Billing Software Market Worth $30B?

Who's got the fattest OSS? It looks as if the market-research firms are crawling all over each other to come up with the biggest estimate for what carriers are spending on the software they use to run their networks and bill their customers.



Just a week after RHK Inc. issued a gargantuan estimate for the operations support software (OSS) market, market-research firm Frost & Sullivan chimed in that the market for one segment of it alone (billing) will be huge -- extra huge.

"I find the potential billing software market to be $29 billion," says analyst Daniel Longfield.

Last week RHK said that sales of OSS software, including billing systems, would hit $33.6 billion this year (see RHK's Fat OSS).

Longfield says RHK's estimate could be low. His figures apply to billing alone, not counting service fulfillment and assurance.

But like his competitor, Longfield stresses that it's the market opportunity, not the market itself, that's at issue here.

Indeed, right now, Longfield says the actual take from sales of commercial billing software is a mere $5.4 billion, divided among a small group of players. The rest of the $29 billion figure he cites represents only what might be possible, given certain calculations.

Let's take Longfield's figures for commercial sales first. Here he cites a market governed by a small group of top players:

Three of these players -- Amdocs Ltd. (NYSE: DOX), Convergys Corp. (NYSE: CVG), and CSG Systems International Inc. (Nasdaq: CSGS) -- are showing solid revenue growth:

Now to the rest of Longfield's $29 billion forecast: Despite the strong commercial market for billing software, Longfield says most carriers are using homegrown billing solutions or getting integrators to set them up as an outsourced project.

Since so much development is going on in house, Longfield estimates his potential market figure by first finding the number of paying subscriber accounts for a range of carrier services worldwide. Then he multiplies that figure by an average of what several billing software vendors estimate is the cost per subscriber of furnishing software to their customers.

"If everyone were paying for billing software instead of developing it in house, the annual tab would be $29 billion," Longfield says.

Is this just pipe dreaming? Are carriers about to launch a mass migration toward a $29 billion market for billing software?

Don't scoff, says Longfield. The likelihood that carriers will start to seek commercial software solutions grows as carriers seek to push out more types of data services and bill for them, Longfield says. He sees the biggest opportunities for third-party software vendors to be in IP broadband and cable or satellite TV, where carriers haven't had years to construct complicated and entrenched OSSs of their own.

The carriers themselves are cagey on the issue of OSS spending, be it for billing or other types of applications.

Verizon Communications Inc. (NYSE: VZ), for instance, whose $38 billion expenditure on operations and support in 2001 was cited by RHK as evidence of the size of the OSS market, says it's a mistake to take that number as evidence of market size. "It includes everything we do to install and maintain our network," says a spokesperson.

Still, who knows? Today's dream may be part of tomorrow's opportunity. These days, it's nice to think so.

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