A Dialogue with Digium’s Danny

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Originally posted on NoJitter.com, Aug 25, 2010

Digium was created just over ten years ago with a Linux support mission. When the company needed its first phone system, its founder Mark Spencer opted to write one instead of buying a system. It became known as Asterisk, Digium’s free, open source, flagship product that wound up challenging traditional approaches to telecom.

Digium’s early revenue came from its hardware division that designed and manufactured PSTN-to-SIP cards for industry standard Linux servers running Asterisk. Its other revenue primarily came from support and training. Digium acquired Sokol and Associates to expand its training programs, and then FourLoop Technologies, which had enhanced Asterisk into a turnkey GUI phone system called Switchvox.

In 2007, Danny Windham left Adtran, and came to Digium to be its new CEO. Mark Spencer opted to return to a technology focus and holds the roles of CTO and Chairman. The company is private, but seems positioned for continued growth. In January of 2009, NoJitter reported Open Source had grown to 18% of the North American Market. Digium moved from its startup digs into a custom-built 60,000 sq ft new headquarters. The company enjoys partnerships with several established players including Polycom, IBM, even Skype.

At 11 years old, the company is facing new challenges. SIP, VoIP, even open source are not unique any more. The transition from PBX to unified communications creates new challenges and opportunities as well, and Asterisk and Switchvox have very different characteristics and customers. I discussed these and other issues with Danny, and it went like this:

DM: Are you a CEO of a company or a leader of a movement?
DW: I don’t view myself personally as the leader of a movement, but I do view Digium as a leader of a movement. There are a handful of people within Digium who play noteworthy roles in leading that movement. I am a CEO of a company that is the leader of a movement. The movement is toward open source communications. Digium is uniquely positioned. Open Source has become less scary, more mainstream, and VOIP is mostly down its path to disrupt traditional telephony. Digium is in the unique intersection where the disruptions of open source and VoIP are coming together. That is what makes us unique.

DM: Asterisk is an open source product. Switchvox is closed, yet uses Asterisk. How do you manage such diverse products within one company?
DW: We are an open source company. We have a gigantic commitment to open source. Everything we do starts with the premise that Asterisk is the reason we are different. We must be good stewards of the Asterisk project.

Think about the market this way. A segment of the market is technically capable and has the interest in utilizing an open source project to solve a problem by creating their own solution. That portion of the market today is not the majority of the market. The majority of the market, within small and medium size businesses, does not have the skill to do that. And even if they have the skill, an even smaller percentage has the inclination to apply the skill to solving the problem. In order for this portion of the market to benefit from Asterisk we package Asterisk into a small-business voice solution best suited to solve their problem. The business objectives of these two groups are very different. Two business units; one creates products and solutions for customizable solutions, the other for turnkey products. Each has their own mission, tactics, goals, and objectives. The foundation of the company is Asterisk.

DM: Earlier, there were lots of enterprises with Asterisk projects, but we hear less about that now. How is Asterisk doing with enterprises?
DW: There are some large organizations embracing open source telephony. The City of Amsterdam embraced an open source philosophy and Asterisk won the telephony portion. That project is on its way to some 25,000 endpoints. That led to another project in the Netherlands which could grow to 100,000 endpoints. We expect this trend of very large implementations to continue. In the US, there are a lot of household names on our customer list.Our business objectives are toolkit items for anyone that wants to use Asterisk. Today, the bulk of those users are enterprise and carrier/service provider class customers. They have the most to gain from an Asterisk based solution. Scalability and expandability are areas where we are focusing development. You can build a highly reliable solution on Asterisk, but it needs to use external components. We want to add more native capabilities for large-scale Asterisk implementations.DM: Astricon (the official Asterisk conference) has a new location this year (the Washington, DC area); will there be anything else new there?
DW: I do feel that we will have more to say this year about how we intend to enhance Asterisk going forward than we have before. It is going to be a very exciting Astricon. It will be very enlightening about how Asterisk will remain relevant in the future.DM: Digium is the only major UC and PBX vendor that does not offer a proprietary or controlled endpoint. Can you explain this approach?
DW: The position that would be nice would be for us to be able to supply a product to the market where Digium was in control of the system and others were in control of the endpoints offering maximum flexibility, maximum cost advantage, and all the benefits from multiple endpoint suppliers. We have tried really hard to deliver a system that can rival the functionality of a proprietary system relying totally on an open standards approach, but we have not been as successful as we had hoped. We are working to provide more Digium control over the endpoint, but I can’t talk more about that yet. We will be announcing that strategy early next year.DM: What changes need to occur before we hear rumblings of a Digium IPO?
DW: First and foremost, there has to be a market for IPOs. Additionally, Digium would have to be a bigger company and would have to want to be a public company. There is a “tax” of sorts or a burden associated with being a public company, and we need to be large enough to support that “tax”. If we were, we would have to ask the question if we want to do that. We are having fun now. At some point it might become important, but it is not the thing that is driving the day-to-day motivation of our management team. We are building a real company, with real products, serving customers in a fashion that makes them happy, and creating real sustainable profits–that is what motivates us every day.

DM: Digium’s hardware business is largely PSTN ports and standard servers–is there a future to this aspect of your business?
DW: Your assessment of the existing hardware family is correct. Our business in this area has been growing, but it is not the most strategic element of our company. SIP promises to reduce the need for hardware ports, and we are not likely to be a major server vendor. We have thoughts on how to evolve our hardware business to deliver more value than we do today. Asterisk must become much more multi-media capable. We need to do the same with video as we do with audio today. We will be announcing more on this.

DM: Regarding your channel, how are most of the dealers split between Asterisk and Switchvox and how is the new certification program working for Switchvox?
DW: Growth in the channel partners has been very satisfying, 50-75% per year for the past couple of years; we now have over 900 reseller organizations certified. We have three types of resellers; Switchvox only, Asterisk only, and both. A recent survey indicates about half our resellers now do both. Resellers are appreciating there is a right time and place for both products. We introduced a new Switchvox certification program in May, and already about 900 individuals have completed it. We are also getting great feedback on the certification program as well.

DM: Switchvox offers Extend, a unique API capability. Can you share the vision?
DW: We are committed to Extend–anytime we touch anything in the Switchvox code-base we “Extendify” it. The concept is that Switchvox can serve a customization need inside small businesses that don’t have the skill to engineer within Asterisk, but do have the skill to write a short script to be able to integrate with other products. Or to enable third parties to integrate with Switchvox. Our long term goal is to expand the Asterisk Exchange marketplace to accommodate Switchvox API-oriented solutions. Today, Developer Central allows third party listings.

It was a great discussion. Danny was quick with responses, and is clearly excited about the future prospects of open source, Asterisk, and Digium.

Dave Michels