OSS Firm Raises $14M

OSS firm Celona Technologies Ltd. has announced a £7 million ($14 million) round of funding that will help the British software startup capitalize on the back office upgrade strategies of major carriers. (See Celona Raises £7M.)

The cash injection is notable for two reasons.

First, new funding rounds are rare these days in the OSS sector. Instead, acquisitions have dominated the telecom software sector for the past few years. (See Ericsson Buys Billing Vendor LHS, Syndesis Strikes $165M Takeover, JDSU to Acquire Casabyte, Amdocs Continues Spending Spree, and 2006 Top Ten: Big OSS Highlights.)

Second, it highlights the importance of Celona's niche market -- helping carriers to migrate their customer, network, service, and business data from multiple old operations and business systems to new, unified, harmonized back office systems. (See Celona Updates Its OSS.)

That's a tough task, especially as the data is in constant use while it's being migrated, but it's a challenge that carriers shifting to next generation networks, such as BT Group plc (NYSE: BT; London: BTA) and Telstra Corp. Ltd. (ASX: TLS; NZK: TLS), are having to meet head-on.

Celona's CEO Tony Sceales says Celona, which has BT as its initial engagement and is now in trials with "two other global telecom players," has "reached the point where we have identified a clear market need, the point where you need to invest to carry you through early stage deliveries." (See BT Uses Celona's OSS.)

Nearly all of the new round comes from Caledonia Investment plc, with a "little top up from our original investor Quester , which remains a significant investor," having stumped up about £5 million ($10 million) to date.

Sceales says the new money will help beef up Celona's headcount to around 80 by the end of the current financial year (March 2008), with bodies to be added in sales and marketing, and professional services "to support delivery capabilities."

The new money is also enough to take the company to profitability, something that should happen in the next financial year, says Sceales.

While Celona has focused on a very specific area of OSS, it's not without competition. Sceales says his company has to prove its worth against a variety of systems developed by systems integrators for specific carrier needs, as well as big data processing system vendors such as IBM Corp. (NYSE: IBM) and Informatica Corp. (Nasdaq: INFA).

He claims, though, that Celona's technology has the edge as it has been developed to enable carriers to add to their information databases during the migration process without losing any data. "Our system has bi-directional synchronization," he states, while the likes of IBM and Informatica have ETL (extract, transform, load) products "that have not been built specifically for data migration."

Larry Goldman, a founder at analyst firm OSS Observer , says Celona is in a space that's "getting a lot of interest generally," but says questions remain as to "whether service providers will want a generic data tool or a telco-specific product." He says some of the OSS sector's heavy hitters, such as Amdocs Ltd. (NYSE: DOX) and Oracle Corp. (Nasdaq: ORCL), offer data integration methodologies backed with tools for creating service catalogs and customer data repositories, while Progress Software Corp. (PSC) (Nasdaq: PRGS) also has an offering for telco-specific data migration projects.

Goldman says Celona's approach fits neatly with the way BT likes to approach its OSS migration, and adds that the British carrier also stands out as an operator that likes to deal with reactive, nimble OSS specialists for specific tasks, rather than rely only on the sector's heavy hitters. Another carrier that also favors that approach is Verizon Communications Inc. (NYSE: VZ), adds Goldman.

The OSS Observer man also notes that the high level of M&A activity in the OSS sector has lead to a low level of fresh investments. "There's more VC money available now than there are people looking for it. Many OSS specialists are looking for a sale rather than diluting their existing investments, though there are some that are trying to grow by themselves in emerging areas," and Celona could fall into that category.

While OSS investments remain a rarity, Celona is not totally on its own in having attracted fresh cash. Other telecom software companies to have received funding in recent memory are policy-based provisioning specialist Intelliden Corp. , which bagged $10 million in May, and wireless fault management startup Zenulta Ltd. , which received seed funding and is now seeking around $2 million to shore up its early engagement with Turkcell Iletisim Hizmetleri A.S. (NYSE: TKC). (See Intelliden Gets $10M and Zenulta Launches Its OSS.)

— Ray Le Maistre, International News Editor, Light Reading