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Byline: Jason Meyers

The people who worked for Qpass in the fall of 2002 weren't able to lounge around after Thanksgiving in tryptophan-induced stupors, or lose themselves in the holiday shopping throng. Instead, they took advantage of the long holiday weekend to complete the final step in a massive transformation of their company.

The original license for the company's software platform was set to expire at the end of 2002, so Qpass had to get a new system in place for its customers. And although both AT&T Wireless and Cingular Wireless were using the system, it was not originally designed for use on mobile carrier networks. So throughout 2002, Qpass worked on enhancing the functionality of its current platform while simultaneously building a whole new Java-based architecture tailored specifically for wireless carriers.

That process culminated on Thanksgiving weekend, when Qpass lined the halls of its Seattle offices with cots, brought in nourishment ("Everything from fried chicken to Red Bull," as one Qpasser put it) and went to work. Employees with functions like marketing and sales had already completed their parts of the transition, so they were designated "Q Lackeys" and assigned such tasks as taking care of their colleagues' dogs and supplying sustenance to busy co-workers. The company's engineering and operations employees spent the weekend taking the old system down, migrating some million wireless accounts to the new platform and bringing it live.

"Lots of people used the analogy of changing tires at sixty miles per hour," said Chase Franklin, CEO of Qpass. "It was that kind of a process."

By 2002, though, Qpass was no stranger to high-speed shifts. The company was founded in 1997 to build a software platform that managed customer accounts and facilitated transactions for Web site operators looking to sell electronic content. Because those were dial-up days, the primary customers were text publishers like Dow Jones, the New York Times and USA Today. In Q1 of 2001, Qpass diversified by repurposing its platform to appeal to cable operators expanding to offer services beyond video, such as home security. Shortly after that, Qpass added AT&T Wireless and Cingular as its first wireless customers on the same platform.

"So the original system, which was really a commerce infrastructure for the creation and sale and support of digital content and services over the Internet, was now being used for that, plus for the delivery of content-based services over proprietary commercial networks," Franklin said. "When the macro economy stumbled - when the Internet bubble burst and the telecom industry headed into a deep recession - we had a company of about 200 people."

That's when Qpass faced the first of many difficult decisions: how to whittle down its operations to a level right for the economic environment but stay in the business with the most long-term opportunity.

"We were convinced that the publishing business was not going to get us to where we wanted to be - as a very big, successful company that made an imprint on the world," Franklin said. "Publishers at that time were a little schizophrenic about how they thought about the Internet as a news distribution channel. In almost no circumstances did an old-line, big brand publisher fully embrace the Internet."

Qpass lacked the financial resources to focus on both cable and wireless, so it opted to concentrate on only mobile.

"Then we needed to take the company down to an operating size we could afford and redevelop our technology so that rather than an adaptation of our original vision, it was a system that was purpose-built for this application and could scale and run reliably for a telecom company," Franklin said.

In 2001, Qpass scaled back its employee base from 200 to 55, shuttering its European operations, its Web site commerce business and its cable business. But even as it dealt with the inevitable employee, customer and investor fallout, Qpass was considering how to apply its technology to the pain points of wireless service providers that were warming up to the relatively nascent mobile data concept.

"We specifically looked at their back offices and what it really takes to manage their business and integrate these new forms of activity into that business without having to build out new business systems or keep replacing the old ones in forklift upgrades," Franklin said. "We chose mobile because we felt they had more of an imperative to actually make forward progress - to invest and build out this capability."

The contribution Qpass makes to help fulfill that imperative is a software platform called Prosperity Series that lets mobile carriers manage all the functions of what the company broadly defines as mobile commerce. Prosperity Series is designed to facilitate the delivery of all kinds of premium services over all kinds of mobile networks while easing accompanying back-office functions like payment, settlement, reporting and customer care.

"It bridges that gap between the necessary operator systems - billing, care, provisioning - and the galaxy of third parties out there, the content and service providers that are adding value to the network in this new world," Franklin said. "Our vision was that the back office was going to go through a challenging evolution. The networks have to do things they were never designed to do in previous versions, but so does the back office."

Essentially, Qpass is trying to make sure wireless carriers are equipped for smoother operation in a mobile commerce environment - not mobile commerce in the sense of simply using a mobile phone to buy things, but rather mobile commerce in the sense of using a mobile phone to buy things FOR a mobile phone.

"All people were talking about was m-commerce, and what they really meant by m-commerce was buying a book at Amazon, or a tractor part when you're out in the field and your tractor breaks down," Franklin said. "Those kinds of things did not make sense to us. Maybe some day people in large scale will use their phones to buy books at Amazon, or parking, or cocktails at a bar - but there was a much more fundamental problem to be solved. We thought a mobile consumer was going to want to use their device to purchase and interact with products that were consumable on that device - and mobile, and immediate, and integrated with the form factor difficulties and all those things."

When it decided to hone in on mobile first, Qpass also decided to focus on North America first, in large part because the region essentially represented a greenfield opportunity for both mobile operators and for Qpass. The company now counts seven U.S. operators as customers - AT&T Wireless, Cingular, Dobson Cellular, Nextel, Alltel and two it has yet to publicly announce.

The Prosperity Series platform is offered both as a licensed software product and on a service bureau basis, the latter intended to appeal to smaller mobile operators. Prosperity Series also features a module called QuickStart that gives operators access to about 10,000 pre-integrated applications from 130 content providers and, as the name suggests, helps carriers introduce new services more rapidly.

The available functionality and format of Prosperity Series is somewhat varied, but at its core the platform is essentially the same - a fact that has contributed to some market confusion but, Qpass hopes, will ultimately help define the market.

"Our first three customers bought three different things: one bought a mobile wallet, one bought micropayments, and one bought IP billing," said Scott Blanksteen, director of product marketing for Qpass. "That was what their RFPs were calling it, but they all bought the same software from Qpass. Now there's getting to be a market segment, a definition of a mobile commerce enabling platform and there's much less fuzz about what the operator's trying to do."

Cingular, for example, has been using Prosperity Series QuickStart since mid-2001. The carrier uses the platform to integrate content providers and for micropayments and billing functions for downloadable content - a rapidly growing market sector for Cingular, which expects to exceed its 2003 downloadable content revenue mark by the end of Q1 this year, said Christy Swink, director of entertainment and mobile marketing for Cingular.

"2004 promises to be a huge year for us in the downloadable content space," Swink said. "We needed a way to bill for services not metered like a typical wireless minute."