel, which has been in place since 2012.
“This is a very significant partnership, and our software has been very much designed to meet their needs, with ongoing iterations and acceptance tests,” Proctor noted. “A lot of Mitel’s customers are by definition concerned about networks and network performance, so being able to bring new things to that environment is critical for us. These aren’t things that are just Mitel-specific. Link balancing and SD-WAN are of interest to customers even if they don’t have a Mitel system.”
Mitel accounts for a majority of Martello’s business today.
“About 60 per cent of our business comes through that Mitel channel,” Proctor said. “The Mitel relationship also gives us an opportunity to have discussions around solving specific business problems. For instance, we have a UC performance tool that Mitel can run as a sales tool to see if UCaaS will work in a particular environment. This came from discussions with Mitel, and we listened to them and solved this problem for them with a browser-based solution. What CIO in their right mind would put a lot of money into a UCaaS solution before seeing if their network will support it?”
Martello has a strong business in Quebec that came through Elfiq, but their presence in the rest of Canada is proportionally less than in other geos.
“We are a Canadian technology company, but it’s hard to get the Canadian federal or provincial governments interested,” Proctor observed. “We have sold to foreign governments before we have sold to our own governments in Canada, which is a little sad.”
Martello’s expansion will take place in a new SD-WAN environment where huge vendors like Cisco and VMware have increased focus on this space, through their 2017 acquisitions of Viptela and VeloCloud respectively.
“I have been asked how we can win against them, and where we win is when there is a technically savvy customer who is also concerned about price,” Proctor said. “We are better value. We don’t cost as much. We perform better, and we do better and that’s a fairly significant play there. We are also getting reach-out from mid tier players who want to partner with us because of our real-time services around sensitive traffic, and being smaller and more agile is a fairly distinct advantage there. Some tech companies also want to license us into their environment, and we are okay with that.”
The TSX-V’s approval of Martello’s reverse takeover of inactive Vancouver-based Newcastle Energy Corp. provides a lower-cost way to go public, avoiding the costs of an IPO.
“Going public is a unicorn event,” Proctor added. “Not many 65-person companies go public. But it will give us the liquidity to execute a merger and acquisition strategy. It shows that there is a different way to grow and not just hop up and down on the VC wagon.”
Proctor explained other elements of the company’s strategy going forward.
“It’s not a question of doing things differently, but we are maturing some of the processes,” he said. “I came from a very large GSI that had far too much process. We will find out what will best work for Martello to allow it to scale. We now have the right people in place. We have made some changes, and are reinforcing the cultural piece.”
Further acquisitions will be a critical part of this strategy. Martello is anticipating the funding from going public and is in discussions with another company now about their next acquisition. The idea is to create a new solution synergy in the same manner as the Elfiq acquisition.
“I don’t want things that will just plug in the side,” Proctor said. “Acquiring Elfiq led to our UC-optimized SD WAN. With acquisitions, we need to find a piece where it adds to something we do already, and does something to solve a business problem. It’s that accretive nature that I’m looking for. An acquisition will bring in their clientele and their channel, but the fit itself has to create something new and interesting.”
The channel aspect is critical going forward. Today, Martello heavily leverages Mitel’s channel, and also has their own, a good portion of which came with Elfiq.
“In addition to the Mitel channel, we have our own mixture of MSPs and VARs,” Proctor said. “We have a channel program for the Mitel channel, and another one for the other partners, which is run by the Montreal team. We get the odd direct sale. but the majority is with partners and channels.”
The fact that the Martello SD-WAN solution is a Layer 2 one that fits inside the firewall is a drawing card for many channel partners.
“For other vendors with Layer 3 SD-WAN, you have to reconfigure all network devices when you set it up,” Proctor explained. Because we are Layer 2, we can go inside the network environment and firewall and establish connections inside, and you don’t have to reconfigure things. That has been important for security pure-play partners, who really like us because they can put us inside the firewall, and don’t have to spent time reconfiguring.”
Proctor also noted that their Mitel channel isn’t just limited to Mitel business.
“Many Mitel partners do other things as well, and we are part of that whole ecosystem with them,” he said.
Proctor stressed that channel success will be critical for Martello as they expand as a public company.
“As a Canadian-headquartered company going global, it’s important to have really solid partners,” he said. “Our channel partners, and our technology partners, will be key to our success. Culture is critical, and we want to be known as a good company to collaborate and do business. People will come find us, wanting to work with us, and we are already seeing that. Going public means that we can grow faster, and help partners grow their businesses quicker.”
Proctor emphasized that the future is bright for Martello’s value proposition.
“Digital transformation has become a bit of a throw-away line, but for a lot of folks it just means that their network is more complicated, as they need to do more things like video streaming and e-gaming,” he concluded. “We want to stay ahead of that. We aren’t really going to do anything that’s really sexy, but we are going to enable people who want to do really sexy things, and become a staple of this global networking environment.”