Journal of Business Case Studies

Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 11
Principled Entrepreneurship And Shared
Leadership: The Case Of TEOCO
(The Employee Owned Company)
Thomas J. Calo, Salisbury University, USA
Olivier Roche, Salisbury University, USA
Frank Shipper, Salisbury University, USA
ABSTRACT
This case describes a unique corporate culture, focused on employee ownership and employeecentered
Human Resource practices, which fosters employee loyalty and motivates employee focus
on organization objectives. The organization‟s CEO and senior management team discuss in
detail the company‟s development strategy, the concept of shared leadership, and its strategic
focus on Human Resource Management. Also emphasized is how the organization‟s recent
partnership with a private equity firm, and its acquisition of an international organization of
similar size, may change TEOCO‟s culture and its business model.
Keywords: Employee Ownership; Private Equity Firm; Shared Leadership; Corporate Culture; Strategic Human
Resource Management
INTRODUCTION
airfax, October 6, 2009. Atul Jain, founder of TEOCO, a provider of specialized software for the
telecommunications industry, had been meeting all day to finalize a partnership agreement with TA
Associates, a private equity firm. For Atul, the pace of activities had been relentless on this special
day. 1 By all accounts, the last 12 hours had been hectic but the closing of the transaction was a success. The event
had started with back-to-back meetings between TEOCO‟s senior management and their new partner‟s
representatives and had culminated with the usual press conference to mark the occasion. The senior management
teams of both organizations announced to the business community that TA Associates [TA] had made a minority
equity investment of $60 million in TEOCO. It was indeed a memorable day, the culmination of intense and uneven
negotiations between two organizations that did not have much in common except for deep industry knowledge and
a shared interest in seeing TEOCO succeed.
This new partnership marked the end of a marathon, but Atul did not feel the excitement that usually comes
with crossing the finish line. It was late and he was tired. Back in the quiet of his office, he reviewed, once again, the
draft of the press release relating the day‟s event. As he read the various statements captured from the meetings, he
still had the uneasy feeling that comes with making life-changing decisions when one does not have all the required
information. There were so many unknowns. Partnering with the right investor, like many other entrepreneurial
endeavors, was not a decision made in a vacuum. It was all about good timing, cold analysis, gut feeling and luck;
the latter was last but by no means least. Despite all the uncertainty, Atul felt that this was a worthy endeavor.
Atul had come a long way since his humble beginnings in India and a lot was at stake, not only for him but
also for the 300 employees of the company. The TEOCO enterprise had been a successful business endeavor and at
the same time a very personal journey. What had begun as a result of frustration with his old job in Silicon Valley 15
years ago had become one of the fastest growing businesses in the telecom software industry; and the fast pace of

1 All employees are referred to in this case by their first name including the CEO because that is standard practice at TEOCO.
F
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
12 © 2012 The Clute Institute
the company‟s development had not gone unnoticed. For quite some time now, TEOCO had been on the “radar
screen” of investors looking for high-growth opportunities. However, Atul had never cultivated a relationship with
potential external investors; he had remained congruous with his long-held business beliefs that an alliance with
external financiers was rarely in the best interest of a company and its employees.
Atul [CEO & Chairman]: “I am often asked why we didn‟t approach an investor for money or seek venture capital. I
have two answers to this question. My first answer is: that‟s not our way of doing business. I believe that every
entrepreneur must aspire to be debt-free and profitable from the very first day. My second answer is: nobody would
have given me the money even if I had asked! I also had a fear – that external investment might impact the culture
and values that I wanted TEOCO to promote and cherish. I wanted to steer the TEOCO ship along a very different
course. My dream was to set up an enterprise based on a model of shared success. TEOCO‟s success wouldn‟t just
be my success; it would be our success. TEOCO wouldn‟t just have one owner; it would be owned by each of its
employees – who would therefore be called employee owners.”
But several months earlier, events had taken an unexpected turn; unsolicited financiers approached TEOCO
once again, this time offering to invest a substantial amount of capital. Still, Atul was reluctant to engage in
negotiations with a party that, as far as he knew, did not share TEOCO‟s values.
Atul: “[In the early days]we took a conscious decision not to accept venture capital. I have always had a healthy
disdain for venture capital because it numbs the entrepreneur‟s competitive edge and enfeebles him. I still remember
TEOCO‟s early battles with [competitors] Vibrant and Broadmargin and how difficult it was for us to compete with
all that extra money flowing into the rival‟s coffers. But we took the hard road – and survived….What, then, went
wrong with Broadmargin or Vibrant? If I have to over-simplify, I‟d say that both were done in by venture capital.
VC is an impatient master; it forces you to always go for the home run, and always push hard on the gas. With
certain kinds of businesses this works; indeed, it might be the only way. Think of Google: their business space is so
vast that only continuous and unbridled growth can sustain the venture. But TEOCO‟s space is very different; there
is no exponential growth here that everyone can go chasing…I would guess that the size of the telecom Cost
Management business is no larger than $100 million per year; so to survive you have to be patient and play your
cards carefully. This isn‟t the place to be if you are in a tearing hurry to grow…. While this strategy of focusing on
niche markets significantly limits our market potential, it does keep the sharks away. The big companies are not
bothered by niche products for telecom carriers; they don‟t want to swim in small ponds.”
Atul‟s comment reflected the situation a few years ago; TA‟s recent partnership offer was made in a new
context. In this rapidly-changing industry, there are constantly new directions in technology and the landscape
continually shifts. The industry, consolidating quickly, required that in order to remain a viable player, TEOCO
would have to change gears – sooner rather than later.
Until now, the primary focus of the company had been on the North American telecom carriers. However,
with the anticipated consolidation of the telecom industry in North America, TEOCO needed to focus on
international expansion. In addition, to leverage TEOCO‟s deep expertise in cost, revenue and routing, the company
would soon need to fish “outside the pond” and enter the global business support system / operations support system
(BSS/OSS) market. Here, TEOCO could find itself in competition with much larger players and it would be valuable
to have a strong financial partner.
Indeed, the company had reached an important threshold in its organizational development. But if TEOCO
was at a crossroads, so was its founder. Atul was in his late forties and he was not getting any younger. In this
industry Atul had known many entrepreneurs who, like himself, had rapidly grown their businesses only to find out
that “you are only as good as your last call.” For a few of these entrepreneurs, one or two poor decisions had
triggered a descent that had been as swift as their earlier ascent and they ended up with very little to show for their
efforts. These were the intangibles. During rare moments of quiet reflection, Atul realized that his “risk return
profile” had changed imperceptibly over time. Having all his eggs in the same basket and going for all or nothing
had been fun in his mid- thirties when everything was possible, but it would be much less so in his early fifties when
starting from scratch would be a very unappealing scenario for Atul and his family. Furthermore, he felt an
obligation to create liquidity for the employees who had supported him on this fifteen year journey and had their
Journal of Business Case Studies – January/February

2012 Volume 8, Number 1
© 2012 The Clute Institute 13
own dreams and goals. At the end of the day, any business has only three exit options: it could get listed, be sold or
go bankrupt! And the latter option is not particularly appealing.
It was in this context and mindset that he had agreed to listen to what TA Associates had to offer. Founded
in 1968, TA had become one of the largest private equity firms in the country. The company was managing more
than $16 billion in capital by 2009 and it had an extensive knowledge of the industry. Atul was impressed by TA‟s
approach, its willingness to take a minority position, and Kevin Landry, Chairman and the “spirit” of TA. This
private equity firm not only managed capital; it also had impressive network of relationships. In addition, TA
executives had been adamant that Atul remain in charge, and he was keen on continuing as the controlling
shareholder. The fund would appoint two board members [see Appendix 1] but TEOCO‟s current management team
would still lead the company as they had in the past.
Reviewing the details, Atul could not spot any flaws in the logic of the transaction. It was neither a
marriage of love nor a “shotgun wedding,” just a pragmatic alliance between two companies with complementary
skills and resources at a time when such alliance was valuable to both parties: TA looking for a good investment and
TEOCO shareholders looking for partial liquidity. As Atul re-read the press release and a few of his quotes, he
reflected that he meant every word.
Atul: “We are pleased to welcome TA as our first institutional investor. As a company that has avoided external
capital for 15 years, we are delighted to find a partner that will strengthen TEOCO without changing the culture of
our organization. We see this as the beginning of a new phase in TEOCO‟s history where we look to add even
greater value to communications service providers worldwide.”
This was definitively a new era and there would be no turning back. For better or for worse, this partnership
had to work. Atul made minor corrections to the wording of the document and authorized its release.
COMPANY BACKGROUND AND ACTIVITIES
TEOCO‟s predecessor, Strategic Technology Group (STG), was founded as an S corporation in 1994. The
company‟s initial focus was to provide high quality consultancy for IT projects. STG‟s first clients included Mobil,
Siemens, Cable & Wireless, SRA, TRW and Freddie Mac. The company started operations in April 1995 and three
years later, in March 1998, the company name was changed to TEOCO (The Employee Owned Company). At the
same time, TEOCO made the strategic decision to shift its business from consultancy to product development and to
focus on the telecommunications industry. This was achieved through the acquisition of a fledgling software product
that processed invoices of telecom payables. BillTrak Pro would ultimately become TEOCO‟s best-selling network
cost management software.
Subsequently, the company grew rapidly. As the number of employees exceeded 75, the maximum
numbers of shareholders an S corporation can have, the company changed its status to a C corporation to enable a
broad based employee ownership. Over the years preceding the burst of the “Dot.com” bubble, TEOCO not only
expanded its client base for its basic products but also invested substantial amounts of capital in three startups. These
entities were: netgenShopper.com for online auctions; Eventrix, an event planning portal; and AppreciateYou.com to
support employee retention. These internet startups functioned as separate entities, each at their own location, with
their own business goals and core values, managed by different entrepreneurs/managers; at the same time, they each
relied on TEOCO‟s cash flow for their development.
Ultimately, none of these ventures emerged as viable businesses and this left TEOCO in a difficult financial
situation. As a result, TEOCO registered its first year of losses in 2000.
Atul: “This failure was devastating, but also a humbling experience. I learned the hard way that no entrepreneur
can survive inside a technology incubator. We had to pay a price for all these transgressions…Our revenues were
still impressive, but the money in the bank was dwindling rapidly… We were truly caught in deep and dangerous
waters. I have often wondered what went wrong. It wasn‟t as if we made one big mistake….I guess we just took our
Journal of Business Case Studies – January/February

2012 Volume 8, Number 1
14 © 2012 The Clute Institute
eyes off the ball. Somewhere along the way, we lost our focus; we tried to do too many things at the same time and
ended up getting nothing right. We had to quickly get back to our knitting. The question was: how?”
Under Atul‟s leadership, TEOCO made the judicious decision to refocus its activities on its core industry
expertise and its largest clients. To achieve this, the organization solidified its position in the telecom sector by
improving its services and developing new products. In 2004, research and development efforts resulted in the
patented XTrak technology which today represents the core of the company‟s invoice automation solution. In
addition, TEOCO was able to migrate from software licensing to the far more lucrative software-as-a-service model.
Instead of a fixed licensing fee, the company charged a recurring monthly fee based on the volume of data processed
for each client. As the recurring revenue model took hold, it became much easier to grow revenues from year to year
and improve company‟s profitability.
In 2006, TEOCO acquired Vibrant Solutions, bringing in cost management and business intelligence assets
with its 24 employees. Ultimately this resulted in the important development of TEOCO‟s SONAR solution for cost,
revenue and customer analytics. Finally, in 2008, Vero systems was acquired, adding routing management and its 36
employees to the repertoire of communication service provider solutions.
This stream of acquisitions and internal development left TEOCO with a staff of about 300 employees and
a portfolio of three major activities: cost management, least cost routing and revenue assurance.
Cost Management
Cost management solutions include invoice automation and payable processing. Powered by XTrak,
TEOCO‟s invoice automation solution processes over 1,000,000 invoices annually. This facilitates the audit and
analysis of billions of dollars in current billings due to each telecom company. While the usual scanning of paper
bills relies on optical character recognition technologies that routinely require hands-on intervention to correct
misrepresented characters on complex invoices, the XTrak technology mines the original formats which produced
the paper to create files for loading into cost management solutions. By eliminating the tedious, costly and errorprone
task of manual invoice data entry, telecom companies increase productivity and reduce costs by increasing the
number of disputes filed and resolved and by reducing late-payment charges. In addition, TEOCO also processes
“payables” on behalf of clients by managing the full life-cycle of invoice payment, including account coding,
management review and payment reconciliation. TEOCO‟s employees audit client invoices, comparing rates,
inventory and usage with other source data to identify and recover additional savings. Finally, the company manages
disputed claims on behalf of its clients from creation through resolution. TEOCO has the technical capability to
capture all correspondence between parties and can review and track every claim to resolution.
With regard to cost management, it is worth noting that the Sarbanes-Oxley Act of 2002 requires every
listed company to implement a reliable reporting system. TEOCO‟s services support this compliance by improving
the details and timeliness of the reports generated by/for telecom companies. TEOCO‟s rapid development in this
area coincided with a market need that was augmented by the legal requirements imposed by the Act.
Least Cost Routing
TEOCO‟s routing solutions help telecom companies determine the optimal route between two customers
with regard to cost, quality of service and margin targets. Capable of supporting multiple services and various
networks, the company is able to monitor CDRs (Call Detail Records) in near real time to identify bottlenecks, reroute
traffic and improve the quality of services for greater satisfaction of its clients‟ customers.
Revenue Assurance
Communications service providers can lose 5-15% of gross revenue due to revenue leakage. TEOCO‟s
SONAR solution is an industry first in supporting switch-to-bill reconciliation. TEOCO combines its specialized
industry expertise with high-capacity data warehouse appliances to create a unified CDR and makes a high volume
of current and historical CDR data available on a single platform for in-depth analysis. This helps telecom
Journal of Business Case Studies – January/February 2012

Volume 8, Number 1
© 2012 The Clute Institute 15
companies uncover billing discrepancies, detect fraudulent behavior, reveal usage patterns, understand customer
profitability, conduct margin analysis, and determine the financial viability of reciprocal compensation agreements.
INDUSTRY LANDSCAPE: Continuous Change
Competitors
TEOCO operates in a fragmented and highly competitive industry. Appendix 2 lists its competitors in each
of the three major business segments. TEOCO operates mostly in North America; therefore, the main competitors in
the cost management segment are Razorsight, Connectiv and Subex. These same companies compete for revenue
assurance, as well as others such as cVidya and Wedo. Finally, in the least cost routing segment, TEOCO faces a
different set of competitors: Pulse Networks, Global Convergence Solutions and Telarix.
Brian [Marketing & Communications Department]: “So [from the customer‟s point of view] what we bring to the
table is just end-to-end solutions that reach all of these different categories. While we still compete with certain
people, it‟s on a specific product; not across the board.”
Indeed, with the possible exception of Subex, none of the above competitors operate in the same three
business segments as TEOCO; and Subex does not provide a domestic least cost routing in North America. Since
TEOCO derives 50% of its revenue from cost management and 25% from revenue assurance, Razorsight and Subex
could be considered TEOCO‟s main business competitors. Faye summarizes TEOCO‟s current market position.
Faye [General Manager/Account Management]: “…In North America, we dominate the cost management space.
We‟ve got a decent lock on least cost routing, which is a very operational and technical function that bridges
between network and finance.”
One of the ways TEOCO differs from most of its VC backed competitors is its focus on internal cost
management. This manifests itself in two different ways. The management begins the year by making a conservative
revenue plan for the year. The company then manages its expenses to be a fixed percentage of the projected
revenues. Investments in Sales, Marketing, and R&D are adjusted throughout the year to ensure that expenses stay
with-in the pre-defined limits. The second way cost management manifests itself is how the cost of each individual
transaction is closely managed and monitored whether it be purchasing hardware, leasing office space, renewing
supplier contracts, recruiting new employees, or planning business travel.
One of the consequences of this strong discipline of cost management is that TEOCO is consistently
profitable, something most of its competitors struggle to accomplish. This enables the company to focus its energy
on clients and innovation.
Clients
TEOCO operates in an industry where clients are known and clearly identifiable. One of the key reasons
clients buy from TEOCO is because its solutions have a strong ROI (Return on Investment). In other words,
TEOCO‟s products quickly pay for themselves and then begin to generate profits for the companies that subscribe to
them.
Faye: “The telecommunication space is who we sell to exclusively, and within that space, we have a relatively
known and discreet customer list or target list, if you will. We don‟t sell cookies. Not everybody‟s going to buy what
we‟re selling…I know who those customers are and I can identify groups within that addressable market that fall
into natural tiers. So either because of their size or because of the market that they cater to, themselves, whether
they‟re wireless or wire line or whether they‟re cable companies, I can identify who they are and then try to focus
products and services that I think will best meet their needs.”
There are four telecom companies that drive about 65% of TEOCO‟s domestic revenue: Verizon, Sprint,
AT&T and Qwest; these are the “platinum” accounts. For obvious reasons, they get a lot of attention from both the
Journal of Business Case Studies – January/February

2012 Volume 8, Number 1
16 © 2012 The Clute Institute
engineering and product delivery standpoints. Thirty-five other companies, including Cricket, Global Crossing,
Metro PCS, Level 3 and Bell Canada, account for the remaining balance of revenues.
TEOCO, like most of its competitors, is client-centered. Smooth customer interactions are not only critical
to increase sales and garner new relationships but also to develop new products. Over the years, most of the ideas for
new products or improvements to existing products have come out of discussions with customers.
Hillary [Marketing & Communications Department]: “Our number one avenue for receiving customer feedback is
our TEOCO summit, our annual user meeting…where customers are able to talk one-on-one with not only TEOCO
representatives but also with other customers to learn what they are doing…and then circling back with TEOCO.”
Initially, TEOCO used its generic products, either developed in-house or brought in via acquisitions, to
start relationships with new clients. More recently, however, the company has innovated solutions driven by specific
clients. These, in turn, are adjusted to suit the needs of other clients. Dave describes this “evolutionary loop.”
Dave [Software Architect]: “With our first product [BillTrak Pro], we sold it to a number of different carriers
resulting in a broad footprint of wireline and wireless carriers. Then we had account managers engage with our
customers, and it‟s through conversations with our existing customers, generally, that the ideas for the next set of
products come out…More recently, I‟d say that most of our products are customer-driven, so what will happen is
we‟ll have someone in the company that will identify a need at a specific customer. Then, we‟ll enter into some kind
of partnership with them, whether we‟ll develop the application specifically to their needs and then work to resell
that and make it useful to other customers as well.”
GROWTH STRATEGIES
TEOCO’s Product Strategy: “Spidering” Through Clients’ Organizations
Since the number of clients is limited, two other ways to grow the business are cultivated. A company like
TEOCO can either “productize” its current services or acquire a competitor with a different client base and cross-sell
its products.
Faye: “…But for the products we‟re selling, if we have two new sales a year, that‟s significant … maybe you could
squeak out a third in a good year. So the majority of the sales growth really comes from existing accounts…most of
the growth though is coming from those large platinum accounts. Those are the ones that have money to spend and
where we‟re driving products, driving solutions, trying to help them tell us or help them identify where they have
needs. The other way to grow the business is to acquire companies that have a different business and then cross-sell
services. For instance, with the Vero acquisition, we added another „vertical‟ line of business [least cost
routing]…And then Vero had a relatively separate client base… so we were able to cross-sell products into each
other‟s companies‟ portfolio of clients [i.e., TEOCO‟s clients buying least cost routing services and Vero‟s clients
buying cost management products].”
Faye joined the company in March 2010, a few months after the TA‟s investment in TEOCO with a charter to grow
TEOCO‟s revenues with its smaller customers. With Faye in position, the company became more market-driven and
far more aggressive in cross-selling its services and products among the three main lines of business. As well, it
adopted a more cohesive approach to expand the client base, including leveraging its reputation for excellence and
for having the technical ability to solve problems across various business segments.
Faye: “We‟re „spidering‟ through [our clients‟] organizations. With each additional organization that we enter
into, the stickier we become. Our software products run the gamut from mission critical to nice-to-have. And the
more mission criticals and nice-to-haves we get, the stickier we are in that organization, in all the
organizations….[For instance]…I‟m not going outside AT&T, but I have – instead of two customers at AT&T, I now
have ten. And they‟re distinctly different sales each time.”
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 17
TEOCO’s Acquisition Strategy
For the first ten years of TEOCO‟s existence, Atul had built the business based on the premise that growth
had to be organic and financed through internal cash flow. To some extent, his views on acquisition were consistent
with his opinions about external financing from VCs and private funds. For Atul, acquisition and growth financed by
external funds represented a risky development strategy that could dilute a company‟s culture.
However, as noted earlier, internal growth through innovation had been slow and limited in scope. Crossselling
products between vertical lines of business coming from acquired companies with a different client base
offered far more potential for the organization‟s growth. Therefore, it was just a matter of time before TEOCO
would decide to “experiment” with acquisitions:
Atul: “When we started building TEOCO, I was very focused on organic growth. I felt that acquisitions tend to
dilute culture and values. But then we happened to acquire a company called Vibrant Solutions (in 2006) and that
acquisition went so phenomenally well, it gave us a lot of encouragement. The people were great, the product was
solid and the client relationships were very valuable. They integrated well into our company and into our culture.
We felt it made TEOCO a much stronger company. We had just broadened from cost management into revenue
management before we acquired Vibrant, but I don‟t believe we would have been as successful in delivering on that
without the expertise of the people that came from that acquisition.”2
The subsequent acquisition of Vero in 2008 brought TEOCO closer to the network and strengthened its position in
the market place, particularly with the larger customers. This reinforced TEOCO‟s belief that acquisition of
carefully selected targets should be a key component of its overall growth strategy.
Atul: “So at the end of that I said to myself maybe my narrow-minded thinking about acquisition diluting the culture
was wrong, that in fact, if you do it right, you have an opportunity to strengthen the culture. .”3
From these two positive experiences, Atul established guidelines for the kinds of companies to target when
scanning the market for future acquisitions. TEOCO would look for companies that:
– Had people with deep industry expertise;
– Offered solutions/products that the marketplace valued;
– Had a solid customer base that had been established over time;
– Offered potential synergies with current products/services offered by TEOCO;
– Had not been able to develop their full potential due to poor management;
– Had a manageable size to facilitate their integration into TEOCO‟s current businesses.
Atul: “One thing you will see in the companies we acquire is that before the acquisition those companies were not
running that smoothly. If they were, perhaps they wouldn‟t be up for sale or be affordable. We tend to acquire
companies that present a challenge but also an opportunity for us to improve the business and make it much
stronger and more valuable.”4
What enabled TEOCO to successfully integrate Vibrant and Vero into its business? TEOCO brought to the
table: 1) a solid core business that generated a positive and stable cash flow; 2) a well-established strength in cost
management (not only for its clients but also for itself); and 3) a disciplined approach to the management of human
resources. Indeed, TEOCO is conservatively managed and Atul is recognized by employees for his ability to select
and retain the best while optimizing the use of the organization‟s human resources. TEOCO core strengths, when
applied to the business of Vibrant and Vero, resulted in a bigger and better company.

2
http://www.billingworld.com/articles/2010/09/teoco-ceo-reversal-on-acquisitions-complete.aspx
3
Ibid.
4
http://www.billingworld.com/articles/2010/09/teoco-ceo-reversal-on-acquisitions-complete.aspx
Journal of Business Case Studies – January/February 2012 Volume 8, Number

1
18 © 2012 The Clute Institute
TTI Acquisition Rationale: Going Global And Getting “Closer To The Network”
In December 2009, TEOCO began to consider the acquisition of the company that would become in 2010
its biggest acquisition ever –TTI Telecom. TTI was an Israel-based global supplier of service assurance solutions to
communications service providers. The company had 300 employees and was listed on NASDAQ (TTIL). Through
this acquisition, TEOCO would gain access to wide array of intellectual property including a Mediation Platform,
Fault Management and Performance Management Systems, and valuable expertise in 4-G and data-centric
networks. Service assurance is important in a data environment because it reduces jitter and packet loss during the
delivery of high value data transfer. To some extent, TEOCO‟s existing portfolio of services and products would
expand on TTI‟s well-recognized expertise in the next generation network (i.e., 4-G). In addition, TTI had an
international client base that offered the potential to cross-sell TEOCO‟s existing product lines. On August 2010,
TEOCO completed the acquisition, thus taking a big step in a new direction which, as of this writing, has yet to
show conclusive results, but is considered a positive move.
Atul (at the time of the TTI acquisition): “Our last acquisition was Vero Systems (in October, 2008) and that
brought us one step closer to the network. We were doing least cost routing and in that world you are trying to help
determine how to terminate calls in the most cost-effective manner. The Vero solution got us working with network
players and got us into the switches. It became clear that the closer we got to the network, the better business value
we could create. So we started looking for companies that have intellectual property and an international client
base that would bring us even closer to the network. TTI [Telecom] really fit that bill for us. TEOCO has
traditionally been focused on North America so we thought acquiring a company with an international client base
was of value to us. Their solutions in fault management, performance management and service management all
bring us closer to network and assuring Quality of Service. We are good at handling large volumes of data and
deriving intelligence out of that data. And we convert that intelligence into business value. A lot of people can derive
intelligence from data but they aren‟t able to create actionable intelligence that creates bottom line value. We think
we will be able to improve the economics of the data TTI collects for our customers. It may be a little into the future,
but we believe this acquisition positions us to get to that future.”5
TTI Acquisition Challenges
From a technical and marketing point of view, the acquisition of TTI represented a very logical move that
would allow TEOCO to expand its business while remaining focused on telecom carriers. It fit many of the
acquisition criteria that Atul had laid out (see prior section), but it also represented a substantial departure from
previous acquisitions in three critical aspects: its size, its location and culture, and the means of its acquisition.
1. The Size of the Target Company: In terms of revenues, TTI was four to five times larger than the last
acquisition made by TEOCO and this purchase effectively doubled the size of the organization. On that
point, Atul was the first to recognize that TEOCO was entering uncharted territories.
Atul: “All the other acquisitions were small. We bought a company with 24 employees, we bought a company with
36 employees, and this time we bought a company with 300 plus employees. So, this is going to present a completely
different challenge and I don‟t know what that is going to be because I haven‟t dealt with it. So, it‟s yet to come.”
From the outset, and unlike prior acquisitions, TTI remained an entity that was managed separately. Therefore, one
of the key issues to be addressed in the short to medium term would be the degree of integration between the two
companies.
2. The Location and Culture of the Target Company: TEOCO had essentially been operating in the US,
whereas TTI was located in Israel and was far more international in its operations. This created tremendous
opportunities for marketing synergies and for cross-selling products to a different client base.

5
http://www.billingworld.com/articles/2010/09/teoco-ceo-reversal-on-acquisitions-complete.aspx
Journal of Business Case Studies – January/February 2012 Volume 8, Number

1
© 2012 The Clute Institute 19
Faye: “So I see leveraging a lot of the existing sales and marketing resources in Israel. I mean they have a strong
presence in Israel, but they‟re really European. EMEA is big. But also CIS, they do a lot in Russia. … MTS is one of
their customers, which is just a huge, huge Russian company. Internationally, it‟s a brand new client base into
which we can cross-sell the least cost routing and probably not the cost management products because they don‟t
translate outside of North America as well. But certainly the least cost routing products. Taking their products into
the North American base is definitively something we can do. And as far as clients‟ crossover versus new, they have
about ten North American customers, only four of whom are existing customers of ours.”
At the same time, however, it also exposed TEOCO‟s business to a pool of larger competitors that
competed on a global basis. TTI was “swimming in a different pond” in which blue chip companies with wellrecognized
brands and deep pockets were aggressively marketing their services.
Faye: “We participate in a handful of shows, and again, that‟s expanding quite a bit this year because of the
international presence and customer base…it‟s further complicated, though, by this acquisition of TTI because …
they are a very sales and marketing-centric company, and it‟s going to be interesting to see how the cultures meld.
… I see a lot of Advil for me between now and then. We‟re going to have to get there. Traditionally, TTI has gone to
a lot of shows and they like to build brand new booths and spend hundreds of thousands of dollars for each of these
shows on their presence there, and [at TEOCO] we don‟t do that.”
Indeed, TEOCO‟s management was cost conscious and not prepared to invest heavily in shows and other
marketing activities where Return on Investment (ROI) is difficult to measure. It was not evident how the two
cultures would merge. TTI management might argue that substantial resources would be needed to compete in their
market segment while TEOCO‟s management would probably take the position that overspending on marketing and
poor cash-flow management were the reasons for TTI‟s financial problems prior to its acquisition.
3. The Means of Acquisition: One cannot understand the acquisition of TTI without first understanding how
the alliance with TA changed the company‟s and CEO‟s ways of doing business, as well as their risk/return
profile. To some extent TA gave TEOCO‟s management both the means and the incentives to take more
risks. TA‟s involvement provided TEOCO with the credentials to approach financial institutions and
increase the company‟s financial leverage to acquire a large target. It is one thing when a US$50 million
company approaches a bank to finance the acquisition of another company of equivalent size. It is quite
another when a US$16 billion equity firm with a substantial stake in the acquirer approves the transaction
at the board level. Following TA‟s equity participation, no one ever asked TEOCO if they had the means to
acquire TTI and complete the transaction. The legitimacy provided by TA‟s participation was essential for
the financing of the acquisition of a listed company where time is of the essence.
Avi Goldstein [CFO]: “… Before TA came on board, taking debt was something that was not on the table. And when
TA came on board and they asked us, „Are you willing to take debt to finance acquisitions?‟ and we said, „Yes‟…
And maybe without TA we wouldn‟t go after TTI because of the debt, not so much because of the size of TTI.”
While providing the means to be more aggressive in TEOCO‟s growth strategy, the partnership with TA
also reduced Atul‟s aversion to risk. It was the TA “push-and-pull” strategy (i.e., providing the financial means
while reducing the acceptable risk threshold) that allowed this transaction to materialize.
Atul: “I haven‟t fully understood how the TA transaction has changed us. I think, over time, I will understand how it
has changed us. All I can tell you is that I feel a degree of financial independence and I personally feel that it is
more important for me to focus on making a greater difference for the world. I don‟t know that I could have
supported this acquisition if I hadn‟t gotten liquidity because this acquisition had a much higher risk profile.”
COMPANY CULTURE AND PHILOSOPHY
The background and evolution of TEOCO provide the context for exploring the unique way in which the
organization functions, which in turn explains the basis for its success. Three different lenses provide the focus for
this understanding: shared leadership; a culture of employee ownership; and human resources as a strategic
Journal of Business Case Studies – January/February 2012

Volume 8, Number 1
20 © 2012 The Clute Institute
function. These three characteristics have combined to contribute to TEOCO‟s success, as well as its competitive
advantage.
Shared Leadership
The shared leadership team is comprised of three leaders of the organization with distinctly different, but
complementary, skills and responsibilities. These leaders are Atul Jain (Chairman and CEO), Philip M. Giuntini
(Vice Chairman and President) and John Devolites (Vice President and General Manager). [See Appendix 3]
Atul is the central figure in the story of TEOCO. By understanding Atul‟s background, philosophy of life, vision
and style, the organization and its unique culture create a cohesive portrait.
Atul was born in India in the early 60‟s. He has an older sister and an older brother. His father was a midlevel
civil servant in India, now retired. Both of his parents live with him and his family, which is customary in
Indian culture. Atul is married and has three children. His intellect and abilities were identified at an early age.
When he was a teenager, he was invited to attend the prestigious Indian Statistical Institute, known as one of the best
schools in India for the study of statistics, which required that the young Atul move away from home to live in
another part of the country.
Atul was raised in the Indian religion of Jainism, an important aspect of his background that shaped his
view of people and organizations. While he does not wear his religion “on his sleeve,” it is evident that his religious
beliefs and upbringing have had a significant impact on his leadership style and the culture he has shaped within
TEOCO. Atul does not go to temple and does not even pray, so in that sense he does not consider himself to be a
religious person. On the other hand, he expressed that he has internalized the culture and religion and that it
manifests in his thinking about business. Jainism is an ancient but minority religion in India,6
yet its influence far
exceeds its size, as Jains represent some of the wealthiest Indians. Among its core beliefs are a philosophy of nonviolence
towards all living things, vegetarianism, a strong belief in self-help and self-support, and a continual
striving towards the liberation of the soul. These tenets can be seen in Atul as he believes that everyone is an
“independent soul,” and that consequently he “can‟t make you do anything that you don‟t want to do.” What stands
out is that this type of thinking is very uncharacteristic for a leader.
Atul: “As a CEO of the company, I understand that I have no control over anybody. I can‟t get anybody to do
anything…so I don‟t spend my time trying to control people…what I try to do is to conduct myself in a manner that
may encourage people to work in a certain way. I can try to create an environment that is encouraging; an
environment in which people wish to excel.”
When he came to the United States it was not to be an entrepreneur but to study for a doctorate degree in
Probability and Statistics. He describes himself as an “accidental entrepreneur.” A disillusioning experience working
for a Silicon Valley firm led him to reconsider his options. When commitments regarding future assignments and
compensation were not honored, and he felt disrespected by the company‟s CFO, he became motivated to take the
risk to establish his own company to prove that “you don‟t have to be an *&%$# in order to succeed in business”. At
the same time, this experience impressed upon him the importance of treating his future colleagues with fairness and
respect.
Atul‟s personal leadership style, which is reflected by the organization, overall, is quite atypical, especially
for an entrepreneur. Atul openly admits his shortcomings. While manifesting many of the traits of an entrepreneur,
he sets himself apart by claiming that one of his greatest strengths is that he knows what he does not know. In fact,
he even says “I know that I don‟t know how to run a business.” In conjunction with his perceived shortcomings, he
also believed that you create joy at work by sharing the decision making with others in the organization. The end
result was his desire to establish a structure of shared leadership within TEOCO. He demonstrated this by

6
Jainism is the least populous of the Indian religions; comprising approximately 0.5% of the population (Hindus represent
approximately 80%, Muslims approximately 12% and Christians approximately 3%).
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 21
establishing a “Steering Committee” of the senior employees within one year of the existence of the company, much
prior to his association with Philip and John.
While there has been much discussion in the management literature on the potential value of shared
leadership, few organizations have attempted it, and even fewer have utilized it successfully. In many respects, the
notion of shared leadership is quite contrary to traditional beliefs about leadership in US organizations, which have
strongly followed the military model of command and control. Atul‟s personal background and beliefs, coupled with
a unique confluence of circumstances, have made shared leadership a major factor contributing to the success of
TEOCO.
To understand why shared leadership at TEOCO was both possible and successful requires an
understanding of the unique combination of personalities, leadership strengths and styles, along with the career and
life circumstances – not only of Atul, the founder and CEO, but also the other two members of the leadership team;
Philip, President; and John, General Manager.
Philip was a very successful, retired executive. Atul read an article in the Washington Post in September, 1998, that
profiled Philip‟s retirement from American Management Systems (AMS) after 28 years. He contacted Philip,
established a relationship with him, and eventually persuaded him to become a member of TEOCO‟s Board of
Advisors. Within a year, Philip agreed to come out of retirement to serve as the Vice Chairman and President.
John followed a path similar to Philip‟s. He served as President of Professional Services for Telecordia. His earlier
career experiences included executive positions at PriceWaterhouseCoopers, American Management Systems
(AMS), and Booz Allen Hamilton. He became a member of the board in 2000, and in February 2004 he joined the
company as a senior executive. In January 2005, he assumed the role of General Manager of its Telecom Business
unit.
Personalities: In contrast with these two veteran executives, Atul was an entrepreneur with little or no experience in
running a sizable business. However, he was a leader with a vision, strong intellect and a passion to build a
successful company. In explaining why shared leadership works at TEOCO when it has not worked at many other
organizations, Atul says that “I recognize that Philip and John are far more seasoned business professionals than
me…. I go to them for guidance and advice and I will rarely do things that they do not agree with.” That said, Atul
acknowledged that there are many challenges to shared leadership.
Atul: “The single biggest thing it requires on my part is to give up a ton of decision-making authority, and most
people in a CEO chair are not willing to do that. I have to be subservient to John and Philip, and I‟m happy to
be…I feel that it is not in my personality to be authoritative…being forced to conduct myself in an authoritative
manner is offensive to my soul.”
John underlined the importance of personality in ensuring the success of shared leadership. While working
at consulting firms, he had studied this concept and he commented, “I will tell you that when you look at the
situation, it comes back to the individuals and the egos that they have. And if they have large egos, this would not
work.” When first asked about describing shared leadership at TEOCO, he responded by suggesting, “How about
shared fate?”
Complementary Management Skills: The skill sets of these leaders are very complementary, and together form a
powerful combination for organizational success. This was described separately, and consistently, by each of them.
Atul excels at cost management and judging people.
Atul: “I really see my role as primarily focusing on culture and values and candidly I own all the decisions related
to the ownership structure and internal management. However, I don‟t build anything and I don‟t sell anything.”
Referring to Atul‟s strengths in cost management and people management, as opposed to direct customer
interface, John noted that Atul rarely has customer interface, as Atul entrusts this responsibility to him. John‟s own
skills and interests are focused on creativity and client relations. He sees his job as assembling people around clients
Journal of Business Case Studies –

January/February 2012 Volume 8, Number 1
22 © 2012 The Clute Institute
and projects, and keeping customers happy. Finally, Philip is the one who makes it all happen. He is skilled at
running a business that will endure, and has the organizational skills to free up Atul and John to do what they do
best. As Philip describes, “We are all strong in a different place. Collectively, when we are together, we basically
combine our strengths and eliminate our weaknesses…we do not compete with each other in our strong areas, and I
think that is the key to it.” John adds, “We would not be as successful if one of the other two of us weren‟t here.”
Atul shares the same view but from a different angle.
Atul: “I understand that I have certain strengths, and I tend to focus on playing to those strengths, and I have an
understanding of what I‟m not. … I think incompetence can be valuable, if you know it. If you recognize that you
don‟t know what to do, you‟re forced to ask others and the resulting collaborative environment has a power of its
own.”
Career and Life Circumstances: While personality and skills are important factors, it appears as well that life
circumstances were a necessary pre-condition to the effectiveness of the collaborative model at TEOCO. In their
own way, each of these leaders acknowledged that at a different time and place, shared leadership would not
necessarily have been a model they would have liked or one with which they would have been successful. As John
described, “I think you have to be at a point in your life where you‟re pretty comfortable with who you are.” All
three of these men, as a result of their career circumstances, have done well in their professional life. All of them
have “builder” personalities; they derive a great deal of satisfaction from growing a business. For these leaders, the
journey of growing TEOCO into a successful enterprise is as important as the end result.
Culture Of Employee Ownership
Atul has shaped the culture of TEOCO and ensures that it is continuously reinforced. This culture is
founded upon the core values of the company. As he expresses it, “I define success as „living up to your values.‟”
Those values are rooted in a business philosophy he calls “principled entrepreneurship,” which he defines as “a
business where you have a set of values and you commit to living up to those values while trying to create business
success.” He further specifies, “They have to be a clear set of articulated values.” In describing his success, he says
that “what motivates me is to make as big a difference as I can for as many people as I can. And I was never in it
solely for the money.”
TEOCO has a clearly articulated set of core values [see Appendix 4] and a very distinct culture. Atul
explains that the former were established even before he knew what the words “core values” meant. The initial
slogan for the company was: “We‟ll take care of our employees, they‟ll take care of our clients, and that will take
care of the business.” He says that the actual articulation of and focus on “core values” began after he read a 1999
Inc. Magazine article based on the book Built To Last: Successful Habits of Visionary Companies,7 which caused
him to ask, “Who are we?” rather than focusing primarily on “What do we want to be?”
A hallmark of TEOCO is the ownership culture that is embedded in the company. As an employee owned
company, Atul wants all employees to buy and own TEOCO stock. Yet consistent with his overall philosophy of
life, he does not believe he can make anybody buy the stock; he can only give them information and the opportunity
to make that decision. He strongly believes that the environment created by employee ownership leads to better
organizational performance and stronger employee commitment.
Atul: “I believe in the model of shared success. And I believe that if you share your success with the people that
actually influence it and create it, then you create [something] extremely powerful. So, I‟m fond of saying that
TEOCO is a difficult company to beat – not because we are so good, but because it‟s tough beating a bunch of
employee owners that feel so passionately about what they do.”

7
James C. Collins and Jerry I. Porras. New York: Harper Collins Publishers, 1994.
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 23
He and the leadership team continuously seek to create and reinforce an “ownership culture” and have
employees take an active part in ownership. Carrie (Director of Human Resources) has worked for TEOCO for
seven years; previously she had worked for other organizations with stock programs that create an ownership stake
in the company.
Carrie: “I would say that TEOCO is the first company I‟ve worked for where it is as big of a deal. And we make it
such a large component of the culture and we spend a ton of time from an HR perspective making sure people
understand all the different elements of ownership, why we feel it‟s important to us, what different programs and
mechanisms are out there to provide ownership and allow them to have an ownership stake in the company.”
Hillary is an employee who has worked for TEOCO for five years in various professional positions, but has
not worked at any other companies. She said she realized how much she appreciates the overall work environment at
TEOCO when she compared her circumstances with friends. To describe the differences that may exist in working
for an employee owned company as opposed to a traditional company, she said, “I think the employees here at
TEOCO have a lot more knowledge about what‟s going on.”
Dave, one of the earliest and longest-serving employees, when asked what employee ownership meant to
him, said “I‟ve got a stake in the game. My kid‟s college education is riding on this whole thing. There are no two
ways about it…. I think a lot of the people in the company think that way.”
Additionally, John, General Manager, explains further, “…It‟s keeping people motivated. It‟s keeping them
focused. I think employee ownership helps us with some of those things.… [It‟s] a very powerful ally when you‟re in
a market that‟s got a lot of competition in it.”
In addition to the organization‟s core values and corporate culture, the sense of ownership is reinforced
through three distinct types of mechanisms: 1) Employees‟ involvement in the decision-making process; 2) Bonus
and Stock Ownership; and 3) A Philosophy of Total Compensation.
Employee Involvement In The Decision-Making Process
The secret to making it work, according to Atul, is that “you have to create a culture of sharing in the
decision-making process.” The core values of TEOCO are manifested in the degree of employee involvement within
the organization, as well as in the many significant ways employees contribute.
“All Hands Meeting:” At 11:00 a.m. on the first Thursday of every month, an “all-hands meeting” is held for all
employees. This is a standing meeting, never moved or cancelled for any reason – one for US-based employees and
one for employees in India. For those US-based employees who are geographically dispersed from corporate
headquarters, a video feed goes out and an audio feed comes back so that questions can be posed from off-site
locations. Each meeting lasts from 60 to 90 minutes and concludes with a pizza lunch.
These meetings have a structured format so that employees know what to expect. First, new employees are
introduced; next, employee service anniversaries are acknowledged and celebrated (five, ten and 15 years‟ service
awards are presented); and then there is a monthly drawing for the TeoStar Award. The second half of the meeting
more formally introduces its principal objective: leadership providing a business update, as well as any news of
particular interest to employees.
Once per quarter the meeting is devoted to detailed financial updates. This is described as an “open book”
presentation; there is a review of the balance sheet and client revenues, an update from each line of business, and a
discussion of new business prospects. Avi, CFO, elaborated that it is “not only one page of the P & L and one page
of the balance sheet; it‟s pretty extensive.” Based on his prior experiences as a CFO, he said this is “like having a
shareholder‟s meeting every quarter.” Further, he specified that the company practices “open book management”
and that the employees can see the books at any time.
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
24 © 2012 The Clute Institute
The February meeting each year is devoted to a presentation on the year-end financials, and employees are
informed what percent of their target bonus they will receive. As of 2011, all employees with 3+ years of service
have received more than 100% of their target bonus for the last several years. Miscellaneous presentations are also
made on topics of relevance, such as an update on the internal stock market.
Every meeting concludes with an open segment called “benefits and concerns.” First, employees are
encouraged to discuss any benefits received or positive experiences that have happened in the company. Mutual
support and a form of company “cheerleading” is adopted. This is followed by a unique opportunity for any
employee to raise any issue of concern. No question is considered out of bounds, and senior management is
expected to respond openly and fully. The only ground rule is that every question must be phrased in the format of
“I wish I knew….” For example, “I wish I knew why our financials were not as good this quarter,” or “I wish I knew
why we do not have a benefit such as… .” Atul said that this protocol ensures that concerns are presented in an
impersonal and non-offensive manner; rather than being a challenge, each question focuses on looking for an
explanation. He said that this approach has been “a game changer,” “has really changed the tone of the meetings,”
and reflects the way in which owners would treat each other.
The A-Team: In addition to the opportunity to raise issues at the “all-hands meeting,” a standing group of employee
representatives meets each month. TEOCO‟s Advisory Team, simply called the A-Team, serves as an interface
between the employee owners and the leadership team. The team is comprised of 12 people: eight full-time
members and four alternates. Any employee can bring any issue to the A-Team, and the A-Team can bring any issue
they choose to the leadership of the company. Similarly, the leadership can bring any issue to the A-Team. This is
considered a mechanism to involve employees in the governance of the business; its chief function is to provide a
voice to the employee-owners. The membership rotates each year, and outgoing members choose the incoming
team. By design it is not intended to be composed of management, and the majority of the members are lower-level
employees. As well, it intentionally includes a cross-section of members: single, married, from all geographic areas
and from different levels within the organization.
Bonus And Stock Ownership
All employees receive an annual cash bonus. The program seems to function more like a traditional profit
sharing plan, as it is not individual performance-related. The bonus pool equals 15% of pre-tax and pre-bonus profit
of the company for the calendar year. The plan is designed to be entirely transparent. Each employee has a target
bonus of 8% of base salary. The eligibility for the bonus percentage increases as the employee rises to different
organizational levels, as follows:
20-40% – Executive Leadership
20% – Vice President;
16% – Senior Principal;
12% – Principal;
8% – all other employees.
Titles have no meaning at TEOCO in the traditional sense of their relationship to a level of job
responsibility. Rather, titles are determined on the basis of the employee‟s value to the company. There is a vice
president, for example, who does not manage anyone.
In addition to bonuses, employees can purchase stock or receive stock options. At the initial founding of
TEOCO in 1994, the only ownership vehicle was for employees to purchase stock outright. At the beginning of the
company, Atul offered employees a specific number of shares to purchase, and he claims that every employee took
full advantage of this opportunity. However, by 1999-2000, the value of the stock had risen to a level that Atul
explains made it difficult for employees to purchase outright, so traditional stock options were awarded, instead of
requiring employees to fully purchase the shares at the time of the grant. While acknowledging that options are
necessary, Atul strongly believes that “option holders are not the same as shareholders,” because he believes that the
mere granting of options does not create ownership.
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 25
With regard to purchasing stock, it should be noted that employees have the option of taking their annual
bonus in stock up to a maximum of 60%. The remaining 40% is intended for use in paying taxes.
The stock plan also provides for repurchase rights. If an employee terminates, the company has the right to
repurchase the stock, with two exceptions. If an employee worked for the company for at least five years and owned
the stock for a minimum of three years or if an employee worked for the company for ten years and owned the stock
for at least a year, they may retain the stock, with the rationale that since they contributed many years of service to
the success of the company, they should be able to continue to benefit. However, for others the stock is typically
repurchased by the company.
Starting in January, 2007, the company decided to replace its 401K match with an ESOP. When the ESOP
was implemented, it was both a bold and controversial decision. Atul came to the reluctant conclusion that if he
wanted to create a broad-based ownership, an ESOP was needed as an involuntary mechanism. This was a difficult
decision for him as it risked making existing employees unhappy, but he finally realized that it “was the only
method to create broad-based ownership [because] educating and cajoling and encouraging was never going to work
broadly enough.”
His struggle with the ESOP was further complicated by the fact that Philip and John were not initially
supportive. Their resistance delayed implementation for a year or two. This issue put the shared leadership model to
a test; still, he said that even though he is the CEO, “there are times I know the right answer and they just don‟t see
it, and I accept their decision.” Only when these two had fully embraced it was the ESOP adopted. In the end, ESOP
became very successful. While some employees were initially unhappy, they eventually saw how the TEOCO stock
has outperformed the market since its inception in 2007.
Despite his belief in the need for the ESOP, Atul maintains that it does not create “ownership culture” in
the same way that voluntarily investing one‟s own money to buy shares does. However, he wanted to achieve a
broad-based ownership which, in his opinion, would not have been possible otherwise. From his perspective,
ownership means wealth and the real benefit would be realized if the company was sold or went public. A successful
and attractive company, especially one in the high tech field, can expect to sell at a high multiple of the price-toearnings
ratio, which would result in an impressive return for employees, rewarding them for their exemplary
performance and company loyalty.
A Philosophy Of Total Compensation
Atul‟s philosophy of compensation is that base salaries should be in the range of 0-10% below the going
market rate. He believes that employees can accept this as a trade-off for a supportive and respectful work
environment, a sizable bonus, along with the benefits of employee ownership. He even prefers it when a new
employee takes a modest pay cut to join TEOCO, because he believes it is “a very resounding affirmation that they
believe in our company and in our core values.”
Atul: “We work our hardest if we are happier, if we enjoy our work and if we feel that we belong. That‟s why
TEOCO has chosen to be an employee owned company; you don‟t work for an employer here, you work for
yourself.”
Since every TEOCO employee owns some company stock and receives an annual bonus and generous
benefits, he feels that they are not underpaid. This full range of benefits seems to be highly valued and appreciated
by employees. Hillary, for example, said that these make it difficult for her to consider leaving to work at another
company. In comparing TEOCO‟s benefits with those her friends receive at other organizations, she is especially
appreciative; three weeks instead of two weeks of vacation, the casual work environment and the flexible schedule
were all cited.
Finally, TEOCO never misses an opportunity to recognize employees‟ commitment to the company, as
well as their performance, by distributing awards. These awards reinforce the core values of the company:
excellence, dedication and team work. It should be noted that these are peer-to-peer awards in which fellow
Journal of Business Case Studies – January/February 2012

Volume 8, Number 1
26 © 2012 The Clute Institute
employees are recognized for actions that exemplify one of the core values. [See Appendix 5 for an exhaustive list
of TEOCO benefits and awards.]
Human Resources As A Strategic Function
In addition to shared leadership and employee ownership programs, the third component of TEOCO‟s
competitive advantage is the way the senior executive team emphasizes the importance of managing TEOCO‟s main
asset: its human resources. In many organizations, Human Resources is seen as a necessary cost of doing business;
the HR function typically operates at a functional level or, at best in far fewer companies, at the executive level.8 At
TEOCO, however, Atul has elevated HR to the strategic level. While there is a dedicated human resources director,
Atul effectively serves as the organization‟s Chief Human Resources Officer.
For most organizations, the human resources policies and practices are transactional in nature. At TEOCO,
the HR function has become the principal means of cultural transmission and reinforcement. In addition, Atul
devotes strategic focus on HR because of his belief in the potential of an empowered work force. To some extent,
part of the company‟s overall strategy is working from the “bottom up.” The company relies on the abilities of its
employees to understand what the market needs and develop new products. An example of how the empowered
workforce functions at TEOCO was related by Dave [Software Architect]:
We are not structured in a way that we have a team for incubating products … it‟s through conversations with our
existing customers, generally, that the ideas for the next set of products come out.
Meanwhile, it is the shared leadership model that provides the opportunity for Atul to be so strongly and
strategically focused on HR while depending on John, Faye and others to bring in the revenues. In an organization
whose principal assets and competitive advantage are its human and intellectual capital, Atul and the shared
leadership team have recognized the strategic importance of HR to its success.
The culture at TEOCO revolves singularly around the principle of employee ownership; it is embedded in
the language, the policies and practices, the daily activities and even the rituals at TEOCO. There is a formal HR
policy manual which is kept continuously current. While the manual is comprehensive in its scope, it is somewhat
limited in specific details. Atul‟s stated philosophy of a policy manual is that “less is more,” and the existing manual
is larger than he would prefer. His rationale for not wanting to embed detailed procedures into the policy manual is
that he prefers to have as few rules as possible. He believes that every employee will always want to do what is in
the best interest of the company, and to reinforce the culture at TEOCO he believes that doing the right thing might
at times require violating a policy.
TEOCO‟s articulated core values, and the resulting organizational culture, are evident in the working
environment as well as in the HR policies and practices. The overall environment could be described as one of
collegiality and mutual respect. Atul‟s background and beliefs support his desire for peace at the office, wanting
employees to respect one another and not wanting employees to feel insecure about their jobs. Hillary validated this
perception when she said “I think the environment is one of my favorite things about TEOCO.” She claims that
Atul comes by her office every week, and she thinks it is the same for many other employees as well. She described
that “he walks around” and is very interactive. Brian independently said that “I get high-fives from Atul probably
four days a week.” He noted that many new employees, especially those who come from larger organizations, often
comment on how surprised they are that the CEO recognizes them, let alone that they see him come down to their
floor. Further, Brian mentioned that interpersonal relationships are very important at TEOCO. For many employees
some of their best friends work there, and “that‟s a really big benefit that isn‟t on any paperwork or on any contract.”
The socialization process at TEOCO begins at new employee orientation and is continuously reinforced
through the HR policies and practices. Carrie (Director of HR) believes that the principal mission of HR is to help

8 As Peter Drucker said, “All organizations now say routinely, „people are our greatest asset.‟ Yet few practice what they preach,
let alone believe it.” “The New Society of Organizations,” Harvard Business Review, Sept/Oct, 1992.
Journal of Business Case Studies – January/February 2012 Volume 8,

Number 1
© 2012 The Clute Institute 27
shape employee perceptions, especially as it relates to employee ownership, and to impress upon every employee the
core value of “driving for progress through ownership.”
The HR policies and practices, themselves, demonstrate their critical importance through the resulting work
environment. Taken together, the culture of employee ownership, combined with the strategic focus on HR, serve to
recruit, motivate and retain the TEOCO workforce.
The importance of human assets to the company‟s success is highlighted by the active involvement of its
CEO and chairman in the hiring process. He interviews every applicant before a hiring decision is made. As he says,
“Nobody gets hired without meeting me, and nobody gets hired without getting my nod.” The two areas in which he
exercises tight-fisted control are hiring and cost management. He believes he has developed unique expertise to
know “who to hire and what to look for.” His focus is not only on technical competence, but on “cultural fit” as
well. In many ways Atul could be described as the keeper of the culture. He gets so deeply involved in the hiring
process that he says he is sometimes asked if he doesn‟t have anything better to do, and he responds by saying that
there is nothing more important because the hiring process is so vital to the company‟s continued success.
TA, TTI AND THE FUTURE OF TEOCO
How will the story of TEOCO unfold with the investment by TA and the acquisition of TTI? From a purely
business perspective, these decisions were justifiably necessary and defensible. However, each of the three
distinctive characteristics of TEOCO‟s model of success, the shared leadership model, the culture of employee
ownership and the resulting HR policies and practices, are being challenged in this post-acquisition environment.
Impact On Shared Leadership
The scope of the combined enterprise presents challenges that may strain the shared leadership model.
TA‟s investment already added two influential directors to TEOCO‟s board. While directors usually have a “nose in,
hands out” approach to management, the representatives of investment funds appointed to a company‟s board tend
to be far more proactive in their “dialogues” with the senior team managing their investment. The subsequent
acquisition of TTI added a fourth executive, Eitan Naor, into the leadership mix and in the last two years, Avi
(TEOCO‟s CFO) has also become a key member of the Executive Leadership Team. Considering the distance
between TEOCO and TTI, as well as their respective nearly equal sizes, it remains to be seen how the strengths and
weaknesses of each leader will play out in the management of this new entity. For instance, Atul‟s well-recognized
skills in hiring and motivating employees on a daily basis may not prove as beneficial or essential for TTI.
Impact On The Culture Of Employee Ownership
Avi claims that the cultures have nothing in common. Yet the senior management team seems adamant that
the culture of TEOCO has not and will not change. Faye says, “I don‟t think there‟s been significant change.” Still,
she acknowledged the inevitability that an aggregated culture will arise in which each organization impacts the
other. But she adds, “I can see [Atul] sitting in that chair right now saying, „It‟s not going to happen.‟”
These statements are not surprising, as it is nearly universal that in this situation company executives
proclaim that their acquisition will not change the corporate culture. Yet some degree of change is inevitable, and
change has already occurred. These events will inevitably impact business activities and decision-making. The TTI
acquisition and the investment of TA enhance the likelihood that within the next three years TEOCO may be
acquired by a larger corporation, go public or require some other fundamental organizational realignment. Before
agreeing to the TA investment, Atul says that he went to the employees for their consent. He believes the employees
were comfortable with the transaction or he would not have done it; he says that the employees are aware of its
positive impact as well as the potential outcome.
Atul is determined to continue on the same path as before these major events. He points out that a condition
of TA‟s investment in TEOCO was that he retain the role of CEO because he is so essential to the culture of the
Journal of Business Case Studies – January/February

2012 Volume 8, Number 1
28 © 2012 The Clute Institute
company. The bank, as a condition of the loan for the purchase of TTI, had the same requirement. Meanwhile, Atul
is intent on TA receiving a good return on their investment in TEOCO.
Atul: “But I will no longer do that with a sense of obligation; I will do that with a sense of joy. You know, if you do
something out of joy, you do it differently than when you do it out of a sense of obligation.”
An immediate impact is that these two events place a strain on employee ownership. The ownership mix
shifted significantly with the TA investment. Prior to this equity transaction, Atul controlled 75% of the shares,
while employees owned 25% from all combined sources. Post-TA, the employee share was halved as they were
offered approximately 60% liquidity on their previous ownership.. Given Atul‟s ownership, and his intention to
maintain a controlling interest in the company, coupled with TA‟s sizable equity stake, an issue that arises is
whether there is any meaningful future opportunity to expand employee ownership. This is further compounded by
the near doubling of the total number of employees.
An interesting paradox, according to Atul, is that despite the lower total employee ownership, there is a
perception that the TA liquidity has strengthened the culture of ownership. He said that he “predicted that post-TA
our payroll deductions [to purchase stock] would go down. It has increased … because [the employees] see a
success story,” even though the stock purchase price has since increased. Atul attributes this pattern to the fact that
employees witnessed other employees making significant sums of money from the TA transaction. He claims that
now they truly understand and value ownership. As he says, “Once you‟ve made money out of ownership, it changes
you forever. And until you do, you don‟t believe it.” Atul felt a very deep sense of gratitude to his long-term
employees for their loyalty and sacrifice in creating value for TEOCO. The TA transaction allowed him to fulfill his
commitment that one day they would get a return on their investment of time and money into TEOCO.
While these events will inevitably bring about changes in the way the company is managed, John believes
that these will not dilute the culture. The TA investment “allowed TEOCO to preserve something that I think is
pretty important to the way we operate, which is having employee ownership in the business, and that employees
have a piece of it.” A firm believer in employee ownership, he has “worked at the world‟s largest employee-owned
company, for Telecordia, which was owned by SAIC.” He claims that TEOCO is heavily modeled after SAIC in
terms of employee ownership as a mechanism.
John: “If you‟re just paying people to show up to work and they get an annual bonus – those are two factors. But if
you introduced the third factor of employee ownership –why wouldn‟t you treat that as a means to motivate the
employees beyond just simply giving them a salary and giving them a bonus? … And that‟s what Dr. Beyster [the
founder of SAIC] figured out before anybody else figured it out.”
These perceptions by senior management were validated by Carrie, HR Manager. When asked about the
relatively small percentage of total stock owned by employees, she claims that the perception of employee
ownership continues to be important, and that all employees still have opportunity to build additional equity. She
cited, for example, that every new employee is granted a certain amount of ownership rights; they determine how
much stock they want to purchase either through payroll deduction or the internal stock market. Brian validated this
further when he said that once employees realize the benefits of being invested in the company, it changes their
perspective. Like Atul, he underlined that this reality became clear for many employees when they witnessed others
cashing out a portion of their equity with the TA investment. As he said, “Once that clicks in, it builds on it.”
It remains to be determined if the employees of TTI will become owners, and whether they will embrace
the culture of ownership. It is also uncertain how TEOCO‟s employee perceptions may change in terms of the
growing price of ownership and the potential diminished opportunity for share availability.
Impact On Human Resources As A Strategic Function
The TTI acquisition will strain Atul‟s role as the organization‟s chief human resources officer and as
someone who has been intimately and deeply involved in all HR-related decisions of the company. Dave describes
Atul‟s current role in HR activities.
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 29
Dave: “Atul is very, very, very engaged at the staffing and who‟s working on what and the hiring process. Its
personnel stuff. Personnel and costs are the two things he focuses on…it blows my mind the level of detail and
recollection he has on individual people and what‟s going on in the company.”
As the company continues to grow, and as the complexity of issues expands, it will become increasingly
difficult to maintain this level of involvement in details. A further challenge will be the issue of the standardization
and consistency of application of HR-related policies and practices. Atul has a strong aversion to formal policies,
preferring instead to have maximum flexibility and discretion in deciding HR issues.
Atul: “Life is all about making decisions and the reason management exists is to use judgment. Too many people
want to make too many rules and they don‟t want to use judgment and I feel that if judgment doesn‟t exist then
management doesn‟t have a job.”
Given the increasingly litigious and regulated work environment for organizations, such a philosophy can
create challenges for HR. When asked about Atul‟s philosophy of a policy manual where “less is more,” HR
Director Carrie admitted that there are some policies “that do cause me a little heartburn just because it‟s a little
tough to administer without having something solid.” One example she cited is that the sick leave policy is
administered on an honor system. The only way to monitor abuse, she says, is indirectly by the impact such abuse
may have on employee performance. As the company gets larger, she believes it would be easier if there were
specific guidelines to turn to in a dilemma, to be able to say, “Here‟s the policy.” Yet despite the lack of
specifications, she claims there appears to be a high degree of consistency in the administration of HR policies.
Whether HR will continue to be viewed as a strategic function and receive the executive focus that it has
had will be tested as well in the new corporate environment.
Impact On TEOCO’s Core Competencies
While Atul believes that corporate culture and philosophy have played “key roles in our success”, he says
“that without its distinctive core competencies the company could not have been successful.” Whether the core
competencies that TEOCO has built can carry over in the post acquisition environment is an unanswered question.
That TTI is similar in size to TEOCO and that they are geographically separated are two factors that will pose
challenges in transferring specialized expertise from the acquiring company to the acquired company and vice versa.
Also, given that the two companies had different cultures at the time of acquisition, additional work will have to be
done to ensure successful transference of core competencies.
CONCLUSION
The challenge for any organization with a strong culture and a loyal workforce is to sustain them and adapt
them in the face of organizational change. Over a very short period of time, TEOCO has changed its capital structure
and expanded its business. How and to what extent TEOCO manages these changes will determine whether it
maintains its competitive advantage and, finally, what will be its overall fate.
ACKNOWLEDGEMENTS
The authors would like to thank the employee owners of TEOCO who graciously shared their knowledge,
experiences and perspectives about the company. Their viewpoints were invaluable in ensuring that this case
provides a true representation of the culture and practices of the company.
AUTHOR INFORMATION
Thomas J. Calo is an Assistant Professor of Management in the Franklin P. Perdue School of Business at Salisbury
University. He earned his doctorate degree at The George Washington University in Human and Organizational
Learning. Prior to his academic career he was a senior Human Resource professional in both the private and public
sectors. He worked in London, with broad European HR responsibilities, and is currently active in teaching Human
Journal of Business Case Studies – January/February

2012 Volume 8, Number 1
30 © 2012 The Clute Institute
Resource professionals in China. Prof. Thomas Calo, Ed.D., Perdue School of Business, Salisbury University,
Salisbury, MD 21801. E-mail: tjcalo@salisbury.edu. Corresponding author.
Olivier Roche is Assistant Professor of Management and international business in the Franklin P. Perdue School of
Business at Salisbury University and Academic Director of the Corporate Governance program at McGill
University, where he received his PhD in management. He is also a graduate from Georgetown University [Law
School] and a licensed attorney in the State of New York. Prior to his academic career, he was an investment officer
at the World Bank in Washington DC and an investment banker in Tokyo and Hong Kong. Prof. Olivier Roche,
PhD, Perdue School of Business, Salisbury University, Salisbury, MD 21801. E-mail: oproche@salisbury.edu
Frank Shipper (Ph.D. Utah) is Professor of Management and Chair of Management and Marketing in the Franklin
P. Perdue School of Business at Salisbury University. His current teaching, consulting, and research interests are
managerial/leadership skills development, and employee ownership and culture. His articles have appeared in the
Academy of Management Journal, Organizational Dynamics, Leadership Quarterly, Human Relations, Academy of
Management Learning & Education, and others. He has been recognized by the Academy of Management and the
Center for Creative Leadership for his work on management development. As a consultant, he assists organizations
in developing and validating their management development processes. Prof. Frank Shipper, PhD, Perdue School of
Business, Salisbury University, Salisbury, MD 21801. E-mail: fmshipper@salisbury.edu
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 31
APPENDIX 1: BOARD OF DIRECTORS
In addition to John Devolites, Philip M. Giuntini and Atul Jain, TEOCO‟s board is composed of a majority of
outside board members with deep telecom industry expertise:
Gabriel Battista, Former Chairman, Talk America Gabe Battista formerly served as Chairman of the Board of
Directors of Talk America, where he previously served as CEO. Prior to joining Talk America in January of 1999,
Mr. Battista served as CEO of Network Solutions, Inc. Before joining Network Solutions, Mr. Battista served as
CEO, President and COO of Cable & Wireless, Inc. He also held management positions at US Sprint, GTE Telenet
and The General Electric Company. He serves as a director of Capitol College, and Systems & Computer
Technology Corporation (SCTC).


Brian J. Conway, Managing Director, TA Associates Mr. Conway heads TA Associates’ Boston office
Technology Group, focusing on recapitalizations, buyouts and minority growth investments of technology-based
growth companies. He is also a member of TA Associates’ Executive Committee. Prior to joining TA Associates,
Mr. Conway worked with Merrill Lynch in Mergers and Acquisitions and Corporate Finance. He serves on the
Board of Directors for Epic Advertising, IntraLinks, and Numara Software.
Hythem T. El-Nazer, Senior Vice President, TA Associates
Mr. El-Nazer’s focus at TA Associates is on
recapitalizations, management-led buyouts, and growth capital investments in telecommunications, media and other
technology-based services companies. Prior to joining TA Associates, Mr. El-Nazer worked with McKinsey &
Company and Donaldson, Lufkin & Jenrette – Investment Banking. He serves on the Board of Directors for
eSecLending, Radialpoint, and is Board Observer at Orascom Telecom Holding S.A.E. and Weather Investments
S.p.A. 


Robert J. Korzeniewski, Former Executive Vice President, VeriSign As VeriSign’s Executive Vice President,
Corporate Development and Strategy, Mr. Robert Korzeniewski is responsible for providing a consistent strategy
and focus for investments and merger-and-acquisition activity. Mr. Korzeniewski served from 1996-2000 as CFO of
Network Solutions, Inc., which was acquired by VeriSign in June 2000. Mr. Korzeniewski came to Network
Solutions from SAIC, where from 1987 to 1996, he held a variety of senior financial positions.
Source: TEOCO‟s website
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
32 © 2012 The Clute Institute
APPENDIX 2: INDUSTRY LANDSCAPE / MAJOR COMPETITORS
1) Least Cost Routing
————-Regions————- –Market Segments–
Vendors NA CALA EMEA APAC OVERALL Mobile PSTN
Ascade P — NP NP NP NP NP
Connective-Sol NP — — P P NP P
GCS NP — — NP NP NP NP
OrcaWave NP — P P P P NP
Prime Carrier P — P P P P P
Pulse Networks NP — — NP NP NP NP
Subex — NP — — — — —
Telarix ML P ML ML ML ML ML
2) Revenue Assurance
————-Regions————- –Market Segments–
Vendors NA CALA EMEA APAC OVERALL Mobile PSTN
Connectiva P P NP NP NP NP NP
Connectiv NP — — — P NP P
Cvidya NP — — NP — — NP
Razorsight P — — — P P P
Subex NP P ML ML ML ML ML
Qosmos P — P P P P P
Wedo NP — ML NP ML ML ML
3) Cost Management
————-Regions————- –Market Segments–
Vendors NA CALA EMEA APAC OVERALL Mobile PSTN
Connectiv P — — — P P P
Martin Dawes — — NP — P NP P
Razorsight ML — — — NP NP NP
Subex P NP ML ML ML ML ML
Note: Source TEOCO Marketing Department: NA = North America; CALA = Central America & Latin America; EMEA =
Europe, Middle East and Africa; APAC = Asia & Pacific. PSTN = Public Switched Telephone Network.
P = has a presence in the market
NP = has a notable presence in the Market
ML = is a market leader
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
© 2012 The Clute Institute 33
APPENDIX 3: TEOCO / TTI LEADERSHIP
Atul Jain, Chairman and CEO: Atul Jain founded TEOCO Corporation in 1994. Prior to starting TEOCO
Corporation, Mr. Jain was with a Silicon Valley firm called TIBCO for seven years. At TIBCO, Mr. Jain’s focus was
to work with Fortune 500 clients to design and build state-of-the-art software solutions leveraging the company’s
trademark TIB platform.
Philip M. Giuntini, Vice Chairman and President:
Philip M. Giuntini joined TEOCO in February 2000 as Vice
Chairman and President. Prior to joining TEOCO, Mr. Giuntini was President and on the Board of Directors of
American Management Systems, Inc. (AMS), a $1B international business and information technology consulting
firm headquartered in Fairfax, Virginia.
John Devolites, Vice President and General Manager:
John Devolites is currently the Vice President and
General Manager at TEOCO focusing on solutions for the communications service provider industry. Previously,
Mr. Devolites served as President of Professional Services for Telcordia. His other work experiences include
executive positions at PricewaterhouseCoopers, E-Commerce Industries, Andersen, American Management Systems
(AMS), Alexander Proudfoot PLC, and Booz Allen Hamilton.
Avi Goldstein, Chief Financial Officer (CFO):
Avi Goldstein joined TEOCO in October 2008 and was
nominated TEOCO‟s CFO on April 2009. Prior to joining TEOCO, Mr. Goldstein co-founded several startup
companies as well provided consulting services in the Telecom arena with a strong focus on Mergers and
Acquisitions. Prior to that Mr. Goldstein served as an Executive Vice President and CFO of ECtel Ltd. (NASDAQ:
ECTX) from its establishment until 2005. Mr. Goldstein led ECtel to a successful IPO as well as private placements
and M&A activities.
Eitan Naor, General Manager and CEO of TTI: Eitan Naor joined TEOCO in August 2010 and brings more than
25 years of leadership and experience in the global telecom and service assurance markets. Prior to joining TEOCO,
Mr. Naor served as President and CEO of Magic Software (NASDAQ:MGIC), where he led a significant restructure
of the business and regained focus in its worldwide network of partners, resulting in a significant increase in sales
and a return to profitability in less than one year. Mr. Naor also had great success in his other professional roles,
including President and CEO of ECTEL (NASDQ:ECTX, Division President at AMDOCS, and Vice President with
ORACLE Israel.
Source: TEOCO‟s website
Journal of Business Case Studies – January/February 2012 Volume 8, Number 1
34 © 2012 The Clute Institute
APPENDIX 4: TEOCO’S CORE VALUES & VALUE PROPOSITION
At TEOCO, The Employee-Owned Company, we are driven by our core values. These values are our
guiding principles in all business initiatives:
– Alignment with Employees, Clients and Community: We act in the best interest of our employees,
clients and community, consistently seeking partnership and mutual benefit.
– Integrity, Honesty and Respect: We value our reputation and conduct our business with integrity, honesty
and respect for each individual.
– Acting with Courage: We demonstrate a willingness to take risks, while conducting our business in a
responsible manner.
– Drive for Progress through Ownership: We are committed to a relentless pursuit of excellence, never
being satisfied with the status quo. We are a team whose sum is greater than its parts and devoted to
constant innovation.
TEOCO sets standards of excellence that others strive to emulate in our areas of focus — cost management,
routing and revenue management. TEOCO‟s value proposition is as follows:
– Innovation: TEOCO‟s committed emphasis on one industry allows us unparalleled customer focus. We
commit a significant share – up to 30% – of our annual revenues to research and development to address
your precise needs.
– Stability: TEOCO is the only firm in our industry segment that is financially sound, debt free and
employee owned. You can rest assured that we are responsive to your needs and will be there tomorrow.
– Integrity: At TEOCO, acting with integrity is one of our essential core values. We focus intensely on
developing mutually beneficial, trust-based relationships with customers and communicating honestly in
every situation.
– Deep Industry Expertise: Our team includes experienced professionals, many of whom have substantial
telecommunications experience and/or have worked directly in service provider cost management
organizations.
Source: TEOCO‟s website