Billing Systems (Retail)

Interconnect Billing Systems

Revenue Assurance & Fraud Management

Mediation Systems

Customer Relationship Management (CRM)

Multivendor Element Management Systems

Middleware

Resource/Inventory Management

Data Integrity

Service Assurance – Fault Management

Service Assurance – Performance Monitoring

Service Assurance – Service Management

Service Assurance – Test & Measurement

Service Fulfillment – Activation

Service Fulfillment – Provisioning

— Ray Le Maistre is Light Reading's International Editor. His beats also include telecom software.

Next Page: The Big Picture

In late 2004, when Light Reading published its previous "Who Makes What" on the OSS market, consolidation was already a major issue. At that time, a lot of companies that had raised money during the bubble period were coming to the end of their cash reserves, while some of the bigger and/or more successful players were beefing up their capabilities as the market improved, if only slightly.

Around that time, the acquisitions with the greatest impact were the purchase of inventory management specialist Granite Systems by Telcordia Technologies Inc. for around $70 million (May 2004), and the purchase of ADC (Nasdaq: ADCT) business unit Metrica for about $40 million by wireless performance monitoring specialist WatchMark-Comnitel, which then renamed itself Vallent Corp. . (See Telcordia Shells Out at Last and ADC Sells Metrica to OSS Rival.)

A lot has happened since then, not least to those two companies. Telcordia was acquired for $1.35 billion in March 2005 by a pair of private equity firms, and is currently believed to have a virtual "For Sale" sign erected next to its corporate Christmas tree that has attracted the attention of IT giant SAP AG (NYSE/Frankfurt: SAP). (See HQ Sale Funds Telcordia Deal and Telcordia Up for Grabs Again?.)

Vallent, meanwhile, is the latest OSS firm to accept a takeover offer from another IT giant, IBM Corp. (NYSE: IBM), in a deal believed to be worth around $200 million. (See IBM Buys Another OSS Firm and IBM Buys Vallent.)

Hot Stuff
These two examples highlight the continuing hot trend of M&A activity in the OSS sector, and, in Telcordia's case, show that a broad portfolio with a highly rated inventory management system at its core is business with value.

Here are some of the other main acquisitions from the past two years that have shaped the OSS market we have today:

Oracle Buys More OSS With MetaSolv

Comverse Acquires Netonomy

Wipro Sweeps Across Europe

Argent Buys Fellow OSS Firm

Subex, Azure Merge

Oracle Acquires Portal

CSG Acquires Telution

Cramer Gets T-Soft, Nixes IPO

Actix Buys Radioplan

MDS Acquires Visual Wireless

CA Makes Wily Acquisition

AsiaInfo Acquires OSS Vendor

IBM Tiptoes to Telecom With Micromuse

FTS Buys Viziqor

Convergence Drives Billing M&A

Comptel Enhances Its OSS

Syndesis Acquires CoManage

MIND CTI Buys Sentori

Martin Dawes Buys Lavastorm

Amdocs Buys Into Cable

Ericsson Buys Mobile Data OSS Firm

Ensim Buys Telegea

Ericsson Acquires Teleca OSS

Micromuse Acquires Quallaby

Concord to Buy Aprisma for $93M

Syndesis Makes Its M&A Move

EMC 'Paying Too Much' for Smarts

OSS Firms in M&A Frenzy

In Telcordia's case, the Granite acquisition bolstered its technology and customer base, giving it a new-generation inventory product and some of the European accounts it had long craved. But it had competition, as Telcordia had to beat off billing giant Amdocs Ltd. (NYSE: DOX) to land its prey. (See Telcordia Nearly Blew Granite Deal.)

So, even as long ago as early 2004, Amdocs was looking to expand its capabilities into the network management and service fulfillment space. Having lost out on that particular deal, it turned its attention to Granite's leading rival, Cramer Systems Ltd. , and eventually stumped up a whopping $375 million for the inventory specialist. (See Amdocs Snaps Up Cramer and VCs Cash In on Cramer.)

And by the time Amdocs acquired Cramer in July 2006, the British firm was already developing enhanced service fulfillment capabilities, allowing Amdocs to tick a number of boxes to add to its existing billing and CRM strongholds. (See Amdocs Unveils New OSS, Cramer Premieres Suite, and OSS Firms Jump on IMS.)

Amdocs has also taken that acquisition strategy a step further, buying its way into the content delivery market, as well as bolstering its billing position in the cable sector and getting into China -- giving itself an even more rounded offering for service providers. (See Amdocs Buys Into Content Delivery, Amdocs Buys Into Cable, and Amdocs Buys Chinese Firm.)

Which brings us to the other major OSS trend.

One-Stop Shops and Buzzwords
The reason Amdocs wanted to spread its wings is that the world's major carriers are undergoing a massive network and back office transformation that is made simpler if they deal with as few suppliers as possible.

Whether it's hardware, software, or services, carriers want to deal with companies that can deliver a lot of what they need with the minimum of fuss and integration. Basically, if you want a piece of the big dollar action, then being big and having multiple assets that suit an NGN environment is going to help win business, now more than ever before.

Two examples of this are BT Group plc (NYSE: BT; London: BTA), which has a core set of hardware and software suppliers that are then supplemented mostly through the partners of those preferred suppliers, and Telstra Corp. Ltd. (ASX: TLS; NZK: TLS). (See Telstra Outlines Massive OSS Project, BT Awards Monster OSS Deal, Siemens Unveils 21CN Partners, Ericsson to Bring Partners to 21CN Party, and OSSs Need Convergence, Too.)

There are plenty of other examples of course -- AT&T Inc. (NYSE: T) has been at it for years. (See AT&T Needs New 'Underware,' Says CEO.)

As a result, the OSS market is converging, with a group of heavy hitters emerging as the key players. Amdocs is one, while IBM Corp. (NYSE: IBM), HP Inc. (NYSE: HPQ), Oracle Corp. (Nasdaq: ORCL), and Telcordia are the others, though there are some with broader product and service support capabilities with the muscle to influence decisions. (See LSI Annexes StoreAge.)

And what's important for these and other contenders is to not just have a menu of OSS products and services, but to show they can fit easily into the IMS (IP Multimedia Subsystem) and SDP (Service Delivery Platform) strategies of the major operators too. IMS and SDP are two of the key buzzwords that any major OSS player can't afford to leave out of their marketing presentations. (See IMS, SDP Revolutionize OSS.)

That doesn't mean there aren't still hundreds of players in the OSS market, because there are. But slowly the number is whittling down, and for those that lack the resources and relationships to find their own way to the carriers' CTO and CIO offices, forming partnerships with the major equipment, software, and integration players is vital for survival.

So who are all these companies, and what do they do? The remainder of this report addresses these questions.

Next Page: Billing Systems (Retail)

Billing is, of course, the process responsible for the production of timely and accurate bills. But billing systems also process customer payments and collections, handle customer inquiries about bills, resolve billing problems, provide information about billing status, and support pre- and post-pay services. This category includes companies that develop and supply retail billing systems, and the rating systems that enable service providers to set up tariffing rules and policies.

Next Page: Interconnect Billing Systems

These are billing systems used for local, regional, national, and international inter-carrier payments, and are very different from the retail billing systems used by carriers for their end-user customers. They are very often referred to as "settlement systems."

Next Page: Revenue Assurance & Fraud Management

These systems verify correct billing, or detect and identify the unauthorized use of service provider network assets. Some software products can assess subscriber activities and identify unusual patterns in the same way as credit card companies assess cardholder spending patterns.

Next Page: Mediation Systems

Mediation products are basically high-level transaction processing systems. They assemble information from various network elements into specific records, which are then fed into other OSS systems -- most notably billing systems and network event management systems. Mediation systems are fundamental to the success of billing systems and they are often supplied in tandem.

Next Page: Customer Relationship Management (CRM)

Formerly known as "customer care," CRM includes all the functions involved in acquiring and retaining customers, making it quite a broad church. CRM can cover a vast array of processes within a service provider (anything involving customer service and support, extending even into service assurance and marketing), with the central theme the management of the customer relationship.

Next Page: Multivendor Element Management Systems

When vendors provide equipment to service providers, they must provide some means of remotely managing that equipment once it is installed. At a minimum, equipment alarms need to be collected and cards need to be configured, so virtually every device in a public network today will intelligently communicate with what is usually a vendor-supplied UNIX-based or PC-based system. A service provider will refer to this as the vendor’s element management system (EMS).

Depending on the vendor’s choice, the EMS will communicate to a service provider's network-wide "network manager" employing various protocols and interface standards.

So each hardware manufacturer will have its own EMSs for its products, but we're not going to include all hardware vendors in this taxonomy. Instead, we're interested in vendors with off-the-shelf multivendor EMS software that replaces multiple EMSs, so reducing the number of software systems a carrier needs to use.

Next Page: Middleware

These systems are not specific to the telecom market but play an important role in managing complex OSS processes. Essential systems such as databases, messaging software, and systems management software need to be managed within a carrier's OSS environment. The software that performs this central management role, and which also manages the security of the network, is generically referred to as middleware.

Next Page: Resource/Inventory Management

Resource management systems are still often known as inventory management systems, though this tends to suggest the management of a database of physical network elements. Resource management systems can track physical inventory and "logical" inventory (though not all perform both functions). By relating equipment deployment to the services being delivered by that equipment, a system can determine the network capacity being deployed and track network usage and available capacity.

Next Page: Data Integrity

"Dirty data" is a big problem for operators, and is the main cause of provisioning failures and frustration for network engineers. Data integrity solutions perform network discovery and reconciliation functions, updating the information held about network systems, and making that information available to other back office applications. They are often supplied with network inventory management products, with which they are closely aligned.

Next Page: Service Assurance – Fault Management

These systems collect and present alarms and events by interrogating network equipment and/or element management systems; and many allow staff to log in to specific network elements to check for additional information that might be relevant to the alarm. While there are some pure fault management systems, they often perform other tasks, such as performance monitoring (for which there is a separate category).

Next Page: Service Assurance – Performance Monitoring

These systems measure and monitor particular technologies, applications, or functions of networks. For instance, in an IP network they might monitor latency and packet loss. There are systems designed specifically to monitor voice performance, and others for frame relay, ATM, and so on. There are also systems specific to wireless networks, as they are optimized to monitor, for example, the quality of the air interface or the transmission path between base stations and the backbone network.

Next Page: Service Assurance – Service Management

Using fault and performance information, these systems deliver a view of service performance based on the customer's view, rather than the network manager's view. This type of OSS requires new metrics to define levels of acceptable performance, and often entirely new monitoring statistics. These systems are used in conjunction with service-level agreements and provide the information to determine whether the SLA metrics have been met by the service provider.

Next Page: Service Assurance – Test & Measurement

These systems are closely associated with other performance management processes but differ in that they often include the significant use of hardware that is capable of launching on-demand, or active, tests that help determine network health. They also differ from the test and measurement systems used in vendor and carrier labs, which test network elements in a non-live environment. These systems are designed to be used under live, commercial network conditions. Most of the leading test and measurement packages offer varying degrees of integration of the test and measurement results with either a fault management or performance management system.

Next Page: Service Fulfillment – Activation

Service fulfillment is the combination of all of the processes involved in implementing a service order and provisioning the service to customers. Activation means "turning on," or making available, a specified service. This could involve the dispatch of engineers and the installation of equipment, but assuming equipment is installed and available, a modern activation system will interface directly with element management systems or the relevant network elements. This means that, for end-to-end service requirements across a nationwide network, an activation system may need to issue commands to ATM or circuit switches to provision circuits, to Sonet terminals to allocate bandwidth, and to a wide array of access devices, such as DSLAMs, digital loop carriers (DLCs), or cable modems.

Next Page: Service Fulfillment – Provisioning

Service fulfillment is the combination of all of the processes involved in implementing a service order and provisioning the service to customers. The provisioning function involves specifying the pieces of equipment and parts of the network that are needed for the service, and the allocation of bandwidth in the transport network. Provisioning is therefore closely tied with the engineering design function and also with resource management systems. Provisioning systems will often have a workflow engine to manage both the automated processes and the manual processes that might be necessary when manual engineering inputs are required.