[Mooney's Bay]

SS8 Networks shutters Ottawa development lab

Date July 28, 2003
Section(s) OBJ-Technology
Brief San Jose-based telecommunications company SS8 Networks has shuttered its local R &D operations as it pulls the plug on a languishing hardware product line.
Chris Koehncke, the company's VP of marketing, said the decision has been coming for months as SS8




San Jose-based telecommunications company SS8 Networks has shuttered its local R &D operations as it pulls the plug on a languishing hardware product line.

Chris Koehncke, the company's VP of marketing, said the decision has been coming for months as SS8 took a hard look at its business in light of the persistent slump in the telecom equipment market.

"It was tough," he said. "I'd say it was half a year the decision coming to Ottawa."

The company was founded as a maker of Voice over Internet Protocol switches, with product development concentrated in Ottawa.

About 18 months ago SS8 acquired the messaging software operations of Minnesota-based ADC Telecommunications Inc. for US$45 million in cash. The company shifted its focus to providing data and telephony services over the Internet, a more promising business than switching hardware as the telecom slump set in.

Last November, weak demand for switching products from U.S. phone and telecom companies led SS8 to cut about half of its Ottawa workforce, leaving 40 staff. SS8's VoIP products were languishing on the testing benches of telecom customers without being deployed, burning up cash without generating any revenues.

Over the winter SS8 considered ways to refocus the Ottawa R &D staff to contribute to its messaging products but in the end decided the most cost-efficient course of action was to simply shutter the operation.

"Clearly as a startup the challenge is always to conserve the amount of invested cash," Koehncke said.

A mark against Ottawa was its distance from the company's headquarters in San Jose, where the bulk of SS8's R &D operations for its messaging products are based. "It was the coast-to-coast development process that really snagged us," he said.

He credited the talent pool of the Ottawa team and the low payroll costs relative to SS8's U.S. operations. He added that SS8 is trying to place the laid off staff and is soliciting other telecom equipment makers in the nation's capital.

The closure of the development lab does not mean the end of SS8's presence in Ottawa. The company will maintain a sales office that will continue to serve customers of SS8's messaging products such as BCE and Telus.

SS8 established its Ottawa operations in June 2000 in a former bowling alley on March Road near the Alcatel Canada campus. At that time the company was banking its future on its VoIP switching products. Former SS8 CEO Harry Wong credited the incentive of R &D tax credits from the federal government for the decision to locate in the nation's capital. In those heady days of the tech boom Wong forecast that Ottawa would become SS8's primary R &D centre.