Ericsson's acquisition of MetraTech, announced Tuesday, is all about strengthening its billing support -- but not for its existing telecom OSS/BSS services. Rather, it's looking to break into new markets such as transport, utilities, and the Internet of Things (IoT), and to support its telco customers that are vying to do the same. (See Ericsson Acquires Billing Vendor MetraTech.)
Ericsson AB (Nasdaq: ERIC) is already a big name in telco OSS/BSS with a converged platform that supports both prepaid and postpaid billing, but where it has yet to make inroads thus far is in the burgeoning IoT market. That's where MetraTech Corp. comes into play.
The Boston-based billing specialist was formed in 1998 to provide metadata-based billing, commerce, and settlement platforms for a broad range of industries spanning 150 countries. The company, which raised $30 million in 2012, counts telcos such as Verizon Communications Inc. (NYSE: VZ) and BT Group plc (NYSE: BT; London: BTA) amongst its customer base, but it has had the most success in multi-vertical industries.
"This is not a telecom play; this is a multi-vertical play going forward," says Heavy Reading analyst Ari Banerjee. "It's helping Ericsson's service provider customers achieve that goal of being multi-vertical and becoming an Internet of Things player...This is how Ericsson is enabling the whole value chain."
For its part, Ericsson says MetraTech will deepen its expertise in billing as well as expand its geographic presence in the US. The Swedish giant has been talking up a "Networked Society" comprising countless connected devices, all of which will require new, personalized business models, often involving multiple partners. They don't follow the traditional telecom data models, and Banerjee says Ericsson needed a platform that was much more agile and cost effective.
"There's huge growth potential, but the revenue is minimal in M2M," he says, adding that revenues are only around 2 to 3% today. "When it comes to buying software systems to support that business model, [operators] won't put in a lot of money. They need something targeted towards the need, but also cost effective."
Ericsson has been building up its OSS/BSS business through M&A for awhile now. During the past few years it has acquired Telcordia and ConceptWave to help it become one of the biggest SPIT vendors in the industry. It has since launched a cloud OSS to support operator virtualization strategies and inked billing deals with carriers such as T-Mobile US Inc. . IoT represents the next step. (See Ericsson Launches Cloud OSS, T-Mobile Swaps Out Amdocs BSS for Ericsson , Ericsson Buys More OSS Smarts, and Leading Lights Finalists 2014: Outstanding OSS/BSS Vendor.)
The financial terms of the acquisition were not announced, but all 140 of MetraTech's employees and contractors will be joining Ericsson when the deal closes, expected before the end of the third quarter this year.
— Sarah Reedy, Senior Editor, Light Reading