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On March 11, 2009 the formation of Avalon Global Solutions was announced. Avalon Global Solutions will acquire the commercial assets and intellectual property of The Net Results Group (NRG) and Avalon Technology. This corporate structure will enable Avalon Global Solutions to maintain Avalon Technology’s Small Business Administration’s Certified 8(a) Small Disadvantaged Business, minority-owned status. Avalon Technology provides lifecycle management solutions for mobile computing and communications, network infrastructure, and information security. NRG offers Telecommunications Expense Management (TEM) services through Business Process Outsourcing and hosted solutions for invoice management, inventory management, and mobile expense management. NRG also provides professional services which include validation and recovery of telecom billing errors, cost optimization, contract and RFP management, best practice reviews, and mobile help desk support.

Background

Avalon Technology and NRG have been business partners for four years. NRG has been providing “white label” licensing of its mobility expense management software to other suppliers including Avalon. In addition, the two firms have partnered to provide Mobile Device Management (MDM) procurement, repair and replacement, help desk support, and use of Over-the-Air (OTA) technology for applications, data management. OTA makes it possible for organizations to deploy application updates, data removal, and security policy based on rules that are established from each user’s profile.

Impact to the Market

In the closely held TEM market, a number of suppliers are using merger and acquisitions to help enhance their capabilities and market presence. The combination of Avalon and NRG follows the January 15, 2009 announcement by Tangoe that it was acquiring InterNoded, a provider of MDM solutions. As the news reaches other market players, it will accelerate industry consolidation and lead other firms to add similar MDM capabilities. These developments will help the market transition from a fragmented cottage industry, with suppliers whose offerings are difficult to distinguish, to a market with fewer players that have economies of scale their through larger size and more robust capabilities. While some suppliers are pursing mergers and acquisitions to escape financial problems, overall the TEM market is well positioned to weather the economic downturn with its compelling Return-on-Investment (ROI) value proposition.

A common mistake is for observers to conclude that the market is not be ready for MDM because device manufacturers are now retrenching from earlier attempts to get into MDM software. The February 24, 2009 announcement of Motorola’s sale of Good Technology to VISTO® , and the September 29, 2008 Nokia Intellisync announcement that it would stop development and marketing of its mobile device management business mobility solutions seem to support this view. Although the MDM software is closely related to the MDM business that Avalon Global Solutions is targeting, there are three factors that make Avalon more likely to succeed compared to Nokia with Intellisynch and Motorola with Good Technology.

Motorola and Nokia tried to adopt the strategy of Research In Motion (RIM) providing strong support for enterprises, but they came to this strategy late and failed to make the commitments of time and resources needed to succeed. Ultimately, Motorola and Nokia are really focused on manufacturing mobile devices not MDM. Second, Avalon and NRG have a strong foundation with sales channels and marketing that is focused on the right contacts in large organizations to cross-sell MDM capabilities to their existing TEM customers. Finally, Avalon’s SBA Certified 8(a) Small Disadvantaged Business, minority-owned status helps it to gain market share in the government sector.

The large spending bill and traditional insulation of government spending from the economic downturn will help Avalon target what could prove to be the strongest part of the MDM market for 2009. With the deep recession, federal agencies are more likely then businesses to adopt security measures and services that provide centralized application and hardware resource controls for mobile devices. In addition, the $20 million settlement from the Veteran Affairs’ laptop data breach affecting 26.5 million people’s identities will serve as a further catalyst in getting government agencies to adopt MDM. Drawing on its work in the government sector, Avalon Global Solutions will be well positioned with offerings that are ready for the commercial sector when the economy recovers. While the economic downturn may have a dampening effect in the short-term, the need for MDM in the commercial sector is real.

Impact to Customers

Most enterprise mobile environments are characterized by little to no standardization of wireless devices and applications. Organizations must manage disparate operating systems for mobile devices. Lax governance of mobility compounds the problems that organizations face. This makes for inefficiencies, added costs, and security risks.

 

Avalon Global Solutions will not face significant technology integration problems because Avalon Technology and NRG have been sharing technology and services during their four year alliance partnership. Therefore, the cautions that usually accompany merger analysis are minimal for this deal. Existing clients should work closely with their account teams to proactively identify any service delivery issues before they present significant problems. New customers in the commercial sector that are making purchases to leverage an integrated TEM-MDM solution with enterprise mobility, network infrastructure, and information security should be sure to establish timelines and clear deliverables for program implementations.

This move is likely to be a positive development for Avalon, NRG and their customers. Both firms have built a strong practice managing the lifecycle for mobility expenses, logisitcs, and support. As these firms join forces, customers will see a blend of Avalon Technology’s focus on growth and IT management capabilities with NRG’s pragmatic focus on financial stability and expense management.

Conclusion

The convergence of telecom and IT requires TEM suppliers to evolve into management of IT assets and expenses. Avalon Global Solutions is one of the early players and part of a select group of emerging firms that are ready to transition from managing fixed and mobile telecom expenses to IT with focus on enterprise mobile computing, network infrastructure, IT assets, and information security. Avalon will join Tangoe and a few other firms that are working to bridge the gap between telecom and IT in mobile applications management. This is one of the fastest growing, but least developed areas of network management.

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