A few years ago, when operators started planning for an all-IP network transformation, it was widely believed that large IT companies would take over the role of the traditional vendors in maintaining the operators’ operations support systems (OSS) and business support systems (BSS). This was mainly because IT companies were the ones equipped with most of these products such as billing and network support systems. However, the traditional vendors were unwilling to give away a potential growth market and made every possible attempt to stay put.

To begin with, telecom software vendors like Telcordia developed OSS/BSS solutions of their own. Small, innovative companies that focused on telecom-specific devices and systems developed OSS and BSS products for next-generation communication networks. Other pure-play infrastructure vendors like Ericsson and Nokia Siemens Networks (NSN) ventured into this space owing to shrinking margins and competition from Southeast Asian companies.

The most obvious target, in terms of the vendors’ core competencies, was network management. To strengthen their OSS/BSS portfolios, they decided to acquire smaller, independent vendors with OSS/BSS capabilities.

The biggest acquisition by an infrastructure vendor so far has been that of Telcordia by Ericsson in June 2011 for $1.2 billion. The acquisition will add software and service support systems to its product portfolio. Ericsson hired Providence Equity Partners and Warburg Pincus to facilitate the all-cash transaction on a debt-free basis. Telcordia’s record for supporting multi-vendor OSS and its incumbency in the North American market were both positives for Ericsson, which had been trying to expand its footprint in North America for a few years.

An alternative route adopted by these large vendors is to partner with traditional OSS/BSS vendors. For instance, Nucleus Connect, the operating company of Singapore’s Next Generation Nationwide Broadband Network, recently partnered with ZTE to build the OSS and BSS platforms that will allow it to support various end-to-end services such as business operations, billing, fault management, network management and maintenance. Earlier, Alcatel-Lucent had formed a similar partnership with Convergys.

Another emerging market for OSS/BSS vendors and solution providers is policy management. This segment has been growing with an increasing number of operators deploying policy solutions to comply with regulatory requirements, address near-term concerns like network congestion and deliver value-added services.

In this regard, the recent acquisition of Bridgewater Systems by Amdocs marks a shift in the policy management market with the creation of an integrated policy/charging solution backed by a large, well-established vendor with a strong sales force.

With Bell Mobility, Clearwire, Comcast, Sprint, Telstra and Verizon Wireless as customers, Bridgewater offers a line of policy engines, network control platforms and home subscription servers with real-time capabilities tailored to wireless networks. When combined with  Amdocs’s billing, rating and charging expertise, what emerges is the ability to support complex 4G business models that are based on dynamic data charging and take into account multiple devices, lines of business and networks, which are essential for monetising data services for service providers.

According to a report by Infonetics Research, the global policy management software market is likely to increase by 49 per cent in 2011 over the previous year and reach $1.61 billion in 2015.

Operators in emerging markets in Africa, Latin America, Eastern Europe and parts of Asia are some of the more innovative users of policy control capabilities. Several operators across the world are using policy management to create unique loyalty programmes to combat high subscriber churn rates and increase ARPUs. They use OSS solutions as a way to personalise, monetise and offer differentiated services. For example, some operators have begun to use policy control to offer unlimited access to Facebook or providing differential access to certain types of subscribers.

Based on the above trends, the OSS/BSS market today can be classified into four types of providers. The first type includes network equipment providers, such as Alcatel-Lucent, Ericsson, Huawei, ZTE and NSN, which offer OSS/BSS solutions pre-integrated as part of the hardware bundle.

The second type comprises enterprise software giants such as Oracle, Microsoft, IBM and Tech Mahindra, which have also entered the telecom software market bundling solutions with enterprise IT.

Traditional OSS/BSS vendors such as Amdocs, Telcordia or Redknee, which base their entire business on telecom software, form the third type. These companies continue to serve the market either directly or via partnerships with network equipment providers and generalist software vendors.

The fourth segment comprises the operators’ own in-house development capabilities. These typically exist only with former incumbents, which have maintained engineering staff for many years, often because of labour regulations.