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Networks & Infrastructure
OSS: A Shifting Mindset
Telecom Software Vendors Make Their Own Transformation
by Keith Willetts, Chairman, TeleManagement Forum
Anyone who has heard me speak or has read any of my articles will know
that I spend a lot of time talking to service providers about how they
must shift their business mindset in this era of extreme competition. I tell
them that survival will depend on their ability to automate their business
operations to drive out cost and drive in innovation and agility.
But getting to a “lean” model for telecom operators also depends on the
software suppliers and systems integrators to supply the software to get
the operators where they need to go.
The telecom software supply area, particularly OSS, has historically been
very fragmented. If you look at numbers supplied by research firm OSS
Observer, they show that Amdocs has the biggest share of the pie with
13 percent of the global OSS market. But then the numbers rapidly drop,
and we see a lot of players with 1 percent or 2 percent market share,
and fully 50 percent of the OSS software suppliers have less than 1
percent market share. If the goal is end-to-end process automation, the
starting point of a large number of small software players is a big
challenge.
Along with this fragmentation comes the traditional operator buying
model for systems. Often how to operate a piece of technology is an
afterthought in most operators’ RFP processes. Second, systems usually
have to be customized to reflect that operator’s way of doing business.
Third, most systems are bought within one of the numerous
telecom ‘stove-pipe’ departments, meaning that there is huge diversity
of systems, technologies and approaches if you look across the
enterprise as a whole and try to automate it.
This fragmentation isn’t good news for anybody – operators find end-to-
end integration and automation almost impossible, but the suppliers don’t
get very fat on it either. Unlike Microsoft, which can churn out several
hundred million copies of the same software, the OSS/BSS guys turn out
very low volumes of software, each of which has to be customized. An
operator might end up spending $5 on customizing, configuring and
integrating software for every dollar spent on the actual software
license.
While that may sound OK, professional services margins for that
customization are often at a much lower margin than software licenses.
The reason Bill Gates is the richest person in the world is because lots
and lots of people buy his software at $200 a pop when it costs just
pennies to produce the copies. Systems integrators may be thought to
like this fragmented model, but the days when they got paid on a time
and materials basis are long gone – they are on fixed-price delivery
contracts, and that means that they make more money the easier the
integration task is.
Operators Influencing Software Changes
Over the past decade, we’ve started seeing some attempts at
consolidation of this fragmented OSS/BSS market. In the late 1990’s, it
was the equipment vendors like Lucent, Nortel and others who set the
pace. That pretty much ended in tears, and most of those acquisitions
were divested at huge losses. Recently we’ve seen a new consolidation
wave with software players like Amdocs, IBM and Oracle recently making
major acquisitions. But does this solve the problem? Do we just end up
with a myriad of fragmented systems sold by fewer companies? And the
appetite for VCs to back new software start-ups seems to be
accelerating, not diminishing.
But I think we are, at last, starting to see that the buyers are waking up
and realizing that fragmentation makes no sense and continual
customization makes even less sense. Because you don’t just customize
software once – every new release from the supplier needs to be given
the same costly customization and re-integration treatment, meaning
that the whole life costs of the software are many times the original
purchase price.
Operators wanted to buy custom software to fit their processes because
they have been doing things ‘their way’ for decades. But over the past
few years we’ve started to see a revolution in operators moving towards
a more systematized and standardized way of running their business
using the TeleManagement Forum’s eTOM model. Unlike a ‘hard’ standard,
like that say for IP, eTOM defines a way of doing business and often
doesn’t seem like a standard at all to some people. But only by
normalizing operator business processes can there ever be a chance of
standardizing the fragmented systems market and allowing a real
commercial off-the-shelf software market to flourish.
But, we’re talking about a big industry and it’s like turning an oil tanker
around. It’s tough trying to get the operators to really follow through
and then getting the suppliers to fall behind them so that we move to a
smaller number of bigger players that have better integration and more
configurable software. I think we’re looking at a 5-10 year evolution
rather than a quick revolution.
The good news is that we’ve been putting even more of the required
building blocks in place. We have the standardized process model with
eTOM, and we have a standardized information framework in Shared
Information and Data Model (SID). We have a common way of
categorizing the various software applications that an operator needs
called the Telecom Applications Map (TAM), and we are busy updating
this to include all of the service creation and delivery platform software
being generated via the Next Generation Networks (NGN) and IP
Multimedia Subsystem (IMS) standards.
Perhaps the most important move we have made recently is to roll out
an online software library of standardized plugs and sockets for fitting
onto OSS and BSS software applications via our Prosspero program.
Prosspero makes available free of charge the APIs and interfaces needed
to achieve interoperability between specific systems that make up an
operators software estate. This is accompanied by test tools, reference
software, implementation experience, cookbooks and online support. In
doing so, our aim is to alter the economics of making standardized OSS
and BSS software and create an ecosystem where buyers have an
economic incentive to standardized software and suppliers have an
incentive to sell it.
To get mass-market adoption, we have to get the buyer-seller flywheel
turning. And that starts with a small number of ‘thought leader’ operators
adopting the lean and Prosspero based approaches. According to OSS
Observer, the top 10 providers account for 60-70 percent of the capital
spend in the telecom industry—each of these operators is not exactly
running at peak efficiency when it comes to purchasing back-office
software.
Some have moved to a more strategic buying approach, but many are
still in the ‘stove pipe’ era. If you take 100 service providers with
revenues of over $1 billion, you’ll see that each has 2 or 3 major
operating arms—such as wireline and wireless. Each one of those
divisions has maybe 10 lines of business, and each business probably has
10 or 20 major product groups.
So once you get to the bottom of this pyramid, you have many
thousands of individual operational departments, each of which is an
OSS/BSS systems buyer. So instead of 100 customers, the software
vendors potentially are looking at 10,000!
So the TeleManagement Forum’s task is not just about technology and
standards. It’s as much about economics and persuading people that
there is a better way of doing business than in the past. The winning
formula is for operators to see OSS and BSS as strategic and buy
according to an enterprise-wide architecture and frameworks (eTOM,
SID, TAM), not fragmenting it at the departmental level; to buy
commercial-off-the-shelf products that are configured to their needs,
not customized; for suppliers to build their products in line with TM
Forum frameworks and support Prosspero plug-and-play APIs as standard
features of those products.
In the end, it’s economics that always wins. The underlying economics
for a more standardized, simpler, cheaper and functionally useful systems
approach is so overwhelming that we will see this change occurring over
the coming years. Those suppliers that get in the vanguard of that
change will be those that reap the benefits.
As operator buying behavior changes and suppliers change with that,
we’ll see a lot of costs and inefficiencies taken out of the telecom
industry. If you can automate processes end–to-end and get rid of the
gross inefficiency that’s plagued the industry for decades; if you can
introduce new services in days rather than months; if at the same time
you can slash your IT integration and maintenance costs; and if
suppliers can make better margins by building once and selling many
times, it’s a win-win situation for everyone.
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