What exactly were they thinking at Schema, when they planned to develop applications for missiles and loading cargo on ships six years ago? Company founder Yuval Davidov could have still been Zionistically motivated, blind to economic feasibility, or perhaps simply as inexperienced as quite a few other Israeli entrepreneurs back then.

Davidov was saved by the need for money. He approached the Gemini fund and Eurofund, where he was more or less told, "Great technology, but with the applications you have in mind, you won`t get very far. If, on the other hand, you want to direct the technology to the communications sector, we have a deal".

What exactly did Davidov have? He brought with him from the Weizmann Institute a technology with optimization capability, designed to solve complex problems. The technology is based on the formula of evolution, the very same jungle theory about the survival of the fittest. How does this relate to computer solutions?

In some cases, if you increase the number of factors involved in problems, options for solving them increase exponentially. For example, take the problem of the traveling salesman trying to find the ideal travel route between target cities from the time-efficiency aspect. If you try to solve his problem using five destinations, the solution will be completely different to the solution involving 50 or 500 destinations. The number of options increases, and the optimal solution becomes complex. Should you try to solve this problem in conventional ways, the computer is likely to crash at an early stage.

How then can the problem be solved? Through compromise. The genetic algorithms do not work for all options. They rule out solutions which don`t develop well, and can therefore reach the solution more swiftly. Incidentally, the human mind works in similar fashion. The method, however, has its disadvantages. Company general manager Dr. Yosi Ben-Dov says, "Certain solutions are likely to be overlooked." Nevertheless, for the company`s current customers, the telecoms, it`s more important to reach an optimal solution within a reasonable time frame, and using reasonable computer resources, than to find the theoretically best solution.

Schema deals with one of cellular operators` biggest problems: optimization of their most expensive resource - frequencies. To illustrate how cost-intensive this resource is, Partner paid the State $400 million for ten megahertz. Frequencies are not only expensive, they`re limited in capacity. Even with all the money in the world, there is a limit to the number of frequencies that can be allocated to cellular operators.

This resource must therefore be managed efficiently. This means that an optimal amount of cellular traffic with maximum quality needs to be transmitted on existing infrastructure. It`s much more complex than the impression it gives, since calls can be disconnected or lines unobtainable if 200 different cell phones are using the same frequency at a given time. Schema`s system, installed at the customer, takes samples of the cellular operators "fleet" in what is known as "drive-tests" and analyses them.

"Globes": Isn`t done in real-time?

Ben-Dov "No. It used to take three months to change frequencies, whereas now it`s a matter of hours. We call this `near real-time`."

Will your product ever work in real-time? It would appear to be a tremendous advantage.

"No, it won`t work in real-time, but it will be possible to allocate more frequencies in a certain place, at a certain time, if required."

How do you price all this?

"We want to take a percentage of the saving incurred by using our product. Bell Atlantic, however, still insists on proof. The company installed our software in their five major cities, which means a potential of millions of dollars."

Schema has sizable rivals: Nortel, Lucent and Ericsson are some of them. These competitors are not very keen on Schema. Ben-Dov: "They don`t like us because they sell equipment and they want to sella great deal of it. We enable customers to exploit existing equipment to the optimum." In the future, the company plans to utilize the technology in other wireless areas, such as WLL (wireless local loop).

It`s strange that you chose to penetrate the US market, while the most advanced market is in Europe.

"That is precisely the reason. The Americans need more assistance."

Your system requires intensive maintenance and presence on your part. It`s expensive to maintain a team of such experts.

"Yes, we send out personnel to operate the systems at the customer`s location. However, we also charge for additional services. This is a vital component in our business model: support services alongside sales of software licenses."

In its initial financing round (excluding the seed stage), Schema raised $2 million from Eurofund and the Gemini fund. In December 1999, the company raised $10 million from Gemini, Walden Capital, Eurofund and Challenge Fund (Etgar).

You have talked for an hour without mentioning the buzz word `bandwidth`. In fact, Schema expands cellular operators` bandwidth.

"We don`t deal in buzz words. We increase the capacity of any given bandwidth. I prefer to say we provide for more traffic on any given bandwidth."

You`re ignoring a very basic buzz word for your market.

"It`s true. People always look for buzz words."



Business Card

Name: Schema
Founded: 1994
Product: Optimization system for wireless networks
Employees: 45
Market: Cellular operators
Customers: Pele-Phone, Cellcom, Bell Atlantic Mobile
Competition: Nortel, Lucent, Ericsson
Ownership: Yuval Davidov (10%), employees (20%), Etgar (14%), Walden (10%), Eurofund (10%), Gemini (15%), private investors (9%).

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Credit: Published by Israel`s Business Arena on 5 June, 2000