Carriers: Get on Your OSS!

Mobile operators are set to award contracts to OSS vendors before the end of 2002 as they seek to meet the QOS (quality of service) demands of their corporate customers, according to niche service assurance player Comnitel Technologies.

The Irish firm has just raised €10 million in further financing to continue its product development and marketing as operators evaluate the systems on offer (see Comnitel Raises €10M).

"Before the end of this year the Tier 1 mobile operators in Europe will be awarding contracts for systems that allow them to offer service-level agreements to their corporate customers," Comnitel's CEO Kieran Moynihan tells Unstrung.

He says Europe's operators had regarded GPRS as just an interim solution they wouldn't need to supplement, believing that 3G would be ready in time to meet business users' needs. Now the carriers are faced with the reality of 3G delays, as well as 2G systems creaking at the seams, and need to invest in the GSM and GPRS networks that are already up and running, adds Moynihan.

In his experience, Europe's major operators have only recently rid themselves of an arrogant approach that made them think their networks would continue to be never-ending cash cows. "The operators thought that simply offering a GPRS network was enough to satisfy enterprise users, but these users want the same kind of service-level agreements for wireless services that they get from their fixed providers," says Moynihan. "So the carriers issued RFPs in April, May, and June and are set to make their choices in the fourth quarter of this year. Obviously we are hoping that we will win some deals, but it's going to be tough."

He also believes that the pressing need to provide such quality assurance, coupled with resource cuts within the operators, will mean the chosen systems will be deployed immediately without any trials.

Comnitel, which was formed in 1998, claims its ServiceAssure system can provide mobile operators the service-level management capabilities and service quality reporting they need to be able to offer corporate customers SLAs for mobile data access. And Moynihan claims his company's product will work with all flavors of mobile network -- GSM, GPRS, CDMA and all types of 3G systems.

The completion of its third round of funding shows the OSS vendor has persuaded its backers that it stands a good chance of winning at least some of those contracts. Its investors are HG Capital, Hamburgische Landesbank (the State Bank of Hamburg in Germany), SAIC Venture Capital Corp., and Enterprise Ireland.

Moynihan knows his small startup, with 85 staff, has its work cut out to persuade the "household name operators" to adopt its system. Comnitel's competitors for the upcoming contracts include Nokia Corp. (NYSE: NOK), Hewlett-Packard Co. (NYSE: HPQ) ("the part of HP that used to be Compaq Telecom"), Agilent Technologies Inc. (NYSE: A), and Telcordia Technologies Inc., which is owned by one of Comnitel's backers, Science Applications International Corp. (SAIC).

An average deployment for a single operator in one country would cost the operator between €1.5 million and €2.5 million, Moynihan estimates.

But how much business is there to win? And are the operators really under pressure from the corporates? Mark Basham, director, OSS, at consultancy RHK Inc. is not convinced the carriers are under the gun. "Certainly the operators will be investing in systems that give them SLA-type abilities, but how much they invest is another matter." They have an ever-shrinking pot of money to invest in their systems, he says, and have other, more pressing concerns to deal with. "The operators will be spending more on systems that help them to monitor the quality of their network more generally, rather than the more specific products that companies like Comnitel have to offer. The service providers want to be sure that all their customers can get connections and make calls as much as possible. GPRS networks are still really getting off the ground and I'm not sure there is that much demand for SLAs from business users just yet."

Having said that, Basham believes there is some business to be won in this more niche area, even if just for pilot schemes, and that Comnitel has good products and a strong team. "Comnitel is a company to watch. It is focused and has done well to raise that much more money. What it really needs is some contracts under its belt. That's important simply from a reference point of view -- the revenues would be a nice bonus. A startup like Comnitel needs some luck and some friends too, as they are up against some serious competition. The larger companies might not have as good a product for delivering SLAs, but the likes of Compaq Telecom have already made serious inroads and forged relationships with the big operators like Vodafone Group plc (NYSE: VOD), and this is a market that is risk-averse at the moment. Those are tough conditions for a startup."

But Moynihan believes he has some aces up his sleeve that will help him bag some orders, and hopes the operators will remember he has been "evangelizing about mobile service management for three years."

"Having the financial backing is a major plus. That's a great help when you're in front of the Tier 1 players. They always want to know if you'll be around in a few years' time, and this new funding takes that question off the table. Our real strength is in the work we have already done on the algorithms used in our products that have been developed by our team of mobile specialists. This means that our system can be deployed and used in maybe two to three months instead of eight or nine. There's no such thing as an out-of-the-box system in the OSS world. It's not possible. But the work our people have done in the past three years makes it easier to integrate into an existing mobile system," says Moynihan.

The new cash injection, coupled with "a conservative estimate of a few contract successes" will be "sufficient to get us through the next couple of years." The company is also seeking channel partners and opportunities to make its solutions available to OEMs, and will need a strong channel partner if it is to even hope of making any headway with North American operators, which, claims Moynihan, are also looking to deliver SLAs to their enterprise customers.

— Ray Le Maistre, European Editor, Unstrung
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