Menachem Kaplan, after leaving ECI, went to Orckit, where he was the system engineer on Orckit's next-generation DSLAM. Gilad Goren worked at IBM's research lab in Haifa before joining Tadiran.

On June 1st 2001, Native announced the appointment of Stephen Harbour as its Chief Executive Officer. Previously, Stephen Harbour was the Marketing Director at Cisco Photonics, a division created in February 2000 following Cisco's acquisition of Pirelli's WDM systems business, which Mr Harbour had joined in 1995.

Native Networks has an office in Israel and a small office in London, which on May 21st 2001 was formally confirmed as the company's corporate headquarters. The London office will be the base of operations for marketing, sales and technical support of the company's NativeMux family of products.

Native is in the process of seeking other executive placements. It plans to employ up to 15 people in London, and perhaps the US, by end 2001. In Israel, Native employs 60 people, 45 of whom are in R&D. It aims to have 100 to 110 staff in Israel by the end of this year.

Native's solution was to put together a system which used the best of the functionality of existing standard systems: Fast Ethernet and up to 1 Gigabit Ethernet (GBE), that were likely to become universal standards for enterprise LANs, SONET/SDH's ring-based transport mechanisms for physical security, and MPLS-based traffic engineering that was more flexible and practical than ATM. This system Native Networks named Asynchronous Packet Transport (APT).

Because all the components of APT are components of existing widely recognised standard systems, Native Networks' solution is automatically compatible with most of the world's public networks.

Operational level
Operationally, the Native Networks system establishes one or more Virtual Trunks (VT) for each customer transported over 2.5 Gbit/s pipes, with each trunk carrying multiple customer flows and with each flow distinguished by its particular QoS and SLA. These VTs are internally elastic and the system has the capability of continuously reallocating unused bandwidth from one customer flow/application to another.

At the network level the system also performs ring-wide load balancing, constantly measuring performance for each customer and also reallocating bandwidth as needed to avoid ring node congestion. APT also grooms and concentrates traffic along the access network enabling operators to use fewer high bandwidth multiservice carrier switch ports at the POP.

Product level
At the product level, the system is currently realisable via the Ethermux box that carries out functions such as performance monitoring, alarm management, security and trouble-ticketing, whilst the whole network is controlled by Native Networks' Packetview NMS. This maintains a constant topological mapping of the network, measures network utilisations, provides maps with colour-coded faults, handles remote management of bandwidth on demand, monitors performance at all levels to provide immediate status on all network resources and gathers statistics for the management of network efficiency, as well as for the enforcement of SLAs.

Unlike SONET/SDH hop-to-hop provisioning, APT's provisioning is accomplished by PacketView at the service level, by defining customers' sites and basic SLA parameters, and then allocating the resources, commanding the network elements and activating the service within seconds.

On January 29th 2001, Native Networks announced it was entering into a development agreement with Agere Systems to produce ASICs for Native's future optical transport products. The initial ASIC, based on Native's chip design, and incorporating IP cores and macrocells from Agere, will be built in CMOS and incorporated into Native's first product line.

Israel Seed Partners, Skypoint and Apax provided $1.8 million seed funding. Soros Private Equity, Jerusalem Venture Partners and Anschutz additionally provided first round financing of $18 million, in exchange for a 45% stake, valuing the company at $40 million. The $4 million credit came from European Venture Partners.

Native intends to start on its next round of funding around June 2001, though the company considers current funding will take it to end of 2001. The company's funding has come from institutions that also fund service providers, which Native believes will help establish decent relationships with its end customers.

The QoS algorithms are the subject of two distinct Native-owned patents, one addressing the node level, and one the ring level. Native also has a patent for packet-protection that allows for very fast restoration after a failure, and has a patent pending describing the manner in which Native combines TDM and packets. Native buys-in commercially available components from Lucent, amongst others.

The customer interface is 100 Ethernet. The 1 GBE interface will also be available in the second half of 2001 and the product is designed to be 5-9s from day one.

The product can handle circuits (TDM) and packets in native format, therefore compatibility on the user side is standard Ethernet, or any standard of TDM interface, and on the ring side, is SDH.

As far as level of integration is concerned, Native believes that its product "should not go beyond Level 2." Native notes it "will not integrate router functions inside the box, as these should be separated and kept inside the CO. Even at Level 2 we are doing the bare minimum."

Native says what is unique about the company is the combination of telecom and datacom.

The next category consists of suppliers with SDH or SONET backgrounds, such as Geyser Networks or Dynarc. According to Native "more and more companies are seeing that our concept of combining Ethernet with SDH/SONET is correct; Appian for example has understood this."

Native though believes it has the edge with TDM support, Extreme Networks, for example, supports Ethernet only, QoS per customer which Extreme cannot provide simply because the Ethernet protocol is not designed to offer it, and efficient multiplexing at the node level. At the ring and network levels, Native's product can carry out load balancing between nodes, so Native's product offers both a node-wide and network-wide solution.

Native lists its top three competitors as Appian Communications, Extreme Networks and Coriolis Networks.

However, according to Native, "our product is very different, so there is a case for saying that our product is not just designed to enter an existing market."

"We estimate the worldwide market for our product will be in total $4-5 billion by 2003/4. This is calculated by estimating how much of the access segment of the SONET market will move from traditional SONET to something which is more packet-aware."

"Alternatively we can get to the same number by starting from the customer side. We know the number of customers and we can estimate how many of them will move to fibre access, and we end up at roughly the same market size."

Native's main targets are firstly the multi-service CLECs, or in Europe the pan-European providers like Level 3 or Storm, and secondly the incumbent operators. However, Native is aware of a problem with the latter, as France Telecom, for example, has said to take a product to the lab will take 6-12 months. Native believes then it will take a long time to penetrate this market.

Why Europe?
The company views Europe as its primary geographic market since this region continues to attract huge investment in fibre in metropolitan areas. Native calculates that in the second half of 2001, European operators will start to build networks around the fibre. Many of the players in this market are American, and focused more on their large domestic market. Therefore Europe is far less crowded as far as Native is concerned.

The company is quick to point out that it is not ignoring the US. Rather Native aims to deal with the US largely through OEM agreements for now, except with some specific customers.

Risk of Failure
Native considers the greatest risk as being in the execution of its strategy, especially not getting to the market on time. The company has total belief in the concept. It feels that its chosen market segment is the safest in these difficult times as it is quite clear that service providers will continue to invest in infrastructure, and specifically in metro and access areas.

It is also generally true that with a small company and a new product, there are a limited number of customer situations that can be taken up for development at any one time, for many different reasons. One reason is that in dealing with early beta customers, the company is bound to be in major learning and development mode and extremely inefficient, whilst also, to some extent, wanting to operate serially so that it can apply the lessons learned from its earliest trial customer to improve the probability of success with the second customer, and so on. To operate too much in parallel, one risks making the same mistakes with all of them.

Funding would appear to be an issue. Having been forced it seems to give away almost half of the company in its main funding round to date, Native needs to move very carefully in allocating its resources, not least because before going into another funding round, it needs to be able to prove that it has commercial and technical momentum in order to justify much better terms than it achieved last time. The margin for error here is probably pretty small.

Whilst the focus on Europe certainly appears to be a way, therefore, of conserving cash and concentrating technical resources on select opportunities there are some risks inherent in this strategy.

Firstly, since networking technology is still understandably seen as an American specialty, a company without an obvious US dimension, or a few US reference customers, is going to find marketing itself in Europe rather harder than usual. Native Networks has indicated that its funders may be able to help with this problem, though whether that is just a notion has yet to be tested and proven. Secondly a narrower market is a reasonable strategy if there is a superfluity of interested customers, but if interest is slow, then a wider market might throw up more opportunities whilst also being less susceptible to general economic effects.

In the end, as Native has indicated, execution is critical. Apart from being a necessary platitude that the best strategy in the world can crumble on the first small failure in execution, smart and timely execution is also totally crucial to early marketing credibility. The lead on any competition may be measured in months and each month of advantage lost may cost several percentage points in profit margin.