Carriers will spend $33.6 billion on software to automate the acceptance, fulfillment, and billing of orders for services in 2002, according to a new report from RHK Inc. By 2005, the firm predicts, worldwide spending on so-called operational support systems (OSSs) will reach a stunning $49.6 billion -- roughly the equivalent of the entire gross national income of New Zealand in 2000.

Yes, that’s billion. B-I-L-L-I-O-N. Billion. But RHK senior analyst Patrick Kelly says that figure includes a lot more than just revenues for products.

”People assume that figure is just commercial spending, but it includes software developed in house as well as payment for outsourcing to systems integrators,” he says.

Indeed, RHK says more than half the OSS money worldwide is being spent to pay in-house programmers and developers to tweak and add to large, complicated OSSs already existing in their networks -- things like billing and customer care software and service order fulfillment code.

"People don't realize how large a market this is," says Kelly [ed.note: no kidding]. He says Verizon Communications Inc. (NYSE: VZ) alone spent $39 billion on operating and support expenses in fiscal 2000.

Commercial OSS products typically have only 60 percent of the functionality required by service providers, Kelly says. The rest needs to be created, usually in a custom manner to fit a carrier's roster of software. This assures that even as carriers reduce their staffs and turn to outsourcers for help, the tab for services associated with OSS development will stay high.

Who are the key suppliers? It depends on what segment of the OSS market one looks at, and in what part of the world. In North America, which accounts for about 42 percent of OSS sales, Telcordia Technologies Inc. continues to lead sales of service order fulfillment and assurance OSSs. Telcordia's offerings include licensed software, professional services, and a lucrative business in Osmine certifications, which guarantee that equipment from third-party vendors will work properly with the Telcordia OSSs in a carrier's network (see Telcordia's Osmine Goldmine).

"Equipment vendors aren't happy when they spend $4 million to $5 million to get Osmine certification, but if you want to play, you have to pay," says Kelly.

Indeed, Osmine certification is considered by many to be a prerequisite for dealing with the U.S. RBOCs.

Some carriers are chafing at the Telcordia bit themselves, Kelly says. But even if they'd like to get rid of some of the older Telcordia software in their networks, it's a difficult process. If a new project is introduced, it needs to be able to work with older software during transition phases. And if Telcordia doesn't stamp its approval on new programs, it can pull its support, leaving carriers in a tough position when it comes to managing their networks.

A handful of other players -- including makers of monitoring gear such as Agilent Technologies Inc. (NYSE: A) and Spirent PLC (NYSE: SPM; London: SPT), as well as fault and performance measurement vendor Micromuse Inc. (Nasdaq: MUSE) -- earn more than $100 million annually from the telco OSS business, RHK says. While there are more than 200 smaller players, the firm projects ongoing consolidation as the downturn continues.

Over the next three years, the OSS market will grow at roughly 14 percent annually, RHK says.

— Mary Jander, Senior Editor, and Stephen Saunders, Founding Editor, Light Reading
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LightMan 12/4/2012 | 10:39:34 PM
re: RHK's Fat OSS Mary,

I sat in on this web cast a couple of weeks ago and was too laughing at this projection. The numbers break down a bit and include billing, in-house dev., consulting, etc. It works out to over $13B for ISV's, if I recall.

I have the powerpoint from the webcast on my site if you want to view it. Here is the associated article:


If you don't want to register, email me and I will send it to you.
watchtower 12/4/2012 | 10:39:33 PM
re: RHK's Fat OSS LR,

Did you check to see if RHK's OSS predictions have been off before?

Who'd wager with me that Patrick Kelly, Larry Goldman, et al. have been as overzealous as their core routing counterparts at RHK.

let's see.....
optigirl 12/4/2012 | 10:39:33 PM
re: RHK's Fat OSS For offering up market hype instead of analysis. What the heck are we to make of this figure? Sure, when you add enough stuff inside the numbers can be explained but what do they really mean? Should I run out and buy stock in 3rd party developers? Should we look at these figures as a sign that things are getting better? Or is it a lame attempt by a company to cash in whatever "credibility" it has to make a few dollars.

Sort of reminds me of a little kid who used to be popular who will do whatever it takes to get people to pay attention to them long after they became irrelevant.

Wake up Wall Street.....
fiber_diet 12/4/2012 | 10:39:32 PM
re: RHK's Fat OSS Can someone tell me just one report that RHK has been accurate on? It is unforunate that many companies built and justified their existance on these reports.

optigirl 12/4/2012 | 10:39:31 PM
re: RHK's Fat OSS Hey, what gives????

Can we have an hourly submission?
chumly 12/4/2012 | 10:39:31 PM
re: RHK's Fat OSS No fiber_diet, unfortunately I can't and yes it is very unfortunate.
watchtower 12/4/2012 | 10:39:31 PM
re: RHK's Fat OSS "RHK Issues Hilarious Forecast" does a better job getting the point across. What's the point? Simple: another analyst firm has issued yet another inflated number.

Change it back?
Steeler 12/4/2012 | 10:39:30 PM
re: RHK's Fat OSS OK, so any employee who modifies a line of code for a change request has his or her salary included. Does this mean you add in anybody building departmental web pages, writing SQL queries, and Excel macros? If so, how do you estimate this? This is ridiculous!

optigirl 12/4/2012 | 10:39:29 PM
re: RHK's Fat OSS Anyone have any comments on this firm's practice of soliciting for or accepting pre-IPO stock in exchange for services? A few friends of mine around the industry have worked for companies where such payment was asked for......
jbuggy 12/4/2012 | 10:39:29 PM
re: RHK's Fat OSS OSS followers, why didn't Larry Goldman issue this report? It seems like he left Mr. Kelly holding the bag, so to speak.

Can't you hear Goldman equivocating away the absurdity of their report?

There's no doubt in my mind RHK will dismiss these criticisms--a reason why they continute to fabricate report after report with meaningless numbers and generic observations.

...my $2 cents.
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