Face to face with AvantGo CEO Richard Owen

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Before you go... AvantGo According to AvantGo chief executive officer Richard Owen, mobility doesn’t just mean a wireless connection, and he should know. Hayward, California-based AvantGo, Inc. has been mobilizing consumers and businesses alike with its popular “synchronize and go” products for several years. In fact, its mobile Internet service has nearly 5 million subscribers, many of whom signed up with their first PDA.

AvantGo works as an “intelligent translator” of sorts, grabbing content from websites and reformatting it for handheld computers. Consumers subscribe to “channels,” which are created by content publishers, for example CNN or USA Today. When a device–be it a Palm, Pocket PC or BlackBerry–synchronizes, AvantGo software on the desktop computer communicates with AvantGo’s proxy servers, which fetch the information for the subscribed channels and downloads it to the device. AvantGo software on the handheld device takes over from there, providing a browser-like experience that mimics a wireless connection.

But don’t be fooled by its popularity among consumers, AvantGo is all about business. In fact, more than 80% of AvantGo’s revenues come from businesses rather than consumers, and AvantGo offers mobile business applications for customer relationship management, supply chain management and field force automation.

Recently Brighthand editor Steve Bush met with Mr. Owen and discussed handheld computing, from convergence to mobile advertising to AvantGo’s policy on custom channels. We’re sure you’ll enjoy Mr. Owen’s candor and levity, and maybe even a few surprises, in this exclusive interview.

Brighthand: What was the original concept behind AvantGo?

Richard Owen: It started with the Palm. They [AvantGo founders Felix Lin, Linus Upson and Rafael Weinstein] saw it as a device that contained more computing power than the early Apple computers, but all you got was a calendar and an address book. They recognized that if corporations were ever going to use them they’d have to do more than just that, namely mobilize their business applications. However, they’d also learned an important lesson during their time at NeXT–that is, corporations hate new platforms.

So they looked to develop AvantGo software around existing platforms, such as the web, and existing standards, like HTML and JavaScript. Even then there was a big problem, a thorny one; the Palm had a limited processor and it didn’t have a browser. What they developed with the AvantGo Client, in effect, fakes out the device to make it look like a browser.

Brighthand: Tom Seibel recently said that he estimates that 100-200 information technology firms will go out of business by year-end. AvantGo appears to be struggling along with the rest of the mobile and wireless industry with revenues on a steady decline since Q12001. What’s your take on the state of the industry?

Mr. Owen: Actually the underlying trend has been flat. We’ve gotten our cost structure down but business remains flat. Not a great story, but it’ll have to do.

As far as the industry, we’re in the ice age. We had a binge for five years, but the macro picture now is that companies are so full of stuff that they’re going into reverse gear and aren’t looking to spend on new technologies. Two or three years ago mobile computing was in the top five of corporate initiatives, now it’s down to something like twentieth. Companies sunk money into WAP and other dead-end technologies. Things were over hyped and now there’s disillusionment.

Brighthand: So what opportunities exist given that disillusionment and reduced spending?

Mr. Owen: We now focus on bringing value to specific business areas, rather than concentrating on technology. We ask questions like, what if you could accomplish these business results? For example, McKesson is among the world’s leading healthcare distribution companies and it is using our AvantGo Mobile Delivery solution to realize direct productivity gains. By streamlining its existing delivery processes, McKesson has seen significant savings and delivery errors have dropped to zero. McKesson also reports it has reduced imaging costs by 100 percent, legal claims by 50 percent, order errors by over 50 percent and delivery claims by 30 percent. That’s a phenomenal story.

At Harvard Medical School (HMS), they have deployed a MyCourses application on AvantGo M-Business Server that is making a dramatic difference. Students now spend less time researching information because it is available in the palm of their hands. Faculty receive upated course evaluation forms and the mobile solution has provided higher quality data and increased form completion compliance from the usual 20%, delivered up to six weeks after the completion of a course, to 80% delivered in near real-time. In terms of cost savings, by simply replacing paper-based surveys with mobile technology, the results in cost savings have been dramatic. The Medical School has saved $150,000 in printing costs associated with course surveys, which is just one part of the MyCourses application, and reduced the need for data entry personnel. The entire mobile project at HMS is estimated to have cost approximately $250,000. In just six months, HMS has realized an over 50% return on investment just from replacing paper surveys with an automated, mobile solution. At this rate, the solution is on track to pay for itself in the first year. Again, a great story.

Brighthand: Sounds like you’ve gone vertical.

Mr. Owen: Yes, it’s all about vertically targeted applications. Vertically we see four key areas: pharmaceuticals, federal government, energy and utilities. Horizontally there’s sales force automation, field force automation, marketing solutions and delivery logistics.

Brighthand: OK, I’m slightly confused. I’ve always thought of AvantGo as primarily a consumer products company.

Mr. Owen: I understand. In the beginning, our bankers insisted that the sizzle was consumers, so they pushed us to get subscribers for our mobile service. There’s something to be said about the first mover advantage and building a large subscriber base. Now all they want us to talk about is wireless. (laughs) But our revenue has always been predominantly from the business sector. For example, in 2000 we made $16 million and $13 million of it was from enterprise software. In 2001, we made $24 million and the majority was from enterprise software.

Brighthand: So does that explain AvantGo’s recent flip-flop on its custom channels policy? It seemed like you were simply trying to eliminate those publishers that were along for a free ride.

Mr. Owen: We got a lot of email on that one. In retrospect, we may have been a bit heavy-handed sending out that notice to every publisher. What we had was about fifty companies abusing the service. Some were even developing full-fledged corporate apps using it, despite the fact it isn’t secure. That’s what we were targeting. We actually only turned off a couple of custom channels. Here’s a funny story. One of the sites we turned off was a religious site in the U.K. They asked us why we turned off their channel. Turns out they were sending out a prayer of the day to thousands of subscribers. Of course we turned it right back on. (laughs)

Brighthand: So what’s your opinion of Mazingo? They have a paid-subscription model rather than a “publisher pays” model. Are they competition for your type of service?

Mr. Owen: No. I think that it’s extraordinarily hard to sell a subscription service. The catch is that you either have to have millions of users or go to a fee model. But you have to have a unique service that people will pay for, like Vindigo. Plus, Mazingo makes money through pornography. I don’t foresee many big publishers, like CNN here in Atlanta, wanting to touch that.

Brighthand: How about mobile advertising? Is that something that’s dead on arrival?

Mr. Owen: Oh, no. Not at all. Advertising on handhelds definitely works. You’re capturing people’s idle time. It’s got colossal potential and is incredibly effective. We did $1.6M in Q4 on mobile advertising.

Brighthand: I notice you have a BlackBerry, a Bluetooth-enabled Compaq iPAQ Pocket PC and a Bluetooth-enabled Motorola cellphone. What’s your take on convergence? Are you a one-piece or two-piece guy?

Mr. Owen: I’m a two-piece guy. My personal bet is you won’t see convergence. Take the Treo, for example. For there to be mass adoption of the Treo you’ll have to persuade people to give up their cellphones. So it has to be a really good phone, which it is, but is it good enough for enough people to surrender their Nokia? Sure you’ll see geeks like you and I with them, but we’ll still have our cellphones and therein lies the problem: you’ve got two payment plans. It’s not so much the device that companies will balk at, it’s paying two bills. Maybe if you can get it all on one plan, integrate the service plans into a single one, maybe that would work. Still, convergent devices are neither fish nor fowl and I see them as limited adoption devices.

Brighthand: So I take it that you’re not big on wireless web browsing or streaming media?

Mr. Owen: No. Listen, GPRS is the most significant development in telecommunications in the last ten years. But why would someone want to go out and buy a GPRS phone? The adoption curve and rollout of sevices are years away. Streaming content? Do you see much streaming media on wired broadband yet? When I read about how you can use your cellphone to buy a Coke from a vending machine I think, yes, it can be done, but why should I?

Brighthand: You’ve got a BlackBerry. What do think of RIM’s recent announcements?

Mr. Owen: RIM has an excellent group of engineers with two strong core competencies: battery management and networking. But Java is a significant risk. J2 isn’t gonna be the solution.

Brighthand: Let’s finish up with your thoughts on two of your initial investors, Palm and Microsoft.

Mr. Owen: The new management at Palm is much better and Palm OS 5 looks promising. A couple of years back, Palm Computing pursued a weak strategy. Rather than expanding the space and continuing to grow the Palm economy through its third-party partners, it began competing with everyone. For example, it became an ISP, competing with OmniSky. Trouble was, it became good at none of those things and the Palm economy withered. If you asked Palm who its competition was it would say Handspring. Amazing. Today, though, things are looking up at Palm and we are encouraged by our working relationship.

Meanwhile, Microsoft recognized that Palm had dropped the ball and stepped in, and it’s maintained its price points. And Microsoft’s been the best, and easiest, company I’ve ever had to work with.

Brighthand: Thank you for taking the time to meet with us, Richard.

Mr. Owen: Thank you.

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