The global operations support systems (OSS)/business support systems (BSS) sector has witnessed substantial activity over the past year. Telecom operators are replacing and/or augmenting their existing systems with more efficient OSS/BSS platforms in order to keep pace with the increasing competition and introduction of new technologies. As per industry estimates, global spending on telecom operations management systems, including OSS/BSS, and next-generation service delivery platforms was estimated at Rs 2.65 trillion in 2012, with OSS/BSS accounting for Rs 1.48 trillion.

Going forward, the segment is expected to continue on this growth momentum. As per informa telecoms & media, annual revenue for the global OSS/BSS market is likely to increase at a compound annual growth rate (CAGR) of 4.7 per cent, from $59.1 billion in 2013 to $74.5 billion in 2017.

 Overall trends

Multiple trends are currently being witnessed in the BSS sector, including transformation, third-party outsourcing and a shift towards centralised BSS. These trends are being propelled by telecom operators attempting to utilise the functionality of new networking technologies, converge fixed and mobile networks, and tackle competition posed by new players in the market.

BSS transformation is being driven by operators aiming to leverage the service layer in a more holistic manner. To this end, operators are considering making the platforms used for offering cross-service bundled deals, on-the-fly-discounting and other innovative pricing strategies completely service agnostic in order to make parameters such as bandwidth, quality of service and voice minutes fully interchangeable.

In addition, these companies are looking to integrate content sourced from third parties and support for over-the-top players with transformed BSS so that complex revenue share deals can be fulfilled and service level agreements monitored and met consistently. Several telecom operators are also aiming at improving customer experience, which requires proactive customer care messaging, notification of approaching thresholds, and highly targeted marketing and promotional offers.

Meanwhile, the OSS segment, as per Nokia Solutions and Networks, is evolving towards customer service management and self-organising networks. Traditional fault and performance management OSS have shifted from infrastructure management to service management.

Moreover, companies have invested in configuration and fulfilment management OSS in order to move towards complete automation. This is expected to enable self-organising and self-healing networks. Both OSS vendors and network equipment providers are currently offering tools to manage and optimise network performance and capacity across multiple technologies, such as long term evolution (LTE), 3G and 2G.

 Regional growth

The demand for support software varies considerably from region to region. According to informa, operators in developed markets are offering more sophisticated services to their customers by revamping their BSS stacks. In comparison, operators in less developed areas may be focusing more on gaining network efficiencies, controlling traffic and offering similar services to prepaid and post-paid customers.

For instance, Western Europe is a settled, mature market with the presence of multinational telecom service providers and a large post-paid subscriber base. Total OSS/BSS revenues in this region stood at $15,776 million in 2013, compared to $14,520 million in 2011. This is expected to reach $20,271 million by 2017. Segment-wise, revenues from the BSS segment stood at $8,512 million in 2013 and are expected to reach $12,039 million by 2017. The OSS segment generated revenues of $7,264 million in 2013, which is expected to reach $8,232 million by 2017.

The Asia-Pacific region has a mix of mature and developing markets. Total revenues from this region stood at $16,183 million in 2013, against $14,927 in 2011. Segment-wise, the OSS space generated revenues of $8,306 million, while the BSS market generated revenues of $7,877 million in 2013. This is expected to reach $9,526 million and $11,477 million respectively by 2017.

The Eastern Europe, and the Middle East and Africa regions have shown similarities in terms of their markets and customers. The Eastern Europe market generated total OSS/BSS revenues of $10,036 million in 2013 and is expected to generate $12,415 million by 2017. Segment-wise, the OSS space generated revenues of $4,579 million in 2013 and will reach $4,991 million by 2017, while the BSS space registered $5,457 million in 2013 and is expected to register $7,424 million by 2017.

Meanwhile, Latin America has been a strong growth area for infrastructure and a few OSS vendors, particularly those offering network traffic control products, are foraying into this space. The total revenue from this region stood at $3,847 million and is expected to reach $5,028 million by 2017. Segment-wise, the BSS space has generated revenues of $1,999 million and the OSS segment registered revenues of $1,848 million in 2013. These are expected to increase to $2,888 million and $2,140 million respectively by 2017.

As per the firm, the North American market with a few large mobile operators that have already planned (if not fully implemented) their OSS/BSS strategies, is unlikely to witness much growth. In terms of revenue, in 2013, the region generated a total of $4,009 million from the OSS/BSS space, with BSS accounting for $2,236 million and OSS contributing $1,772 million. This is expected to reach $2,869 million and $1,821 million respectively by 2017.

 Product-wise revenues

BSS

Revenue management products are expected to generate the maximum turnover, from $11.3 billion in 2013 to $15.6 billion in 2017. With this, the BSS segment is expected to corner a market share of 36.4 per cent by 2017. Meanwhile, service/application management is expected to grow from $9.8 billion in 2013 to $14.1 billion in 2017. Further, customer management will grow from $9.5 billion in 2013 to $13.1 billion in 2017.

 OSS

In comparison to the BSS segment, between 2013 and 2017, revenues from the OSS space are expected to witness slow growth at a CAGR of below 3 per cent. Within this space, revenues from network management products will grow from $15.7 billion in 2013 to $17.8 billion in 2017, at a CAGR of 2.5 per cent. Meanwhile, revenues from data management products will grow from $12.7 billion in 2013 to $13.9 billion in 2017, at a CAGR of 1.8 per cent.

 Business-led revenues

Business-led revenues in the OSS/BSS segment can be divided between software and services. Software includes software licensing, the sale and integration of software products with existing systems. On the other hand, services entail cloud-based OSS/BSS, managed services, stand-alone systems integration projects, consulting, training, and maintenance and upgrades.

BSS software-led revenues will witness a CAGR of 7.2 per cent and increase from $11.4 billion in 2013 to $16.2 billion in 2017, while BSS service-led revenues will increase from $19.2 billion in 2013 to $26.6 billion in 2017, at a CAGR of 6.7 per cent.

OSS software-led revenues will witness a CAGR of 2.3 per cent and increase from $16.3 billion in 2013 to $18.3 billion in 2017. Meanwhile, OSS service-led revenues will increase from $12.1 billion in 2013 to $13.4 billion in 2017, registering a CAGR of 2 per cent.

As per informa, in line with recent trends, revenues from software licensing will continue to diminish as a proportion of total OSS/BSS revenues. This decline is expected to continue beyond 2013-17, as telecom operators are considering alternative business models such as complete ownership or a hosted or cloud-based software-as-a-service model.

 Likely future trends

Wide-scale deployment of LTE networks is expected to fuel growth in the OSS/BSS segment between 2013 and 2017. Overall, the gap between OSS and BSS revenues was over $2 billion in 2013. This gap is expected to widen further between 2013 and 2017, as activity in the BSS space increases.

Revenue-wise, the OSS segment is likely to remain relatively static once the initial demand for greater data extraction stabilises. However, network optimisation solutions will have a part to play as data traffic increases. In comparison, BSS is likely to see a peak in the next two to three years as LTE uptake increases. Demand is expected to be sustained beyond 2015 by the roll-out of LTE-time division duplex, particularly in China and India.

While still a nascent business model, there will be some growth in cloud-based products, particularly BSS, among Tier II and Tier III operators. The cloud platform will represent a relatively inexpensive way of offering customers sophisticated services on a pay-as-you-go basis.