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Optical/IP

Syndesis Makes Its M&A Move

NICE, France – TeleManagement World 2005 – OSS firm Syndesis Ltd. has acquired data-integrity system specialist CoManage Corp., Light Reading has learned from several reliable industry sources.

Syndesis, which swept through here yesterday with news of a new strategy and direction, has been saying it will expand out of its traditional provisioning system domain into other areas of OSS (see Syndesis Lands Monster OSS Deal).

Yesterday, at the annual European OSS conference and exhibition, TeleManagement World, Syndesis's Chris Swan, the firm's VP of sales and strategic alliances, said that expansion will be achieved by organic growth, tightly knit partnerships, and some acquisitions, though he declined to provide further details in any of those areas.

Apparently, Syndesis is off to a roaring start as it has closed a deal with CoManage, which was due to exhibit at this show but pulled out at the last minute.

No financial details were available yet, but sources say the deal was concluded last week. CoManage is a privately held company that has raised $57 million from backers such as Goldman Sachs & Co., Highland Capital Partners, Bessemer Venture Partners, and Lucent Venture Partners Inc., among others.

Adam Boone, CoManage's senior director of marketing, declined to comment on the news, and Swan trotted out the Syndesis mantra that it can't confirm or deny anything – anything at all!

So what could Syndesis, one of the few OSS companies with annual revenues of more than $100 million, want with CoManage? In a nutshell, its system helps carriers collect and manage accurate data that is then used by OSS systems to locate network faults and provision services.

"Dirty data" is a big problem for operators, and is the main cause of provisioning failures and network engineer frustration. Various OSS industry estimates put the accuracy of essential network data in carrier back-office systems at between 40 percent and 80 percent, with anything above the latter deemed as a decent level of accuracy.

CoManage has developed a data-integrity system called TrueSource that is used by carriers such as AT&T Wireless (now part of Cingular Wireless LLC), BT Group plc (NYSE: BT; London: BTA), Sprint Corp. (NYSE: FON), and Verizon Communications Inc. (NYSE: VZ).

It also has partnerships with firms such as Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) and Accenture (see Marconi Resells CoManage).

That customer base will help Syndesis with its plans to expand its industry and geographic reach. Swan says that following its success in winning lucrative deals with Tier 1 operators such as Telecom Italia SpA (NYSE: TI), the company plans to strengthen its presence in the wireless industry, in Europe and Asia/Pacific, and expand beyond its current IP service provisioning domain.

And the CoManage system will sit neatly with Syndesis's own service discovery system, which gathers network data to determine, in real time, which services have been provided to which customers. Such a system is reliant on accurate network data.

Syndesis also hopes to expand what it sees as success with triple-play service providers, though Swan still won't confirm whether the company has won a massive deal with Verizon, a multi-year deal reported to be worth up to $40 million (see Syndesis Lauds OSS Deals).

Now, says Swan, the company plans to offer a broader range of OSS systems, extending out of the service fulfillment area and into service assurance, particularly fault management, and into the inventory management space, where data integrity is a vital component.

The Syndesis man also identifies content and network policy management as areas for expansion, but again declines to specify whether Syndesis will develop its own products in this area or look to partner or acquire its way into these niche areas.

So, is this a sign that the still overcrowded OSS sector is about to experience some much needed consolidation? Not according to OSS Observer analyst Larry Goldman.

"We're not seeing any consolidation trend in the industry. There were only 25 M&A deals in OSS in 2004, but most were spin-outs, such as ADC Telecommunications Inc. selling its software units. There are still about 400 companies in this sector," says Goldman (see ADC Sells Metrica to OSS Rival).

— Ray Le Maistre, International News Editor, Light Reading

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