“My entire adult life has been related to surviving times of crisis. For the last twenty years, I have been building and growing telecom products through recession and upturns,” explains PortaOne CEO Andriy Zhylenko in a Loom video debrief for this story. Andriy and our other founding partners created PortaOne over two decades ago. They built it around specific values and a specific corporate mentality. There’s no better judge (or advisor) than time. And time has proven these values and that mentality to work.
1991: Collapse of the Soviet Empire and the University Years of Our Key Founders
“The beginning of my university years — my first experiences of ‘adult life’ — occurred exactly when the USSR collapsed,” explains Andriy. “During my years at Kyiv Poly, besides learning computer science, we received a ‘full immersion course’ on surviving and adjusting to volatile economic conditions. For instance, even Ukraine’s monetary system changed three times during that period.”
“Any business requires constant improvement of processes and workflows: be it the personal entrepreneurship of trying to balance university attendance with freelance software development or running a multi-million telecom product company during a recession,” reasons Mr. Zhylenko.
2000: The Dot-Com Crash and the Birth of PortaOne
Like Botticelli’s Venus, PortaOne grew out from the sea foam 🌊 (which appeared after the dot-com bubble burst). In the late 1990s, the founding team worked (or were independent contractors) for Telenor (Norway’s major national telco) in the Czech Republic. Back then, Telenor was one of the major telecom investors in Eastern Europe, with shares in various local FTTx telecoms.
Telenor was basing its investment activity on the assumption that the ongoing “Internet boom” would cause a dramatic increase in Internet use across Eastern Europe. When the bubble burst, Telenor scaled down all activity in Eastern Europe to save precious resources for its main telecom products during the subsequent recession. So, the dot-com crisis enabled the Prague Five to launch PortaOne.
2008: How Did the Subprime Mortgage Crisis Drive the Demand for Telecom Products in Recession Times?
Telecoms give scant shelter in a weak economy, in the opinion of Sinead Carew from Reuters. In her excellent analysis of 2008 and the role of telecom products in recession eras, Ms. Carew opines that “phone lines will be the last thing consumers cut” when forced under strict budget limitations.
The subprime mortgage crisis is a significant period for analyzing telecom products during the recession and afterward. You need two to three years after the crisis settles to start seeing its constructive aftermath: the reformatting of existing ecosystems and the reappearance of new ones.
This crisis gave us Slack (and the concept of the asynchronous workplace), Skype’s $8.5B acquisition by Microsoft in 2011, and then Meta’s acquisition of Instagram for $1B in 2012 and WhatsApp for $19B in 2014. Please read our recent messaging story for more analysis of what these acquisitions meant for the telecom industry.
The mid-2010s: The Telecom-Specific Recession, Caused by the Failure to Adapt
Unlike banks and insurance companies, bankruptcies are an infrequent event for large telcos. Telecom products (even in a recession) are usually cash cows. Therefore, the agony of a telco (or telco vendor) could last for decades. Somehow, Canada has a bad reputation for bankrupt (and almost bankrupt) telco vendors.
The corporate roots of Canada’s Nortel trace back to Alexander Graham Bell’s invention of the telephone. The Bell Telephone Company of Boston, Massachusetts, incorporated its Canadian subsidiary (Bell Canada) in 1880. Bell Canada is still one of the country’s largest telcos. In 1895, Bell Canada spun off its manufacturing arm. Hence the Northern Electric and Manufacturing Company appeared. After a century of corporate transformations, mergers, and acquisitions, it became Nortel in 1976 to reflect its new “focus on digital technology.”
Well, that focus did not work out so well in the end. Nortel filed for bankruptcy in 2009. The procedure lasted almost a decade, culminating with court settlements in 2016 and 2017. Interestingly, US telco vendor Avaya won an auction for Nortel’s Enterprise Solutions business. Avaya filed for bankruptcy twice, in January 2017 and February 2023. A little later in this story, we’ll provide a detailed analysis of the healthy and unhealthy patterns that lead to the survival or demise of telecom products in recession eras.
2020: COVID and Quiet Quitting: Guess Who’s the Winner? 😉
The COVID pandemic sparked a wave of quiet quitting back in 2020. According to Bryan Creely (credited with coining the term), “quiet quitting” is the practice of meeting the minimum requirements of one’s job and not investing anything unnecessary. Some authors claim it to be simply a fancy name for “gen Z laziness.” The opposite view is that this phenomenon is rooted in the new reality of structured asynchronous business communication.
The new normal drives the need for recession-proof telecom products. While more and more professions become online-based and industry experts discuss the new metaverse jobs, telecom is the backbone of this digital transformation. Anything “virtual” or “digital” still needs physical data transmission.
When Your Router Marries Your Power Outlet
So, no matter how nomadic your digital life is, it still needs a physical outlet: your Internet router and electricity source. Some experts even predict they (the router and the power outlet) are going to “marry each other” soon. Add decentralization (and decent built-in billing by PortaOne), and you get an immense ecosystem of opportunity.
We’ve already had (a somewhat involuntary and very rapid) deep dive into this new reality in Ukraine this winter. Even grocery shop sellers in Kyiv became fluent in how to set up a Starlink, connect to a diesel electricity generator, or feed a debit card terminal and in-store lamp with backup electricity from Anker or Ecoflow high-capacity batteries.
2022: Telecom and the Most Recent Recession Induced by the Russian Military Aggression in Ukraine
The full-scale Russian invasion of Ukraine had some engaging lessons and implications for telecom products in recession times. High demand for security and tech resilience is by far No.1 among those lessons. Telcos all over the world watched with awe as Ukrainian energy companies and significant telcos helped their countryfolk survive the horrible winter of 2022/2023.
It’s too early to provide an analysis of the startup ecosystem and mature business initiatives that stemmed from this winter. After all, it ended only a few weeks ago. However, we do see more telecom products around ambient critical notifications, peer-to-peer enemy sighting reporting and anti-aircraft surveillance, backup energy supply, resilient Internet access (hello, Starlink), and cloud storage supply. We’ve already covered examples of tech resilience in this blog using the cases of PortaOne technology centers in Chernihiv, Sumy, and Kyiv.
The Patterns (of the Telecom Products in Recession Times)
“When you see a pattern, it can change your life,” explains Robert C. Barkman, Ph.D, writing for the Psychology Today blog. PsychCentral defines pattern as “repetitive action, a task or behavior engaged in frequently, often without giving it much thought.” In personal life and business, patterns are powerful mind tools that define our success or failure.
Five Patterns of Telecom Products That Had Issues While Surviving the Recession
Let’s start with the unhelpful patterns. Usually, these are guided by good intentions. However, history has given us plenty of examples of how these intentions can lead successful businesses (small ventures and giant corporations alike) in the wrong direction.
Losing the “Lines between the Dots” by Firing the Wrong People from Telecom During a Recession
People who stick to their positions longer than others are usually very capable manipulators. It seems “impossible” for your business to survive without them. At least at first glance. In an HBR piece titled “Why the Wrong People Get Laid Off — And How to Prevent It,” Peter Bregman lines up two things employees can do to protect themselves: (1) be excellent (meaning: productive); and (2) be confusing. “Employers fear uncertainty” sums up Mr. Bregman’s argument.
Think about preserving the collective wisdom of your organization when optimizing your workforce (a fancy and polite name for “firing people out to the street to save money on their salaries for your salary and those of our partners/shareholders”). It’s always tempting to fire the “inessential” personnel first. However, the outcome might sometimes surprise you. “Inessential” people sometimes prove more essential than the “essential” ones.
Firing the Wrong Secretary
When this author worked as a patent lawyer (a long time ago, back in the 2000s), we — a group of young and hungry junior associates — had a legal secretary. She knew more than our partner-in-charge about what we were doing. It was not only about “making a copy” (remember, this was the 2000s, when people still used copy machines). It was about knowing (1) what that copy really meant; (2) what the optimal workflow would be to get that copy to where it was needed; and (3) which attorney or paralegal would handle that copy the best.
One day, this “miracle secretary” asked for a salary raise (a trivial amount compared to the revenue our practice was generating). Her bosses turned down her request. So, she decided to quit.
Over the following months, many associates from that practice also quit (the author of this post included). Then, in due time, the partner-in-charge found himself in the position of having to explain himself (and the sharp decline in new clients and revenue) to his other partners.
Having Too Little Cash Cows and Too Many “Visionary Products”
Many people with a startup mentality hate “cash cows.” In business jargon, these products have a sustainable target audience and revenue streams that quietly generate corporate income without requiring too much innovation or customization. The BCG coined the term back in the 1970s. Many business consultants readily explain to practicing entrepreneurs: “Avoid investing in cash cows; grow your ‘stars’ or visionary products.”
What an excellent piece of (theoretical) advice! In practice, many businesses — beyond Fortune 500s or unicorn startups — end up being the operators of one or several “cash cows” that they somehow domesticated by luck or hard labor. “There’s nothing wrong with having too many cash cows. Nobody has died of that so far. You can always sacrifice some. However, you are in trouble when you have no cash cow, just a bunch of ‘visionary’ products with unclear prospects of yielding at least some cash,” explains Andriy Zhylenko.
Cutting the Wrong Costs
“Been there. Seen that,” continues Andriy. Have you ever gone over your storage quota on your Gmail (or whatever web-based email or cloud drive you use)? Typically, a modern cloud provider would notify you of that and then recommend running a utility that shows you the largest files, the duplicates, and some other recommendations on searching and deleting unnecessary files.
Often, you will choose not to delete your largest files (your wedding footage, your child’s first steps, your favorite porn movie…). However, you might still delete the five or so next largest files, rescuing 5 Gb of precious storage quota. Then, over the next weeks or months, you suddenly discover that you badly need two of those deleted files. You had also batch-deleted several hundred thousand old emails, including some that contained photos and conversations from a friend who was killed in war recently. Thank you for the advice, dear smart storage optimization robots! Is there a better way of doing this (and of doing crisis-driven cost-cutting)?
How Is Anti-Crisis Cost-Cutting Similar to Rescuing Disk Space or Cloud Storage Quota?
This story’s author has launched a healthy monthly routine of locating and deleting unnecessary photos, videos, and screenshots. Being on the battlefield makes it simpler. You constantly delete certain types of footage. If your device gets captured, you don’t want the enemy to see it. You also move any precious footage to safer places. We started using the #DeleteMe hashtag for spacier video footage that was very important on some days but became unnecessary within a week.
Similarly, don’t leave your destiny in the hands of storage optimization bots (and personnel optimization consultants, a.k.a. “the firing squads”). Implement your own healthy routine of weekly and monthly performance reviews. Instead of the “punishment hour” that every employee of your organization dreads, turn these performance reviews into an advice meeting. Give people real tips and honest feedback. Yes, this will take some of your (and your talent manager’s) time. However, it will also prevent any batch firing of “not so minor” people — like that essential legal secretary.
Lacking Diversification in Your Product Portfolio: Industries, Regions, Specific Large Accounts
Here is a short and fast piece of advice: If you depend on a single entity or being (industry, region, customer, star employee, government official, or friend) — that’s unsustainable, and it will usually end sadly. So, while that industry, region, or customer is still there, do all you can do to escape that dependency. Launch free trials for new customers and industries. Run hackathons and developer or customer conferences. Create a startup incubator or accelerator to grow new customers.
Relying on a Dubious Technology: Proprietary (and Greedy), Vendor in Decline, OpenSource but with Little/No Support, and Growth Prospects
We won’t mention any names here. Unlike some of our competitors, we have no time to engage in trolling. However, PortaOne is a go-to post-illusionment destination for many telcos. It’s like that working-class dude who meets an aging diva at a local bar and spends the evening listening to the story of her life. This story has two poles (like north and south, not to be confused with the dancing ones).
North Pole: “A La Carte”
This vendor has a shiny, beautiful website in multiple languages and an international sales team occupying an entire floor of a business center in a vast multinational city. You will attend a sales kickoff meeting at a cozy Japanese or Italian restaurant. You will get an invitation to an annual customer conference in Las Vegas and a dedicated account manager catering to all your needs. Then, one day, you will ask them to add a specific feature requiring a dozen developer hours and several hundred lines of code. Indeed, this will happen when you need to revamp your telecom product in a recession. That’s when all hell will break loose, from a la carte to a la forno.
You will discover that the vendor values and understands the importance of your feature request. That is why it’s included in the road map, with an estimated release date of April 2031. Yes, that’s quite a wait, your account manager will empathetically admit. So, for now, you can order custom development services. The additional cost should be around two million dollars. Oh, your entire yearly revenue from the service is only half a million? Well, then, it’s probably wise to wait until 2031.
And just in case: there’s a new integration with SnapChat and BeReal! It’s free for existing customers. “Just watch your Digital Transformation Officer’s wonderful Las Vegas presentation.” Your customers will love it when placing an international call to their granny in Guatemala.
South Pole: “Free as in Mousetrap Cheese”
If Karl Marx wrote code or was a team leader when he was 23, he would never have charged people a penny! He would have created a free world, as in speech and beer. Society would be supporting itself based on class justice and equality. Humanity would develop brilliant software just for fun — such as the BorsalinoSwitch you wrote last night at your university dorm. Telcos will start using BorsalinoSwitch for their real-world needs. And these businesses share the same values as you, that 23 y.o. unmarried young genius preparing to write a Ph.D thesis in computer science at Berkeley!
So, these telcos would simply license back their improvements to BorsalinoSwitch. (And they have to, that’s a license requirement!) This will enable competitors to copy-paste the unique features and start selling them as their own. But why should a competitor do this in open-source software’s wise, just, and perfect world?
Chief Software and Class Justice Evangelist
Fast forward a decade. The dorm is gone (and so is the Ph.D). You are married with three kids, a minivan, a townhouse, and a mortgage. Then the next recession erupts. Suddenly, you decide to accept the position of Chief Software Evangelist at your long-term ideological nemesis (headquartered in Redmond). After all, your life’s mission is to educate evil corporations about all the benefits of open source and class justice. They call it “soft power.” Now, the opportunity so gladly presents itself.
You will have a six-figure salary (not a bad thing during a recession) and lead an excellent pro bono project dedicated to the search for extraterrestrial civilizations using modern achievements in the open source AI/ML. What’s up with BorsalinoSwitch? Oh, you just gracefully released it into the caring hands of the community, stepping down as the head of the Borsalino Foundation. After all, the community should be able to figure things out. Somehow.
Five Patterns of Telecom Products That Successfully Survive Recession
Enough of the harmful patterns. Let’s move on to the good ones. But please remember: these are often plain vanilla, boring, and not at all dramatic (like many good things in life).
Become More Accountable and Agile or Die!
Here’s some good accountability advice from Scott Ford, (then) COO at Techstars. You might be interested in reading our own story on the issue of agility and implementing agile product delivery.
Sometimes accountability means cutting back your pet projects and personal favorites. “PortaBI was a product I dreamt of building for quite some time,” recalls Andriy Zhylenko. And, just like with the “favorite child,” we did it all by the book. We conducted customer research interviews, held a design sprint, released a beta, did a technology pivot, then (ultimately) released another beta. PortaBI got rapid traction with a community of early adopters among our customer base. These were our most technologically advanced and entrepreneurial customers.
What Happened to PortaBI?
Our optimism failed to persist after a couple of things happened:
- We realized that giving a “Swiss-army knife” telecom tool to operators led to them using it in a wide variety of ways, including a seemingly infinite number of ways that our standard data model could be filled with accurate data.
- We started charging an actual fee for it.
Suddenly, those same “early adopters” notified our sales team that they were happy with the existing analytical tools (those built into PortaSwitch, or the ad-hoc external ones developed over the years in-house). Still, we never give up, and we are now contemplating PortaBI v3.
The timely decision to scale down the development of PortaBI v2 did at least enable us to preserve our precious developers in 2022 and invest resources in our “cash cows” while waiting for the next “star product” opportunity. A working example of a coping strategy is launching telecom products with the upcoming recession in mind.
Control Your Finances in Time
Interestingly, BI and analytics are also central to our next piece of advice. People usually think of “controlling finances” as throwing that chocolate bar and a few of those sofa pillows out of your shopping cart before checkout. “The reality is that controlling finances is a workflow, not a series of interim outcomes,” explains Mr. Zhylenko.
Andriy and the team built their own “BI system” for managing customers and planning the new release of features. “PortaOne has no warehouse or big physical assets. Our code and people are our major assets,” he reasons. The “internal BI” enables the PortaOne team to distribute customers among three cohorts: the “drivers,” the “peaceful majority,” and the “misfits.”
“Drivers” and the “Peaceful Majority”
“Drivers” are the customers that combine the power and flexibility of PortaSwitch with their in-house engineering expertise to create new types of products, push product development forward, and, in some cases, generate much of the corporate income for PortaOne. We build our products around them.
The “peaceful majority” are the customers who make good use of our products, pay their bills on time, and update their PortaSwitch once every few years. Usually, they serve one (or a few) narrow market segments and have no desire to grow much more significantly than they are now. They also get our full attention (and we are constantly putting in the effort to advise and educate this cohort via various marketing channels, including this blog).
Finally, the “misfits” are those cases where there is a mismatch between the customer’s aspirations and abilities and what our team and the product can provide. This could be compared to someone buying a 4×4 Jeep and expecting the skills for (enjoyable!) off-road driving to be automatically bestowed upon them when signing a contract in the car dealership.
Trying to assist someone remotely when their car is stuck in mud a hundred miles from the nearest service station takes a lot of time and produces frustration for everyone. Nevertheless, no case is hopeless. We have programs where our support engineers can become “playing coaches” and transfer their expertise to help companies run operations and execute new projects (and some fantastic success stories have come out of this). However, it only works when the other party is willing to change. We hope the “misfits” are also reading this blog. It might convert them into “drivers” someday. 😉
Capture Talent As It Becomes Available!
Of course, when discussing “talent,” the first person that comes to mind is someone like Guido van Rossum. However, hiring van Rossum in 2023 is like trying to become a principal investor of Tesla in 2010 or Apple in 1985. The talent is hot until only a few people understand it. That’s why the most pragmatic and efficient hiring strategy is to find talented people at the beginning of their careers, or who are pivoting from one industry or profession into another.
Don’t try building teams “around” your newly hired industry talent just because these people have some prior merits and reputations. Think about what they will bring to your team in terms of group dynamics and team expertise. Making sure people feel professionally empowered and fulfilled will ensure they stay with you long after the crisis is gone and the employment market again becomes saturated with new job offers.
Decide When You Should Outsource and When You Should Insource
Yes, a gazillion good articles, blog posts, and Quora questions cover this issue. However, the real problem is when your business should go either way. Telecom is a universe of undocumented opportunities, previously built connections, and various astonishing technology mashups. That’s why contemplating a wise technology partnerships strategy and grooming your road map is essential for the survival of telecom products in recession times — and in times of growth.
“Every good software developer and PM wants to build using new SDKs, APIs, and resume-worthy ‘cool’ technologies. No one wants to mess around with decade-old, poorly documented technology in decline. However, in telecom, that’s quite often the case,” explains Andriy Zhylenko. “You must use outdated technology because the customer’s equipment has been perfectly running on it for two decades. Then you adapt that technology to be compatible with modern tools and use containers and cloud infrastructure whenever possible. And people are happy to pay for this.”
Here’s the “golden outsourcing algorithm” that Andriy uses:
- Is someone ready to pay to solve this pain?
- Are people inside the PortaOne team or partners/contractors skilled enough to solve this pain and make the customer happy?
- If we have inside expertise, do we want to use it for this task, or is outsourcing better?
- If it’s better to outsource, will we still be making a profit as someone who “connects the dots” for solving this problem and is accountable for the proper outcome?
Learn to Think of Your Opportunity Window from Three POVs: Employee, Business Owner, and End Customers
The “opportunity window” literature is flourishing now. It often does so in difficult times. “Recessions are good for entrepreneurial employees. That is how we started PortaOne,” jokes Andriy. “However, in 2023, I’m ultimately in the business owner’s shoes, and that’s a different story.”
The nature of opportunity exists because other people can’t see it. Therefore, any “playbook” on finding opportunity windows is quackery.
However, people whose minds tend to be successful in locating opportunities often see things differently from others. And what we see as “a spark of genius” usually results from the hard daily work of recognizing thousands of patterns, figuring out those that stand out, and turning them into successful telecom products even during a recession. At PortaOne, we are dedicated to helping people who see things differently. Please contact email@example.com if that sounds like a good fit for you.