Software manufacturer moves from fraud detection to detecting buying patterns

An Ottawa-based telecom equipment manufacturer is hoping to use its experience in fighting fraud as a springboard to help telcos sell more services. Magardi Inc has been in the telephone fraud business for 15 years, which has opened up opportunities to launch new product lines that anticipate consumer demand. Bruce Jones, president and CEO of Magardi, says anyone involved in anti-fraud activity is essentially tracking customer behaviour, and that’s valuable information in a highly competitive marketplace."If I’m arranging a family event, all of a sudden I’m calling all over the place and my calls are being blocked because I’m on the phone," Jones explained to Network Letter. "Realistically am I a very good candidate for call waiting or call answer?" Magardi worked with the former Stentor alliance on fraud detection in 1994. Jones remembers using the expertise garnered by that experience to approach potential customers. "We really started to understand what was out there in the way of fraud and what was out there in the way of fraud products and then we determined there was a much better way of doing fraud ," he recalls. "And that’s where we came up with OUTsmart and we came up with the whole idea of Smart Pattern to actually do fraud." Telecom giants like Teleglobe, Sprint USA and Global Crossing were receptive to the idea and became clients. Magardi is following up with the introduction later this month of a new product called INcharge that handles inter-carrier billing. The billing verification software will be attractive to CLECs wanting to insure they are getting their money’s worth on interconnection charges. It is estimated that competitive telcos across North America lose around US$3 billion due to billing discrepancies. Currently, most telcos are using carrier access billing systems to approximate their bills. "What the carriers are finding out there typically is that the error rate on your inter-carrier billing is about 10 per cent plus, and for new carriers it’s much greater than that," Jones states. "And typically about half of your revenues as a local carrier come from inbound traffic. That means that five per cent of your revenues are basically at risk." By drawing from a number of independent sources of data, INcharge is able to slash that error rate to about three per cent, the president estimates. Magardi was founded 15 years ago as an R&D operation. In the mid-1990s, it decided to go into the products line. Its first offering was the OUTsmart software package, which helps telcos deal with the losses suffered when people use stolen passwords or calling-card numbers to make free LD calls. The company is currently in the process of adapting from voice-based products to IP software. "What we’re finding is that a lot of our clients out there are using IP type facilities for the long haul and backbone, yet for the last mile they’re still using circuit switched facilities because that’s where the industry is today. So one of the things that we’ve found is that it’s become pretty important for people that we cover off both," Jones notes. Earlier this month Magardi laid off about 30 employees, reducing its workforce to about 55 people. With the exception of five sales people in the U.S., the rest are in Nepean ON. The president attributes this to the evolution from voice to IP technology. Jones expects to be advertising for new positions in the IP division almost immediately. The privately held firm is currently going through another round of investment. Jones is coy when asked if the company could issue a public offering in the near future. "I’d say we’re looking at a liquidity event, if I can put it that way, which these days either you get acquired or go through an IPO within 12 months. That’s where we’re going."

Software manufacturer moves from fraud detection to detecting buying patterns

News | 10/23/2000 4:00 am EDT

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