& cplSiteName &

Why Amdocs Is 'Seeing' Microsoft

Ray Le Maistre
8/14/2012
50%
50%

Technology patents are much in the news these days, usually because of a legal battle. But one recent intellectual property agreement involving Amdocs Ltd. (NYSE: DOX) and Microsoft Corp. (Nasdaq: MSFT) stands out from the crowd because it hints at what could be an important development in the Service Provider Information Technology (SPIT) sector.

The announcement, made by Microsoft, notes that the agreement includes "a license under Microsoft's patent portfolio covering Amdocs' use of Linux-based servers in its data centers." (See Microsoft, Amdocs Strike Patent Pact.)

But that's only part of it. This isn't just Amdocs licensing from Microsoft -- this is a cross-license agreement that "provides mutual access to each company's patent portfolio."

So what's that all about? Our interest was piqued further when both parties declined to answer any questions related to the agreement.

That's probably because this is more than just a cross-licensing deal: It looks more like the start of related efforts by both companies to broaden their appeal to the global communications service provider (CSP) sector, which, if they are successful, could dent Oracle Corp. (Nasdaq: ORCL).

Here's why.

Growth potential at Amdocs
The company has broadened its portfolio in recent years, making some notable acquisitions. It's best known, though, for its billing systems and services and is the market leader in this sector. Those systems, in common with most other high-volume transaction systems deployed at CSPs, run mostly on Oracle platforms -- database software often running on Oracle/Sun servers, or HP Inc. (NYSE: HPQ) servers -- notes Heavy Reading senior analyst Ari Banerjee. That's something CSPs are comfortable with, as they need their back office systems running on dependable, scalable IT technology.

Of course, that suits Amdocs, too, at least from an operational standpoint: It doesn't want to be damaged by the failure of any underlying IT systems.

But it's not that simple. Historically, Oracle was just a supplier. But now it's a rival, having acquired its way into the OSS and BSS markets during the past five years or so. Oracle Communications, the IT giant's division for the CSP market, is now one of the giants of the SPIT sector. (See Oracle/Sun Expresses Telco Ambitions, Oracle's Higher Price Lands BEA, Oracle Buys More OSS With MetaSolv, Oracle Unveils SDP Plans and Oracle Acquires Portal.)

And Oracle technology does not come cheap (with good reason -- it works). Amdocs pays a lot of cash to Oracle each year (believed to be tens of millions of dollars) in license fees and that makes its solutions more expensive.

Now, Amdocs isn't short of cash. The company, which has a current market capitalization of $5.3 billion, just announced its results for the nine months to the end of June, during which it generated revenues of more than $2.4 billion and net profits of $293.4 million. (See Amdocs Reports Fiscal Q3 Profit of $98.7M.)

That's very impressive, but investors always want more. And Amdocs, while weathering the global economic turmoil of recent years, is still very reliant on the North American market for its business (about 70 percent of revenues) and isn't showing signs of generating even better sales or margins. And while the vendor is trying to break into new markets, with a small degree of success, its new billing wins are mostly with Tier 1 operators, the ones that can afford large, relatively expensive systems.

Heavy Reading's Banerjee agrees that Amdocs needs to do something different to boost its chances with mid-sized and smaller CSPs. "Its problem has always been figuring out how to scale down to mid-tier markets. It needs to find a way to scale down and be competitive in price-sensitive markets," notes Banerjee.

That imperative might have more urgency these days as Amdocs faces growing competition, with Huawei Technologies Co. Ltd. becoming a force in the telecom software world and with the recent acquisition of Convergys by NEC Corp. (Tokyo: 6701)'s Netcracker Technology Corp. . (See NEC to Buy Convergys Unit for $449M and NetCracker Plays End-to-End Game.)

So the pressure appears to be growing for Amdocs to find another IT technology partner to help it build more affordable billing/charging solutions for a broader range of customers and to reduce its costs (or grow its margins, however you want to look at it).

So, could that partner be Microsoft? Possibly, but that would require a leap of faith for CSPs to trust their billing and charging systems to Microsoft's SQL Server database technology, which is currently perceived, in general, to be lacking the required scalability and downtime capabilities for CSP billing deployments (though Microsoft is working hard to change that perception -- see below).

So Amdocs will be looking to stress test a combination of its BSS systems with Microsoft's database technology to validate that combination for potential customers and, should it go to market with such a combination, it has a patent deal with Microsoft in place.

That, of course, could have all been covered by a unilateral patent agreement, with Amdocs licensing from Microsoft. But this is a bilateral deal, so ... What does Microsoft want with Amdocs patents?
Microsoft has been trying for years to become a major IT supplier to CSPs but hasn't had the level of success it wanted. Heavy Reading's Banerjee notes that it has had a fair degree of success in the CRM market but not much else.

These days it is more visible as a partner to CSPs, with offers such as its Office 365 service that is resold by a number of major operators and has become a solid partner with many BSS vendors, such as Redknee. (See The Other Microsoft and The Other Microsoft.)

But it's still hungry to play a greater role with Tier 1 CSPs and to do that it needs to develop products that are more carrier-grade than they are at present: Having access to Amdocs's patent portfolio will enhance its R&D processes, enabling it to build better IT systems from the ground up.

It's already making as much noise as it can about the suitability of the latest iteration of its database technology, SQL Server 2012. In May, Microsoft and Redknee, along with other partners, boasted of a performance and scalability benchmark tests "designed to simulate the requirements of a typical Tier-1 communications service provider." (See this Redknee press release.)

Working closely with Amdocs on such developments will give Microsoft more credibility with the major CSPs, believes Banerjee. And it seems likely that benchmark test results will be forthcoming from Amdocs and Microsoft in the near future.

The main unknown is whether any major CSP back office deployments of Amdocs systems running on Microsoft IT will ever happen. But if it does, this will be the patent licensing deal that set the ball rolling.

— Ray Le Maistre, International Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
CommScope – Meeting the Demands of Tomorrow's Networks

3|24|17   |     |   (0) comments


Phil Sorksy, Vice President International at CommScope, discusses addressing the challenges faced by service providers today, and as future trends emerge.
LRTV Huawei Video Resource Center
AMS-IX & Huawei's OSN 902

3|24|17   |     |   (0) comments


Huawei shows how its OSN 902 platform helps the Amsterdam Internet exchange to connect the world using multiplexing.
LRTV Huawei Video Resource Center
Huawei's Smart Energy Innovation Center

3|24|17   |     |   (0) comments


In Nuremberg, Huawei showcases its latest capabilities in the digitalization of Internet resources, network infrastructure and intelligence at its Smart Energy Innovation Center.
Valley Wonk
OFC & Hyperscale: A Good Mix?

3|24|17   |   01:50   |   (0) comments


Cloud and telecom players want different types of equipment for their networks, as the chatter at OFC reveals.
LRTV Custom TV
Etisalat on NFV Journey

3|24|17   |   10:37   |   (0) comments


Etisalat is a service provider that prides itself on bringing innovative technologies to the markets it serves. It was one of the first operators to implement 3G and leads the pack in fiber penetration. Now, Esmaeel Al Hammadi, Etisalat's SVP of Network Development, explains the operator's journey to virtualization, beginning with the network core, as well as the ...
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 3

3|22|17   |     |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting on the application of technologies and key business verticals such as transportation, smart city, manufacturing, media and finance.
LRTV Documentaries
No Regrets: Cox's Finkelstein on Fiber & More

3|22|17   |     |   (0) comments


At the Cable Next-Gen Technologies & Strategies event in Denver, Cox's Jeff Finkelstein examines the cable capex conundrum.
LRTV Documentaries
Cable Next-Gen: The 'Mile High' View From Denver

3|22|17   |   11:56   |   (0) comments


Alan Breznick kicks off the Cable Next-Gen Technologies & Strategies event in Denver, casting his thousand-yard stare over cable's current competitive landscape.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 2

3|21|17   |   2:27   |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting digital transformation solutions around IoT, smart data centers, OpenCloud ecosystem and its newly announced storage-as-a-service solution.
LRTV Custom TV
Driving Better Mobile Customer Experience While Transforming the Mobile Network

3|21|17   |   7:47   |   (0) comments


The Citrix NetScaler mobile gateway is an intelligent traffic management solution which can markedly improve the customer experience provided by mobile operators, even when traffic is encrypted. Critical network services can be consolidated and virtualized using NetScaler. Because of the unique architecture, NetScaler can be deployed on any hypervisor, on a ...
LRTV Custom TV
Mastercard: What's Next for Mobile Payments?

3|21|17   |   7:49   |   (0) comments


2017 marks the fifth consecutive year for Mastercard at Mobile World Congress and it was a great time to reflect on the amazing advances the payments industry has made as well as discuss "What's Next' in the digital commerce future. We spoke to James Anderson, executive vice president of digital payments at MasterCard, about digital wallets to tokenization to ...
LRTV Custom TV
Mastercard: 2 Billion Adults 'Trapped' in Cash Economy

3|21|17   |   03:51   |   (1) comment


Despite advances made in the last several years, two billion adults around the world are trapped in a cash economy and lack what we take for granted -- a safe way to receive, save and use money. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, chats about how Mastercard is developing new ways to ...
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
High-Band 5G: Let's Address the Range Question, Shall We?
Dan Jones, Mobile Editor, 3/21/2017
Eurobites: A1, Nokia Turn It Up to 11
Paul Rainford, Assistant Editor, Europe, 3/22/2017
FTTH No Slam Dunk for Cable
Carol Wilson, Editor-at-large, 3/23/2017
Welcome to the Wild West of Privacy
Carol Wilson, Editor-at-large, 3/24/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
At MWC 2017, Qualcomm's CTO Matt Grob talks to Light Reading's CEO and Founder Steve Saunders about the progress being made in the development of the technologies and standards that will underpin 5G.
Animals with Phones
Neither Do We Click Here
Is that a prerequisite?
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.