Asterisk Phone System: Riding Telecom’s First Waves

Youthful naïveté played to Mark Spencer’s advantage in 1999, when the 21-year-old, working out of his Auburn University dorm room, launched Asterisk — an open-source software-based phone system.

The willingness to spend sleepless nights perfecting codes and the confidence to ignore older naysayers motivated the computer engineering major. But knowing too much can be a drawback for a future business founder, Spencer warns now, in jest.

“Part of what I have discovered in hindsight about being a good entrepreneur is not just having the amount of knowledge you need to complete a task, but to not have so much knowledge that you find out you’re not supposed to be able to do it, ” says Spencer, now 37.

Modeled after Linux, the first open-source operating system, Asterisk was the first open-source communications software. The program, which turns a computer into a phone system, is distributed under a dual-source model of being open-source with a commercial license. That means users download Asterisk for free but must share with the public how they customized the program.

Asterisk’s free and intangible nature birthed a demand for paid products and services such as phones, training, apps, and fax and echo cancelation add-ons through the business Digium. Headquartered in Huntsville’s Cummings Research Park, Digium continues to sponsor Asterisk. Digium Chief Executive Officer Danny Windham compares Asterisk to an iconic American marketing model.

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“People who build razor blades give away the razor in order to sell the blade, ” he says.

When he was an undergrad, Spencer needed a phone system for his new technical support business but could not afford the hardware-based models offered at the time.

“I thought, you know, I’m a software developer, ” Spencer says. “I’ll just write my own. If I can figure out how to get a call into the PC, the rest is just software.”

Within a couple of weeks, the system was running online.

Asterisk’s open-source platform appeals to school systems, universities and municipalities across the country and around the world, with high talent, low-cost technical support. The city of Amsterdam runs on Asterisk and Google, the U.S. Army and the University of Pennsylvania all rely on Digium phone systems. 

In college, Spencer worked as a co-op student at Adtran, a telecom business also in Cummings Research Park. A mentor, Danny Windham, offered him a job that he politely declined, but it was not in vain.

“He was running his own company out of his dorm room and the job offer was apparently unappealing, ” Windham says now, glancing at Spencer. “So Adtran said, ‘Hey, if you move your company to Huntsville, we’ll invest in it and you can try to build a real business.’”

Spencer said yes.

Adtran’s investment, Windham adds, was a risk worth taking in a business climate on the tails of the Internet’s first bubble of success.

The Huntsville Digium office — a modular building enclosing 60, 000 square feet and housing 140 employees — is a close neighbor to Adtran. But it expands well beyond that Huntsville HQ.

Digium acquired businesses in San Diego in 2007 and Atlanta in 2013 and now has a total of 200 employees. There is an office in London, but, because of expense and untapped American markets, Windham says the company is concentrated on growing in the U.S. That said, Digium and Asterisk users and clients span the globe.

“Asterisk made its way around the world without Digium having to go there and create a market, ” Windham says. “In fact, Asterisk created a demand for Digium, and in one sense, it’s the greatest marketing tool we have, because it goes places we didn’t go first. Most companies, they have to go there and set up businesses before they start selling a product.”

Though Digium advertises online, word-of-mouth among web developers and Asterisk users is its most effective advertising tool.

“The beautiful thing about Asterisk is if you give away something valuable, people find out about it without you having to tell them, ” Windham says.

Revenue grew by just more than 40 percent in 2008, but in 2014 and previous years it remained a steady 20 percent, according to Windham.

Just as Asterisk is dual-source, it also has a dual nature.

“Open source is a very kind of emotional type thing, ” Spencer says. “On the one hand, it is very rewarding when you hear about these people who have been able to build livelihoods out of the fact that I just made this decision to make this software open source, and they have been able to build businesses and feed their families all over the world.”

Yet, open-source software requires self-policing, and delivering consequences to users who don’t play by the rules is not always practical or cost efficient. While the U.S. and Europe generally abide by and respect open-source policy, China often does not.

“Chinese culture does not value intellectual property the way the rest of the world does, ” Windham says. “They don’t really think they’re bad actors. They think intellectual property belongs to the people.”

Leeching, he added, has been a problem since Asterisk’s beginning.

The good news is that communications has been evolving the last 30 years and will likely continue to. “Communications is the thing that allows businesses to be successful, ” Windham says.

“It’s a fast-moving, unforgiving industry at this point, ” Windham says. “And if we don’t innovate and stay current, then we will be smaller five years from now.”

“Digium, like any business today, will have to continue to change to remain relevant, ” Windham says. “The communications industry is changing very quickly, and Digium is doing everything we can to change along with it and hopefully be a step ahead.”

Some of that changing vision is toward new fields. As chief technology officer, Spencer is dabbling in aviation software, prompted by his piloting hobby.

“I just try to find the areas here that are the ones where I feel like I can have the most impact in a positive way and not be disruptive, ” Spencer says.

But the company is also taking a new risk within the communications field — a gamble on a start-up within Digium called Respoke, launched in late February. The cloud-based communications platform allows website developers to easily add communication features, such as chatting, to their sites. Website masters must only know how to send commands to Respoke. Windham says Respoke is appealing to small businesses that have no tech staff.

“Today, if you go to a website and want to talk to somebody, you have to pick up a phone, ” Windham says. “Why can’t you talk to that person through your iPad?”

Digium will sustain its products and programs while building future interests, Windham says, the key to a successful business.

“Many companies get stuck in the past or current, and if you do that and the market changes drastically you might get left behind, ” Windham says. “Digium is invested in the future — evidenced in a start-up inside of Digium to go build a product that will hopefully be important to the future.”

When Digium began developing Respoke, the market was speculative, he adds. But with luck and insight into the future market, he is counting on continued success.

“Hopefully we’ve got that right blend again, ” Windham says.

Jennifer Howard and Dennis Keim are freelance contributors to Business Alabama. Howard is based in Decatur and Keim in Huntsville.

text by JENNIFER CROSSLEY HOWARD • photos by dennis keim

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