"Voice over IP is easy," says Scott Whittle, vice president of product management at Patton Electronics Co. "What we do is telephony over IP. That's harder."
It may be a fine distinction, but differentiating yourself in the market for VoIP black boxesthe gateways, bridges, routers, etc. used by VoIP carriers and their enterprise and small business customersis no easy task. Players like Patton, a 22-year-old telecom equipment manufacturer in Gaithersburg, Maryland, near Washington DC, tend to be anonymous to the larger VoIP public, despite their products being the glue that holds VoIP services together.
"Telephony over IP is when voice over IP works well," Whittle explains. "When customers don't notice whether it's VoIP or PSTN, when you get the same call quality, when there's always dial tone, when you can hear the other guy clearly and there's little delay. All those things are taken for granted in the TDM world, but they're a challenge in VoIP."
Patton's big differentiator? "Our products are able to deliver on the promise of voice over IP. They make VoIP transparent: They deliver low latency and they deliver crystal clear voice quality."
The company's competitors might dispute the uniqueness of this value proposition and Whittle himself, on reflection, can come up with a few more specific differentiators. But if you're building a taxonomy of the VoIP industry, Patton indisputably deserves a place, however well differentiated.
The company might fly under the radar for some since it does a majority of its business60 percentoutside North America. It was formed in 1984 by the brothers Patton, Bobby and Burt, while still at college, with help from other brother Bruce. Dad Roberta "serial entrepreneur," as Whittle puts itjoined later. They're all still involved and Patton is still privately held. That's another key differentiator, Whittle says. "It means we can adapt really quickly to customers' needs. You have to be responsive in this business, because if you're not, you're going to lose the sale."
Patton started off as a simple distributor of data communications products and evolved, first adding design and engineering capabilities, then in-house manufacturing and product support.
"Other companies might have one leg of the stool or two," Whittle says. "They might have engineering but use custom manufacturers. We actually own the machines that build the products. I can go in the back and see them being made. I can walk over to the other side and talk to the engineers who designed them. Over in another part of the building, I can talk to the support engineers. It gives us incredible flexibility in the market."
Today the company makes over 500 products, including 300 VoIP-related SKUs in 18 linesor 19 or 20 if you include new products coming. It builds access platforms, IP bridges, DSL aggregators, network termination units and channel service unit/data service units (CSU/DSUs) for connecting routers to digital circuits, VoIP gateways and routers, DSL customer premises equipment, Ethernet extenders, IP PBXs, and SIP phones. Black boxes for the most part.
"From the edge of the cloud into the customer premises and everything in between," is how Whittle characterizes Patton's scope. "And there's not a vertical we don't service, industrial, enterprise, carrier."
The company sells mainly to carriers and systems integrators who use Patton's products in their own facilities and/or in customers' premises. The sweet spot for the VoIP products is Tier 2 and incumbent VoIP carriers offering first-line servicesi.e., aiming to convert customers to VoIP as their main telephony service. "That's where we're seeing the market move," he says. "That's where people are being successful."
Patton has built a global distribution network. Its VoIP market, in particular, has an international complexion. The company's VoIP Competency Center is in Bern, Switzerland, where it also has light manufacturing and assembly capacity. And it has regional offices in Sydney, Australia, Beirut, Lebanon, and Vietnam. The company is strong in Latin America (especially transmission products) and Europe (especially VoIP). And Asia is coming on gangbusters in all product markets, Whittle says.
Patton sells as much as possible through VARs and systems integrators, although some customersalternative telephone carriers, for exampledemand a direct relationship with the manufacturer. In those cases, Patton still pulls in a regional partner to service day-to-day after-sales needs and hold inventory for big customers.
The company started building early "voice over packet [network]" products 12 years ago, but the current generation of SmartNode and SmartLinc products only began to appear about six years ago and have really taken off in the last four. The VoIP products now contribute a third of Patton's revenues. That will grow to over 60 percent by the end of this year, Whittle predicts. The VoIP portfolio experienced year-over-year sales growth of 30 percent last year and it's tracking at 35 percent this year.
Patton engineers design the products using a combination of standard components and protocols and patented technologies developed in-house. While it acquired some of the signaling stacks that the SmartNode products use to control SS7, SIP, ISDN, and H.323 sessions, it developed others itself. And it holds patents on a quality of service (QoS) technology trademarked as DownStreamQoS, which is now built into its SmartWare router and gateway software.
Conventional QoS prioritizes outgoing packets at both ends of a conversation, but incoming or downstream traffic surgesa large file being downloaded, for examplecan also effect latency in voice connections. Patton routers and gateways enabled with DownStreamQoS can also throttle incoming data to prevent degradation in call quality.
A key market for Patton is integration with legacy PBXs. A carrier's customer wants to take advantage of reduced calling costs from VoIP but has a traditional PBX that still works welland may, in the case of European customers, be on a long lease. Carriers can install a Patton SmartNode as an interface between the VoIP service and the legacy PBX. To the PBX, incoming VoIP calls passing through the SmartNode look as if they're coming from the PSTN.
Some SmartNode products include unique features that make it possible for end customers to start taking advantage of low cost outgoing VoIP calling while waiting for the incumbent phone company to complete porting their existing number to the VoIP service. The Patton unit correctly and transparently routes calls whatever the number portability status and saves the carrier a truck roll when porting is complete.
Other Patton products combine router and PSTN gateway functions in one box and can even serve as PBXs. "A single managed entity is what the market is demanding," Whittle says. "It means a lower cost of acquisition for customers and that is very much appreciated by the carriers."
The company's key competitors in the VoIP space are Cisco"just because they're there"the German company Lancom Systems, and AudioCodes Ltd., headquartered in Israel. Patton differentiates itself by providing complete network integration in one box, by supporting a full range of VoIP protocols andmost importantlyby ensuring products are certified to interoperate with all major VoIP systems used by service providers.
"Most everybody's [gateways and routers] work [with softswitches] for basic calling," Whittle says. "But what happens when you get into advanced call features, when you get into three-way calling, for example? Or how do you do call transfers, or what happens when [the user presses] the flash hook?"
New products coming down the pike include a Smart Residential VoIP Analog Wi-Fi Telephone Adapter (S-WTA), due out soon. It's designed for bundled services providers to use in residential and SOHO customer premises. It includes two-call voice and fax ports, four-port LAN Ethernet switch, WAN port and integrated 802.11g Wi-Fi. The S-WTA supports SIP for VoIP and IPTV and IGMP (multitask) protocols for multimedia services.
Patton may not be a household nameyetbut it's certainly a player. With some unique technology selling into hot application markets, at the very least, it deserves a place in your industry org chart.