Optical provisioning software vendor Syndesis Ltd. is rumored to be in line for acquisition by Amdocs Ltd. (NYSE: DOX), which makes customer care, billing, and order management software for carriers.

The rumor highlights the changing nature of the market for provisioning software, in which "who you know" is now just as important as "what you know." Faced with an ongoing reduction in carrier capital spending, makers of provisioning software are finding their best hope of staying alive is to grab the right partner, even if it means losing independence.

Rumors of a stronger alliance between Amdocs and Syndesis have been afoot for weeks, amid speculation that Amdocs may be out to buy other companies as well -- including Metasolv Software Inc., which also makes customer care and management software. But a recent restructuring at Syndesis seems to have augmented the focus on an Amdocs/Syndesis pairing. There's even a figure of $177 million being bandied about.

Amdocs refused to comment. As for Syndesis: "The rumor doesn't surprise us. We've been working closely with Amdocs for awhile, and we have a great deal of respect for them in the marketplace," says V. J. "Ginny" Dybenko, vice president of marketing and partnerships at Syndesis (see AmDocs, Syndesis Announce Partnership).

As to the validity of the rumor, Dybenko won't confirm or deny it. But she acknowledges that Amdocs has been in acquisition mode -- as evidenced by its purchase of customer relationship management software maker Clarify earlier this month for $200 million. "We'll have to wait and see what happens over the next few months," she says.

If the deal materializes, it could be a good match for privately held Syndesis. Amdocs has long been a key player in the carrier software market, and its quarterly report in July showed earnings per share of $0.33 on revenues of $404 million, an increase of 36 percent and 43.5 percent over last year's revenues and EPS, respectively. And with a market cap of $6.44 billion and current share price of $28.95, things seem to be looking well for Amdocs.

Syndesis, meanwhile, seems to have been preening itself for a suitor, regrouping and refocusing its product line in light of the ongoing downturn in carrier capital spending.

For a couple of years, Syndesis pitched high-end, highly customized provisioning systems to OEMs and any and all carriers. It partnered with the likes of Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), Siemens AG (NYSE: SI; Frankfurt: SIE), and Sycamore Networks Inc. (Nasdaq: SCMR) to create tools aimed at helping service providers provision services based on multiple vendors' gear.

Now carriers have curtailed spending on new broadband gear. So Syndesis's ability to autodiscover equipment -- the basis for any good provisioning system -- is now being peddled as an end in itself. "We help carriers find what's actually in their networks, stranded equipment. In one case, we found OC3s the service provider didn't even know existed," Dybenko says.

It's a strategy that depends on partnerships with billing, operations support systems (OSSs), and integrators, because once the gear is found, carriers want help making the most of it. Enter Amdocs, as well as a slew of other companies, including technology consultants Accenture (NYSE: ACN) and Cap Gemini Ernst & Young.

Syndesis's new tack also has resulted in some internal changes, reflecting the company's new approach to the carrier market. In June, the company got a new CEO, John Lochow, a former executive VP at reseller Tech Data Corp. (Nasdaq/MMS: TECD). Founders Neil Baimel and Doug Chapman are taking on "more consultative" roles. And in September, the company laid off roughly 15 percent of its workforce, eliminating many jobs in the corporate side of the house.

Does Syndesis's new direction signal change in the business of provisioning software? In some ways, yes, say competitors. "What we do is one piece of the puzzle, albeit a vital one," asserts Russell Rothstein, VP of strategic development at HarmonyCom, another provisioning vendor. There's certainly a trend to combine the pieces together via strong parterships, he says.

For its part, HarmonyCom has teamed with Cisco to develop a subscriber management and provisioning package for that vendor's gear. The business it gains from the alliance should help it survive the shifts in the market.

Other provisioning vendors acknowledge that carriers are getting more demanding: "They want to see the money, they want to see exactly which manual processes will be replaced. You have to prove the case. The model is much tougher," says a spokesperson for Emperative Inc., which also offers provisioning tools for multiservice broadband nets. But he says the focus on ROI and dollars saved isn't necessarily a new one for this market sector.

The immediate issue is clear, for Syndesis at least: "We intend to survive all this," Dybenko says.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com