Out of the shadows
01 November 2009 |
The nature of OSS and BSS vendors is changing and these changes could have an effect on carrier businesses, finds Tim Phillips
While OSS/BSS vendors have been a reliable way for carriers to simplify their business, maybe to simplify complex processes or to move staff off the balance sheet, many now go far beyond that. Innovative services, bundles or applications, outsourcing structures and ways to create partnerships have propelled OSS/BSS vendors from a simple “your mess for less” proposition into a position where they can truly be transformative.
Vendors such as Amdocs, Comverse, Telarix or Arbinet (see box “Outsourcing without lawyers” on p11) have been effective if rarely glamorous. The model of OSS/BSS outsourcing as the opportunity to give your mess to a third party who will clean it up is an alluring one, but one with limits on both sides of the deal. For the vendor, it offers the chance to use best practice to reduce cost and perhaps improve service, but little more. For the carrier, it’s a quick win, but in the long term it offers little opportunity to innovate.
It’s no surprise, then, to see the companies that have built businesses on managed services innovating with both breadth and depth. And it is no surprise that these innovations are finding an enthusiastic audience in carriers large and small.
“Carriers need to accept that outsourcing is not a sign of weakness. It could be quite proactive,” explains Camille Mendler, a vice president at Yankee Group. “The new model is the carrier saying: ‘We’re not going to be prescriptive, come up with applications for us’. The reality is that telcos have had a pretty lousy service innovation lifecycle. For developers it is 12 months from idea to launch. In some carriers it takes that long to get the business case together. Meanwhile, the market has moved on.”
All about efficiency
Shawn Zargham, CTO of Telarix, explains that the 12-year old interconnect business has added packaged applications to handle more of their customers’ systems. “Today, the name of the game is efficiency. And most carriers are looking at a way to standardise their systems. A large carrier might not want to outsource its entire voice business. It has to look at the situation and make an assessment of what’s best for the business,” he says. “Now we can work directly with carriers because we provide the complete suite of products. Trading, routing, billing and settlement has to be combined on one platform. At heart, we’re a cost management business, but a revenue generation business too.”
John Hughes, assistant vice president of marketing at Comverse Global Services, explains that while the company remains a product-driven company, the demands of innovative customers have led it into managed services. To adopt the Comverse One platform, many carriers are opting for Comverse to build, operate and then transfer it back to the operator.
“We know how to deploy what we do, we understand how to run it. It is very much up to our customer how we manage this. We base the transfer period on their needs, but six months is about right. But we have had customers at the end of six months who have told us they are not comfortable with managing it, and we will continue to manage it for them for longer,” he says. “We have seen this in the number one operator in a country as well as smaller operators.”
The risks of having a billing platform that does not work makes operators institutionally risk averse, he says, which is one reason that many IT departments outsource the job to Comverse. The other reason: they have a full dance card already.
“The bigger operations have long development and roll-out schedules and often the business will come up with new ideas, only to find out that there is not space in the calendar to implement it. That’s when we can say, we will host it.They realise there is no one on the planet that understands what we do better than us. But sometimes they work with a third party – we have different engagement models. We will build, operate and transfer to a systems integrator if that’s what the company wants.”
Comverse is even further away from the usual model of outsourcing than it seems: it doesn’t want to be in the business of cost reduction at all, Hughes says. “We are not a managed service provider for the sake of it. We run the software because our customers need it. If they want a hosted service, we will provide it, but our goal is still to make them self-sufficient.”
Interface between cultures
If Comverse is “really a product company”, then Amdocs has always had a strong managed services business for its back-office applications. Since November last year, when it purchased operator portal company Changing Worlds, it has moved to the front of house as well. Michael Lurye, director, product marketing at Amdocs Interactive, explains: “The evolution of data services is a fundamental driver. SMS or MMS is really not that different from voice from a practical standpoint, they are supplied and billed person-to-person and billed by usage, and are stable. There isn’t anything fundamentally different in the systems supporting them. But other applications are a much more fast-paced world.”
Amdocs Interactive has 58 customers for its operator customers, which personalise the services for retail customers. As such it is not just an interface between operator and customer, it becomes an aggregator of applications, and an interface between the cultures of operator and developer. “The pace of change in the developer community is two orders of magnitude faster than the carrier community. The parties we do business with have a very different culture. When you put service providers together with the developers who create those services, their expectations are pretty far apart,” Lurye explains.
Amdocs Interactive is basically managing a digital storefront for operators, who use the applications to drive revenues and attract customers. Amdocs will either select the applications for the operator, or let the operator have control, but Lurye warns: “This requires Amazon-like, iTunes skills which don’t make sense for an operator. The operator is basically in a different vertical.”
Currently the applications are overwhelmingly licensed: while Amdocs offers revenue-sharing, only recently have operators been interested in this more entrepreneurial model. But just as Amdocs has integrated customer-facing applications to its back-office abilities, Lurye reports that some operators are now adapting to a revenue-generation model that's common in the internet world.
An example of how far this process can go: “I would say that from our perspective we have seen a real sea change in the last year or 18 months. The prevailing wisdom used to be to build it, and that’s difficult for a carrier with a three- or four-year planning horizon,” says Steve Crawford, the vice president of marketing at Jamcracker. “They have found that the cost of delivery from their own service delivery platforms is a very capex-intensive model. Given today’s economic reality, that’s difficult to justify.”
Not straightforward concepts
The business support needed to offer software as a service (SaaS) is considerable: billing, purchasing, quality of service are not straightforward concepts. Carriers who want to develop SaaS offerings often find the market moving on before they can bring products to market. Jamcracker was originally developed to bring SaaS direct to business customers. It has found that carriers had access to the customers, but no ability to develop and manage pre-integrated suites of software which it markets as the Jamcracker Services Delivery Network (www.saascatalog.com).
“We allow them to aggregate the delivery of third-party services, a single point of purchase, billing and support. Three or four years ago we extended this to pre-integrate lots of different providers,” Crawford explains. “There are literally thousands of different providers. Cloud services providers are popping out of everywhere right now.”
One example has been Telstra’s T-Suite, but other operators are currently working with Jamcracker as the point of contact for what are effectively a suite of outsourced services.
While Jamcracker usually deals on the business side, Crawford admits that it sometimes causes internal friction. “At some point during the negotiation there is a bit of back-and-forth between operations and marketing and the business. Ops asks why the business is outsourcing, and says ‘tell me what you are going to need in three or four years and we will start to build it for you’. The world has changed, as has the pace of innovation.”
This isn't a business targeted at small operators: Jamcracker targets Tier 1 and 2 customers who struggle to change. “If they want to transform they need to get away from thinking about lines and calls,” Crawford says. “The large carriers have marketing talent and a long-term view. It takes a while for them to make a decision, but they’re an awesome machine when they do.”
Crawford reports a “180-degree turn” in attitudes from large carriers: perhaps an acceptance that the companies who simplified processes in the past have far more valuable when given freedom to change the processes and innovate. “Guys like Amdocs Interactive and Jamcracker are not looking at $5 billion deals, but they might have a much greater effect on that carrier’s ability to develop new revenues,” Mendler explains.