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September 20, 2005 


 Q&A: Steve Pazol, CEO of nPhase in Chicago, on International Business 8/30/2005
The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO Ė Steve Pazol is CEO of Chicago-based nPhase, which provides enterprise-class machine-to-machine (M2M) services to manage, monitor and control global assets.

Along with Sandeep Mehta, Pazol co-founded Professional Consulting Services, Inc. (PCS) in 1990. In 1993, they founded Mehta & Pazol Consulting Services (MPCS) in Pune, India. In 1998, they started ManageTheWorld, a subsidiary of PCS, which became nPhase in 2003.

In part three of a three-part Q&A, Pazol sat down with international expert Michael Muth to discuss working abroad and foreign languages.

Michael Muth: Why not locate your NOC in India?
Steve Pazol: Though weíve thought about it, it has to make business sense. The economics donít work to outsource everything to India and I donít think it ever will. We need a presence in the U.S. Others are bringing work back. To offshore, labor has to be a big component of the cost. While the cost structure has changed so you can do it, it needs to make sense.

MM commentary: Some of the slight lags in communications and increased telecom costs might have something to do with it.

MM: How did your relationship with Computer Associates Unicenter develop?
SP: That was nine or 10 years ago. We were an IT consulting project-based firm doing implementations. They approached us initially as an implementation partner. The relationship grew and we became one of their larger resellers. There was a magazine, Unicenter Advisor, which I edited for seven or eight years. I then edited and co-authored ďUnicenter for DummiesĒ.

I write quite a bit and was looking for a creative outlet. Thatís also one reason why we started M2Mblog.com. We developed a pretty good international reputation grouping network management. In the late 1990s, the light bulb went off in my head that thereís a lot more to monitor (not just the IT stuff). It was that practice that ended up morphing into nPhase.

MM commentary: For a techie, he is quite literate.

MM: Have you visited Nokia in Finland?
SP: Yes. I loved it. Nokia approached us in 2002. They called the market ďM2MĒ. They had a software platform for which they needed a service provider. They helped us make our connection with AT&T Wireless, which became Cingular. This made us much bigger in the wireless space.

I visited Helsinki, Finland in December. I stayed at a resort area call Kittila, which is about 100 kilometers north of the Artic Circle. We went to the sauna and jumped in the frozen lake. I almost had a heart attack. We drank lots of vodka. It was a blast.

I ate some reindeer, went on a snowmobile, did some ice road rally racing and did some good business. The sun never really came up. It was pretty neat.

Nokia has since exited the M2M market. They came in a bit early with not the right business model and eventually exited the market. It was disappointing because they were a good partner. In other ways, this has helped us with Siemens and Wavecom. They gave a boost to the market.

Though the name nPhase has nothing to do with Nokia, our partnership with Nokia was the boost required to spin off nPhase from the consulting firm.

MM commentary: I visited Helsinki on my way back from one of my extended trips to Poland. I also spent six months in Stockholm, Sweden a few years ago over the winter. The cold didnít affect me there as much as the extended darkness. The Scandinavians do very well in technology businesses (such as Ericsson in Kista, Sweden, which is just outside of Stockholm).

MM: What did you discuss and learn in the Netherlands two years ago?
SP: It was with our partner Atos-Origin. We had been collaborating unofficially. M2M is a market in which they were interested. They invited me to speak. I speak a lot Ė eight to 10 times a year Ė mostly in the U.S. It was a high-level introduction to M2M and why it is happening.

A lot of people didnít have a clear understanding of why wireless is a big play in this space. Wireless Internet is getting much cheaper and pervasive in the environment. The cost of communications is going down. This convergence makes M2M an application of a lot of these things.

MM commentary: In case you havenít heard of them, Atos-Origin is huge. The company was formed from the 1997 merger of two French-based IT services companies. Origin was a subsidiary of Royal Philips Electronics. Atos-Origin acquired KPMG Consulting in the U.K. and the Netherlands. Today, the company employs more than 46,000 people.

MM: Were there any changes in working with Excellnet when they were acquired?
SP: We just closed a nice deal with them. Excellnet is known for collecting point-of-sale data.

Theyíre in many retails stores. They get point-of-sale data back to servers. There are a lot of other assets that can use that same transport. Weíre their partner in going after that data. They have thousands of accounts and we help provide the overall solution using our services, intellectual property and maybe wireless.

MM: What has been your biggest international opportunity?
SP: One of our biggest is with air compressor Gardner Denver in Quincy, Ill. Itís very strategic for us. Weíre starting in the U.S. and deploying globally. They have 100,000 units in the field. It should be a significant revenue opportunity. Atos-Origin would be the other.

MM: What has been your biggest problem working abroad?
SP: We used to do a lot of work in Brazil. We had a challenge getting money repatriated. Four years ago, the government was adding an additional 25 percent tax on invoices. That was one of the reasons we stopped doing a lot of things in Brazil. When we do our contracts, theyíre all in U.S. dollars. I donít want to do currency hedging. The customer takes on that risk.

Weíve worked with irrevocable letters of credit. Weíve made them purchase the plane tickets and travel. One of the reasons weíve partnered with Atos-Orgin in Europe is because people want to deal with a local face rather than someone from the U.S. When you donít have one, youíre hurting yourself.

For Europeans, the U.S. is very different. You donít have as many choices with a few major carriers, the huge geography and the concentration of power. Our payroll has gone up tremendously. Itís like the dot-com boom. Our turnover isnít bad. Weíve had a very good long-term core group. That has been a big challenge. The weak dollar doesnít help.

MM commentary: Disappointingly, it appears as if the problems outnumber the opportunities. Iím afraid this perception is somewhat typical.

MM: How much time have you spent living and working abroad?
SP: Iíve never lived abroad so Iíve spent less than 10 percent of my career mostly in Europe. I havenít spent that much time in India. Iím not that effective there.

While India is an interesting place to travel, I just canít get that much done. My partner is there all the time. He has family there. Itís very painful travel to get there. Chicago is as about as far as you can get from Pune. You can go West or East. They are on the other side of the world. They are supposedly starting direct flights to India from OíHare, which would be great.

MM: How much international business have you studied?
SP: I read quite a bit. Iím pretty interested in that. Kenichi Ohmae writes about international strategy. Before I go on trips, I like to read up on and learn about the history of the country.

When I was in Finland, the Netherlands and Germany, I didnít have enough time to absorb the history of all the countries. In my mind, it makes a huge difference. I was able to ask some relevant questions. I had already done some research. I was counter to many myopic Americans. They appreciated the time I took to do some research.

MM: Do you speak any foreign languages?
SP: Ich kann ein bisschen Deutsch sprechen.

MM: Has this helped or hurt you?
SP: The language helped more from the fact that I made the effort. Most of the people I dealt with speak English. It made a big difference that I made the effort. At least I could ask questions. I experienced the Brazilian churascuria steak house before it got popular here. It was novel to me when I went there.

MM commentary: Itís difficult to achieve any level of fluency if you donít have the time to commit to learning a language. I even got some smiles from Parisians when I tried to address them in my horrible French. Sacre bleu!

MM: Is there anything else we should know about M2M?
SP: M2M is like the Internet for machines. We donít know what the killer applications will be. Weíre still learning. No one knew eBay and Amazon.com would become so big when e-mail was novel. Weíre just at the nascent stage. Being based in Chicago is pretty neat. Still, itís challenging from a funding perspective.

MM commentary: Today, most people think of M2M as toasters talking to refrigerators. Thatís the consumer application. Like many other things, the business-to-business side could be much larger.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muthís full biography.

Previous Columns:
Q&A: Steve Pazol, CEO of nPhase in Chicago, on Outsourcing to India (8/23/2005)
Q&A: nPhase CEO Steve Pazol on Machine-to-Machine Service Industry (8/17/2005)
Q&A: Daitan Labs Founder James Bergamini on Brazilian Workers (8/2/2005)
Q&A: Daitan Labs Founder James Bergamini on Brazilís Silicon Valley (7/26/2005)
Q&A: Daitan Labs Founder James Bergamini on Next-Generation Telecom (7/19/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Asian Advancement (6/28/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Findings From Asia (6/14/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Analog, Smart Buildings (6/7/2005)
Q&A: Manpower CEO Jeffrey Joerres on Changing European Regulations (5/31/2005)
Q&A: Manpower CEO Jeffrey Joerres on Comparison Between U.S., France (5/17/2005)
Q&A: Federal Reserve Bankís William Testa on Cautionary, Hopeful Prospects (5/3/2005)
Q&A: Federal Reserve Bankís William Testa on Chicago Business (4/26/2005)
Q&A: Federal Reserve Bankís William Testa on Headquarters, Exports (4/19/2005)
Q&A: Lisle Technology Partners CEO Adarsh Arora on Keys to Outsourcing (4/5/2005)
Q&A: Lisle Technology Partners CEO Adarsh Arora on Outsourcing in India (3/22/2005)
Q&A: Lisle Technology Partners CEO Adarsh Arora on Offshore Outsourcing (3/15/2005)
Q&A: CECís David Weinstein, Kapil Chaudhary on International Experience (3/1/2005)
Q&A: CECís David Weinstein, Kapil Chaudhary on Internationalization (2/22/2005)
Q&A: Brian Briggs of Acclaro on Whether to Outsource Localization (2/8/2005)
Q&A: Brian Briggs of Acclaro on the Complexities of Localization (2/1/2005)
Q&A: Brian Briggs of Acclaro on International Localization Services (1/25/2005)
Q&A: RPXís Robert Okabe, IECís John Janowiak on Global Events (1/11/2005)
Q&As: FastRootís Terry Howerton, Doug Cogswell of ADVIZOR Solutions (1/4/2005)
Q&A: Opportunity Internationalís John Kamperschroer on Partnerships (12/21/2004)
Q&A: Opportunity Internationalís John Kamperschroer on Technology (12/14/2004)
Q&A: Opportunity Internationalís John Kamperschroer on Innovative Financing (12/7/2004)
Q&A: IEC Senior Director John Janowiak on Trade Show Realities (11/16/2004)
Q&A: International Engineering Consortium Senior Director John Janowiak (11/9/2004)
Q&A: Founder John Lee of Chicagoís Hostway on Web Site Localization (11/2/2004)
Q&A: Founder John Lee of Chicagoís Hostway on Growing Globally (10/26/2004)
International M.B.A. Guide to Moore School of Business, Thunderbird (10/12/2004)
Your International M.B.A. Guide to Northwestern, Loyola University (10/5/2004)
Entrepreneurís Guide to International M.B.A. Programs in Chicago (9/28/2004)
Q&A: Prairie Angels Founder Bob Okabe on Diction, International Cities (9/7/2004)
Q&A: Prairie Angels Founder Bob Okabe on International Adaptation (9/1/2004)
Q&A: Prairie Angels Founder Bob Okabe on Managing U.S. Subsidiaries (8/24/2004)
Q&A: Origin Ventures Founder Steven Miller on Investments, Angels (8/17/2004)
Q&A: Origin Ventures Founder Steven Miller on the Canadian Way (8/9/2004)
Q&A: CPCP Founder David Baeckelandt on Multilingual Importance, Mentoring (8/3/2004)
Q&A: CPCP Founder David Baeckelandt on Japanese Disclosure, Due Diligence (7/27/2004)
Q&A: Chicago Pacific Capital Founder David Baeckelandt on Overseas Funding (7/20/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on the Art of Partnering (7/13/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on BP, AstraZeneca Wins (7/6/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on Global Software (6/29/2004)
Q&A: CEO Terry Howerton on Why Chicago, Ukraine Made FastRoot (6/22/2004)
Q&A: FastRoot CEO Terry Howerton on Blended Chicago Approach (6/15/2004)

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