Was British Telecom's acquisition of Ribbit a success or failure?

On July 29th, 2008 BT announced it had acquired Ribbit for $105 million dollars in cash. At the time I was working with Jaduka, a Network IP company. Although, we were a bit envious many of us saw this exit as validation of a wider industry vision that the global telecom companies were ready to reinvent themselves. The vision of inevitably becoming a dumb pipe provider had begun to shock a few global telcos into action. The concept of a Telco 2.0 world was beginning to take hold, so we thought.

Two plus years after the acquisition has been finalized, implemented, and accounted, can it be viewed as a success or failure?

From the financial standpoint of the founders and investors in Ribbit, it must be viewed as a success. It can be counted as a minimum 8x return on the total $13 million dollar investment. The company had only been started in early 2006. Ribbit was a text book Silicon Valley startup and exit.

The next questions are whether BT and the wider industry view the acquisition as a success.

Ribbit's founders, lead executives and much of the original talent at Ribbit are no longer employed by BT. Some would consider that loss of staff natural attenuation during tech company acquisitions. Entrepreneurs having achieved a liquidity event don't typically stick around large companies. However, it gets tougher  for BT to defend the loss of their  leading executive force behind the acquisition, JP Rangaswami. His team was seen as the leading evangelists for re-inventing the Telcos.

Some might say that a move to SalesForce can be expected for an executive most comfortable with the title of chief scientist. World class executives make moves all the time and JP's team was recognized as leaders by the industry. So, maybe the people side of the BT/Ribbit acquisition was always destined to work out like it has.

However, the BT phrase that I have heard used several times over the last few months regarding Ribbit is that it is being "internalized."  No one seems to use the term and then follow it up with a jaunty phrase of congratulations. I know corporate speak is strange but it feels more like a pyscho-analytical term to me. Internalizing the Ribbit platform within BT suggests that it will be used as a self help tool kit.

I am confident that somewhere within BT accounting a credit and debit EBITDA sheet can justify the $105 million dollar acquisition. The Ribbit platform as a tool for internal development and the Ribbit soft switch as a no cost alternative to vendor supplied development tools and switches could be viewed as "internalized" assets with depreciation value. Given the US dollar exchange rate, any of us could come up with a financial equation that justifies the deal.

On paper, both sides can probably make claims that the acquisition was a financial success.

Does it feel like a success to the wider industry? Is Telco 2.0 style innovation being driven through out BT or the wider telecom industry because of this acquisition?

At this point in time, the primary BT/Ribbit failure is one of hopes, expectations, and vision. There are worlds' of innovation happening within the broader telco application industry.  Can this innovation always be supported and leveraged by the giant global telecoms. No, of course not.
What are the factors that drive success or  precipitate failure and can we control for them?

This post is one attempt to get more industry journalists, analysts or business school teams to take a deeper look at a few of the past technology driven acquisitions made by global Telcos. The success or failure of a particular initiative or acquisition is not the  most important question. What are the factors required to drive Telco innovation? Can innovation really happen from within a Telco anymore?

Patrick Murphy
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