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September 26, 2012
Ericsson AB (Nasdaq: ERIC) has dipped into its M&A war-chest yet again to buy Service Provider Information Technology (SPIT) specialist ConceptWave Software Inc. for an undisclosed cash sum. (See Ericsson Acquires ConceptWave.)
The move comes nine months after the Swedish giant closed the US$1.15 billion acquisition of Telcordia, which made it one of the world's major suppliers of back office software systems and services to communications service providers (CSPs). (See Say Goodbye to Telcordia.) Toronto-based ConceptWave, which has 170 staff and a customer list that includes AT&T Inc. (NYSE: T), Belgacom SA (Euronext: BELG), Comcast Corp. (Nasdaq: CMCSA, CMCSK), Level 3 Communications Inc. (NYSE: LVLT), Swisscom AG (NYSE: SCM) and Time Warner Cable Inc. (NYSE: TWC), specializes in order management (handling the multiple processes involved in executing complex customer orders) and product catalog management (defining all the components of a service/application to enable new product creation, campaign management and product lifecycle management). (See The Order Management Revolution and ConceptWave Gets Certified.)
But hold on -- didn't Ericsson get order management capabilities as part of the Telcordia acquisition? Well, yes, but ConceptWave's systems are more developed and refined: Ericsson says ConceptWave will enable it to help its CSP customers develop more personalized services.
And it's worth noting that Telcordia and ConceptWave have a historical relationship, as Telcordia has, in the past at least, rebadged and resold ConceptWave's order management systems, as this press release from 2003 shows.
Why this matters
Ericsson is looking to position itself as an indispensable supplier of back office software systems and tools to CSPs as all manner of SPIT capabilities become increasingly important to CSP transformation, service development and differentiation strategies, and the ConceptWave acquisition is the latest example of how the giant vendor is investing in that focus. (See Ericsson's SPIT Vision and The SPIT Manifesto 2.0.)
And, according to one industry analyst, it's a deal that makes a lot of sense. "The acquisition of ConceptWave fills another large gap in Ericsson's OSS/BSS portfolio that wasn't entirely covered by Telcordia," notes Heavy Reading senior analyst Caroline Chappell in an email. "Telcordia was working on a service catalog capability when it was acquired by Ericsson," so this appears to be a case of buying rather than the longer process of building in-house, notes the analyst.
"Heavy Reading's 2011 study of the plans of 130 service provider respondents worldwide for cloud services highlighted the requirement for a service catalog that can help service providers manage and co-ordinate the dynamic provisioning of multiple types of (cloud-based) services. Such a capability is critical, not only to the ability to play in the fast-moving world of the cloud but also to operational improvement programs that affect customer experience, such as right first time fulfillment."Chappell adds: "This acquisition is yet another example of the large equipment players," such as NEC Corp. (Tokyo: 6701), "seeing the SPIT world as strategic, so they are assembling a complete suite of BSS/OSS assets, both for their own use as managed services providers -- managed OSS/BSS, managed M2M, managed cloud services -- and to offer to service provider customers." (See NEC to Buy Convergys Unit for $449M and NEC Shells Out $300M for NetCracker.)
She continues: "Heavy Reading is seeing growing evidence of service provider intentions to transform their current SPIT estates to support customer experience initiatives and/or moves into new market areas such as cloud and M2M.
"This represents a major opportunity for the network equipment suppliers as such transformation programs typically accompany network technology changes -- so a trigger for Ericsson's customers would be the move to LTE and EPC [evolved packet core]. As a result of this acquisition, Ericsson can boast a more extensive OSS/BSS stack, although it does face another integration exercise and the market is still waiting for firm details of its integration with Telcordia," concludes Chappell.
SPIT Bits: M&A Matters
SPIT Bits: M&A Mayhem
NetCracker's Suite Spot
Ericsson: We're No. 2 in OSS
Euronews: Ericsson Seals Telcordia Deal
Why Ericsson Wants Telcordia
Ericsson + Telcordia: What the Analysts Say
Innovation Osmosis & the Return of D&R
OSS 2.0: Telcos Need to Expose Themselves
— Ray Le Maistre, International Managing Editor, Light Reading
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