As the world economy comes out of the deep economic recession, the telecom sector, which had bucked the downward trend and shown strong resilience even during the recession, is back on a strong growth path with the launch of new technologies and applications, and migration to all-IP networks. With a substantial increase in data traffic in global markets especially emerging markets like China and India, the systems need to be continuously modified and upgraded to handle such content.

Moreover, the advent of technologies such as 3G, long term evolution and Wi-Max has increased the complexity in operations and billing. Consequently, over the past few years, global communication service providers (CSPs) have realised that OSS/BSS are a “part of the service” and not a mere back-end support function. Today, complex customer-focused services have gained importance, especially those involving mobile data integration with voice capabilities. Telecom operators are struggling to offer real-time services and counter issues like falling ARPUs and increased competition.

Driven by the need to improve operational efficiency and the increasing scale of operations, telecom companies are now stepping up their investments in expanding and upgrading their OSS/BSS set-ups. CSPs, both large and small, are creating a market for innovative OSS/BSS products, and are open to new ideas and alternative approaches for improving operations and monetising networks. The ability of CSPs to use innovative technologies, processes and OSS/BSS in order to understand and deliver customer-focused products and services is essential to maintain relevance with customers and profitability in today’s competitive market. The role of CSPs as a bit pipe provider is also changing. OSS/BSS strategies must keep pace with the improvements in network architecture for providing next-generation services.

The operators’ bullishness about this segment is reflected by its market size. The consolidated revenue of the global OSS/BSS market has been growing at a compound annual growth rate of 6-7 per cent since 2004 and stood at $15-$15.5 billion in 2008. However, in 2009, the market was affected by the economic downturn. Nonetheless, the OSS/BSS market has received a boost with the rollout of next-generation networks and increasing investment in the segment post the global economic slowdown. In terms of revenues, the global OSS/BSS market is estimated to reach $21-$22 billion by 2013.

While the sector will witness increased investments in the Asia-Pacific region, driven primarily by network rollouts, North America will continue to be the largest market for OSS/BSS solutions. Globally, while both OSS and BSS solutions would witness healthy growth, OSS functions are expected to grow faster than BSS.

Key trends 

While operators in the mature and developed markets started making investments in this segment as early as 2008, emerging and high-growth markets like China and India are yet to catch up.

Operators in Europe invested significantly in the OSS/BSS sector in 2008. There have been investments in switching from legacy to next-generation networks over the past four-five years as carriers have been implementing back-office upgradation programmes. For instance, Comverse completed a replacement of multiple OSS/BSS for Russian carrier MTS which involved the migration of 33 million customers in just eight days. In addition, there has been an increase in the number of products and services related to voice over internet protocol, internet protocol TV and video. China is also likely to witness huge investments in this segment. The Chinese government’s reorganisation of the telecom sector 18 months ago, along with the distribution of 3G licences in January 2009, has created a strong demand for complex billing and revenue assurance systems, customer relationship management (CRM), service fulfilment and delivery, greater OSS/BSS integration as well as tighter control over network resources.

Chinese vendor AsiaInfo has signed contracts with all of the country’s parent network operators. The company has started implementing billing and CRM software solutions in 11 provinces for China Mobile. The vendor is also providing OSS/BSS support for the TD-SCDMA trials and rollouts. However, the presence of only three operators in the Chinese market  presents risks for vendors like AsiaInfo, as any slowdown in investment by one or more operators could create serious problems for a vendor catering to such a small customer base.

As far as the competitive landscape of the sector is concerned, IBM, Oracle, Telcordia and Amdocs dominate the OSS/BSS market. However, this market  comprising over 80 vendors, is fragmented, and has been consolidating over the past few years. The key takeover deals in the sector over the past two-three years include Comptel’s acquisition of Axiom Systems, Convergys’s acquisition of Ceon and Amdocs’s acquisition of Jacobs Rimell.  Equipment vendors are also entering the industry. For example, hardware major NEC acquired Netcracker for about $300 million in 2008 and Alcatel-Lucent acquired service management software vendor Motive. Alcatel-Lucent has also signed a non-exclusive agreement with Convergys to integrate its Infinisys billing system.

The industry has witnessed an increasing number of mergers and acquisitions after the economic slowdown in 2008. One such example has been IBM’s takeover of OSS specialists Intelliden and Netezza. More recently, US-based CSG acquired UK-based billing company Intec for $376 million, thereby establishing the world’s second largest BSS provider after Amdocs. CSG’s outsourcing model served the market well under a post-paid subscription system. However, with the advent of always-on, always-available real-time services, CSG could no longer sustain this model as its clients needed more direct access to their customer data in real time. According to Frost & Sullivan, further consolidation is expected over the next year.

Another trend is that of streamlining the number of systems in the back office as this reduces the operators’ integration burden, and consequently, the opex for system integration. A more realistic outcome is that carriers sectionalise their OSS/BSS, taking a portfolio of systems from a single vendor that may address an entire function such as revenue management, rating or billing.

As operators move towards 3G, and ultimately 4G, the pricing plans based on volume, speed and application will become more complex and necessitate significant investments in billing functions as tiered pricing becomes the norm. While the current billing functions would suffice for now, these are not equipped to handle dynamic bandwidth services. In order to launch innovative packages that are more usage based and ensure their success, it is important that the three key functions of charging, policy management and policy enforcement work in tandem and in a real-time loop. To influence revenues and customer behaviour through tiered services, operators have to determine the metrics related to network performance and latency. However, billing cannot help determine these metrics as most systems have been built on the basis of metrics for voice. Consequently, operators have to consider what goes into real-time charging and billing and what is needed for future policy management before making major investments. Key OSS/BSS vendors are now looking at offering a converged billing/policy management solution as policy management has assumed a critical role in OSS/BSS functions. Some vendors are of the view that it is easier for established real-time rating and charging players to add policy management and rule-based capabilities to their solutions as there is more complexity in charging than in adding advanced sets of rules. Vendors like Comptel, on the other hand, feel that policy management specialists are better equipped for more complicated deep-packet inspection capabilities when more sophisticated and dynamic policy management is needed.

Bridging the BSS and OSS gap is gaining importance in the telecom industry.  Service providers are looking to bridge this gap by using combinations of technical integration and business process management. Many have adopted the TeleManagement Forum’s widely used eTOM (enhanced Telecommunications Operations Map) model. eTOM is a process map that helps service providers track processes across these traditionally separate domains. The TeleManagement Forum is also helping service providers to align their end-to-end BSS and OSS architecture, processes and information through its shared information/data (SID) model, OSS/J and other standards.

Service providers such as BT, AT&T, France Telecom, Telecom Italia, Telstra and Belgacom are implementing projects to improve their networks, systems and processes. In fact, Telstra is reducing its 1,252 business and operational systems by 75 per cent over the next two years. 

Clearly, carriers would need to continue investing in their back offices, and operators who overlook this segment are likely to remain a step behind. Meanwhile, vendors will need to cope with longer sales cycles and increase their focus on cost efficiency.