Vodnjan, a speck of a place on the Croatian peninsula of Istria, is the unlikely home to a European unicorn, a startup valued at US$1 billion–plus. The town has about 6,100 people, cobbled streets, a medieval clock tower, and a reputation for great olive oil. Today, it also has a new high-tech campus on its outskirts, home to Infobip, the brainchild of Silvio Kutić, whose family is from Vodnjan.
In 2019, more than 4.8 billion people received messages on their smartphone from their taxi drivers, social media sites, banks, delivery companies, and other sources — messages powered by Infobip technology. Millions of consumers in rural areas without Internet access also used the company’s platform to access services and share information.
Infobip is one of a handful of key players in a fast-growing sector known as communications-platform-as-a-service (CPaaS). CPaaS is a cloud-based delivery model that allows organizations to add real-time communications capabilities, such as voice, video, and messaging, to business applications without the need to build the technology infrastructure. Market researcher IDC forecasts that the CPaaS market will grow from $2 billion in 2017 to $10.9 billion by 2022.
The Infobip story began in 2002, when Kutić left his job as an engineer in Zagreb to return to Vodnjan. After a series of false starts, Kutić landed on messaging technology as a core business when he developed a way to send family members who lived around the world a Christmas text message. He pitched this idea to Vodnjan’s local council, and the following year 14,000 seasonal greetings were sent from the town hall to Vodnjan’s far-flung diaspora. Infobip now has 67 offices in 52 countries, works with more than 650 mobile operators around the world, and has a roster of marquee clients, including consumer brands such as LG Electronics, Papa John’s, Burger King, Xiaomi, and Costco, as well as more than 350 banks such as Sberbank, Raiffeisenbank, Alpha Bank, and Emirates NBD.
Strategy+business sat down with Kutić in London recently to learn more about Infobip's evolution, the implications of tech regulations, and how artificial intelligence will change the way we interact with the Internet in the future.
S+B: Infobip began as way to send a holiday text message. What were the steps that got you there?
KUTIĆ: I started studying electrical engineering, working on the transfer of electrical power. My first real job was at the state-owned electrical power supply company in Zagreb. I worked there for four hours and realized it wasn’t for me. I left for lunch and never went back — I took the first bus to Vodnjan. It’s a small town, but for me, it’s the center of my universe. That was in 2002, and Internet penetration in Croatia was maybe 10 percent. But everybody had a mobile phone. For several years I worked on ways of using mobile phones for receiving information, and the first project was called Mynet, which eventually evolved into a new endeavor called the Infobip in 2003. This project was effectively a way of having group communications via SMS [short message service]. The first collective message took the form of a Christmas card. But we realized quickly that the technology wasn’t scalable, so we eventually migrated to building a communications platform, and in 2006, we founded the company Infobip.
S+B: How were you able to make the technology scalable?
KUTIĆ: It took time — time and hard work, with many inventions and disruptions along the way, until we came to what became the global technology platform for messaging. I loved this time of falling down and getting up again. But the culture is different here than in the United States. In the U.S., you celebrate failures; you celebrate people who are courageous enough to try something new. It’s a different story in this part of Europe. Failing is not an option. In 2012, I read a book, The Lean Startup, by Eric Reis, who explains how this works in the United States. I said to the whole city: We’re building, not failing. This is what innovation looks like. Failing is a necessary evil. If you want to learn, to have this invaluable feedback loop, you have to fail.
By 2006, our main services were SMS, voice, and email. At the same time, everyone was using different SMS systems. It’s like people were on parallel networks. There is the Internet, and then there is a network where all mobile and fixed operators are connected globally. So we developed a global network for SMS and, in the beginning, we were basically offering it for free to the mobile operators for a share of revenues based on the specific service they were using it for. We were working with about 100 operators, or 10 percent of the market, then. Today, we work directly with about 650 mobile operators globally.
Companies use us when they need authentication, verification, and identification services, or when they need to engage with their customers in a personalized way. People will know us mostly as providers of validation codes that come through SMS when they sign in to places like Amazon or Google, for instance. We also provide number masking. Uber, for example, uses this service as a voice and number proxy so that riders and drivers never exchange real phone details, making it safer for both parties. Banks also use us for one-time passwords, for instance. Enterprises are increasingly invested in ensuring a secure digital trading environment. It’s no longer a “nice to have.”
And now the whole industry is progressing toward a conversational user interface where people can instruct bots using natural language. This type of voice proxy authentication is not [far from] becoming standard. It is done with artificial intelligence [AI], which, together with advances afforded via machine and deep learning, represents a massive area of growth and value to companies.
S+B: Big companies have a habit of buying the smaller companies that have the technology they want. Are you going to be the target of your current customers?
KUTIĆ: We’ve had some interest, but for now we are still 100 percent privately owned, so the story continues.
S+B: What are the hot areas you are working on?
KUTIĆ: The Internet of Things at home and for business is a big area of interest. We believe the conversation interface is coming of age, and the “new normal” way of seamlessly communicating with services will be via the devices that have become a part of everyday life. We are doing some proof of concepts now with three or four selected companies in Croatia.
The majority of the things we do every day are for the first time. We are in a continuous learning loop.”
We are also seeing a shift in Web applications toward click-free consumption, where you will no longer have to surf and then download Web applications to receive those services or products. Instead, people will simply be able to talk to a bot that will automatically mediate and provide those experiences without the need for any additional manual interaction. That’s where we want to play, and that’s where we see big changes that will be very good for people, because it will allow everybody to, let’s say, spend less time on process and procedure and do everything more quickly via voice.
Siri and Alexa do some of this already, and it is really cool. But for B2B, there is also a market. Everyone wants to be in the cloud and online 24/7, and that means more value will inevitably move to the cloud, which means more value will be present and accessible through the Internet. This is good, but it also comes with questions around security. Currently, about 30 percent of all our business is authentication and verification — it’s clearly a concern for businesses, so we are working in partnership with the mobile operators to address it.
S&B: Do you think this is going to be a more regulated market in the future?
KUTIĆ: Yes, customers demand it — but the regulators are always a little slow. Right now, digital identity is not certified by the regulator or the government. I think that we should move to a fully regulated digital identity framework and this should be connected, within certain limits. For example, we need to be wary of oversurveillance as we move more toward biometrics, such as facial recognition. The key to success will lie in finding a balance. So, in an ideal world, you would have a technology that would create a digital identity, no matter what device you are on and what transaction you were trying to do, but at the same time that digital identity would be regulated in some way such that no one could hack it.
With our product now, we can identify an exact device and secure all the steps needed to make an online session secure, which eliminates middlemen, and leaves no room for phishing or scamming attacks. We are already testing and working on this.
S+B: Will regulations put constraints on companies like yours in the future, or on the people who use your technology, and if so will that slow down the progress?
KUTIĆ: I think progress will be progress. Maybe there will be moves to slow down some technology, but we cannot blame the regulators. The technology is evolving so quickly, and this a very niche segment — there are just a few companies doing authentication. Once regulations come in, all we can hope for is that they strike the right balance between protection and obstruction.
S+B: Let’s talk a little bit about customers and the customer experience in this digitized world. What’s your take on that?
KUTIĆ: You have the digital native companies that automatically embrace these new technologies. They do everything online; everything is mobile-first. Migration to a conversational interface powered by AI is booming. There are tens of engineering companies all working on some kind of AI communications innovation for this. Everybody wants to implement this type of technology because it helps build up deep learning networks. There will be digital companions or assistants with subject-specific knowledge that will be able to solve 99 percent of all problems. These in turn will go through continuous upgrades all the time as new information comes to light, and it will only be when the devices no longer have answers that the system will switch seamlessly to human agents. It’s a win-win situation, where call center agents are relieved of repetitious tasks that can be easily automated while ensuring that all customers get the right level of assistance faster. More and more banks and insurance companies, as well as other traditional businesses, are implementing this. Let’s just say that providing customers with a great brand experience is a booming industry.
S+B: And customers are accepting this without batting an eye?
KUTIĆ: Yes — why would you not accept this if it’s helpful? In 80 percent, 90 percent of the cases it’s used, and if it’s well done, the customer will not know when you have a bot and when you have a live agent [answering queries]. For “most asked” requests — like “Can I check my balance?” “When did I pay my last invoice to X company?” or “Can I change my seat?” — technology is much better at dealing with these requests programmatically, thereby freeing up human agents for more complex problems.
S+B: Now it is voice assistants. What’s your time frame for augmented reality to jump in and have hologram Alexas that jump out of the box?
KUTIĆ: Four or five years.
S+B: How do you see future growth prospects? PwC’s 23rd Annual Global CEO Survey showed that most business leaders predict a global slowdown.
KUTIĆ: We started the company just before the financial crisis and we’ve been growing all this time, because this part of the communications industry is always growing. It is no secret that the people-to-people SMS marketplace is declining globally as people switch to using services like WhatsApp, but A2P (messaging from an application to a person) is still growing about 20 to 30 percent on a global level. So, basically, all the parameters where we play are growing, with a prevalence of digital native companies like WhatsApp, Viber, and Twitter all needing to communicate with their users. They want to do this in the best way possible on the channels users prefer, including voice. And that’s what we do.
Everyone is digitizing. It’s…become normal, so much so that companies like us become part of [other companies’] communications strategy. Before, it was a new thing, and we had to explain what it was all for and where the benefits were, but now, they come to us. In the last two to three years, our industry basically went mainstream.
S+B: What are your challenges as you grow?
KUTIĆ: The majority of the things we do every day, we are doing them for the first time in our lives. We are in a continuous learning loop: You have new technologies, new customers, and the ever-changing competitive landscape with lots of regulation added into the bargain. Every day is a school day.
Then there is the organizational infrastructure challenge. It’s not the same to be a company of 50 people and to be one of 200, then 500, then 1,000. Today we are more than 2,000 people. We hired 800 people in the last year alone. It’s a constant challenge, but we realize how lucky we are to have been able to grow at this pace. We must be doing something right.
S+B: How do you find the people you need in your corner of Istria?
KUTIĆ: We definitely come from a very small area, and for such a global company, this means we do not have all the homegrown skill sets we need anymore. We now have 67 offices globally, and we employ 61 nationalities today in our company. So, in order to be successful, we learned how to learn. We set up our own Infobip Academy. Everybody we employ first goes to the academy for between two and four weeks of on-boarding to learn about how we function as a company, how our industry is developing, what our solutions are and the value they bring, and what the competitive landscape looks like. Following that, new employees spend a further six months experiencing various other knowledge-sharing initiatives. This year we had 1,200 people come through our academy, with some returning for a refresh. We call this learning by doing.
We call our people Bippers, and we have Bippers Educating Bippers. This has proven a very successful initiative. So, for example, if you have come across something of interest or you would like to pass on a learning to your colleagues, we help you to create a webinar for the benefit of others inside the organization. It has proven popular, with more than 60 webinars broadcast to date.
S+B: How would you describe the Infobip corporate culture?
KUTIĆ: We have a down-to-earth, family-oriented culture in the company. We say we are the humble engineers. We mean that we are never too sure about what we are doing, we always listen, and we always learn. Most importantly — and this is why I think we have been successful — a large part of our culture is about focusing on teamwork. Together we help each other to learn.
- Deborah Unger is a senior editor at strategy+business.