The more than $1 billion India’s Reliance Communications will spend in its seven year managed services deal with Alcatel-Lucent has both positive and negative ramifications for the OSS/BSS sector. This is yet another sign of a growing trend wherein large operators look to outsource their network operations (and OSS, sometimes BSS as a result) to the world’s largest equipment manufacturers. Here are four ideas of what this trend might mean for the OSS/BSS sector in the coming years.
1) Small, best-in-class pure-plays could become more valuable. If you’re a smaller OSS or BSS vendor that’s recognized as among the best at whatever your core competency is, this trend might be good for you. Consider Ericsson’s acquisition of order management and product catalog vendor ConceptWave, executed in September last year, as evidence. The M&A teams within these big suitors seem to realize that OSS/BSS capabilities are central to their ability to win these massive, end-to-end, managed services deals. If you’re a privately owned, early- or mid-stage company, it’s an ideal situation to have more large, cash rich buyers in the market who might just bid against each other for your company.
2) The idea of buying (or licensing) OSS/BSS software might already be passé. We’ve already seen the market move away from best of breed, custom-integrated architectures. Operators seem to prefer the “one throat to choke” model. The idea of an IT department with no IT budget has surfaced. And as cloud-based solutions, or OSS/BSS offered in a SaaS model, become more prevalent, operators worry less about which software is best to bring in house. Instead, they can focus on which cloud offering combines the right functions with the best economics. In these big managed services deal, OSS/BSS is rolled up as part of the end-to-end offering. The specific components – whether on-site or provided from the cloud – become less important to the operator; the managed services provider just needs to fulfill its requirements effectively (or convince the operator it will be able to do so). There’s a heck of lot less licensing, contracting, integrating, maintenance, and concern about which “widget” is best in that scenario. The idea of conducting an exhaustive search for a specific OSS component suddenly looks like a terrible use of business resources.
3) The real value of OSS/BSS standards will play out. If functionality is most important, and uniqueness is downplayed, then standardization may increase as a requirement in OSS/BSS. A seven-year agreement looks beyond the horizon in this fast-moving industry. The managed service provider probably knows that the OSS/BSS platform it has today will need to be enhanced and upgraded over time. In order to pull that off smoothly, it makes sense to have the various components it builds, partners for, or acquires standardized and therefore easier to upgrade or replace. At the very least, this will put the OSS/BSS sector’s existing standards to the test in the coming years. Has the hard work done within the TM Forum, for example, been implemented in ways that achieve real interoperability? If we don’t know already, we are highly likely to find out.
4) BSS may become more unique, or commoditized, or both. Ericsson is, by some measures, the biggest BSS player in the world. NEC, with its NetCracker and Convergys acquisitions, is making its move. Huawei has been extremely vocal about its convergent billing offerings and has branded the heck out of itself in the OSS/BSS space. So where does that leave Amdocs, Comverse, and CSG International, among other pure OSS/BSS players who aren’t part of a massive network equipment provider?
With regard to the AlcaLu-Reliance deal, there’s a real focus on OSS capabilities, but very little chatter about any BSS components. The OSS pieces in this deal appear to be network-facing – i.e. focused on things like “real time network optimization,” “network performance,” and “service quality,” according to the report from Ray Le Maistre, editor for BillingViews partner Light Reading.
So here’s the question – Is BSS, and billing in particular, enough of a differentiating factor to warrant some uniqueness and customization? Or, will BSS ultimately become a throw-in on a network outsourcing deal as parts of the OSS stack appear to have become? I think both scenarios will play out in different circumstances. For operators, it’s a matter of matching BSS strategy to the business plan. Have a simpler plan? BSS possibly can be a widget. Have a more complex, product- and marketing-intensive plan? BSS probably needs to be at the tip of the spear.
The bottom line, however, is that there’s no reason Ericsson or NEC can’t excel as a BSS provider. But stand-alone BSS providers will have an awfully tough time competing for billion dollar, network-driven, managed services deals that may come to characterize how many large operators choose to procure both their network technologies and their OSS/BSS capabilities..