Will OSS Consolidation Benefit Carriers? (cont'd)

Karl Whitelock, Lead OSS Strategist, Agilent Technologies
Agilent has played something of a consolidator’s role already. Remember that Agilent acquired OSI NetExpert and effectively merged it with products like Firehunter and mature applications developed when Agilent’s OSS business was still part of HP’s Telecom Systems Division. While Mr.Whitelock was unable to comment on whether Agilent has an acquisition strategy, he did suggest that consolidation needs to benefit the industry in several key areas. “I think the model needs to be organized around who has a services focused strategy…managing network components is not where the sector needs to be anymore,” he says. In addition to a focus on managing end to end services, Whitelock bolsters the argument for improved integration. He says, and the other executives interviewed for this story agreed, that architecture is a focus for carriers today and will be a critical part of any consolidator’s strategy. He cited a common need for improved architectures built on technologies like JMS, and stressed the relationships among integration, business process management and a move toward real-time information enabled by these capabilities.

Robert Curran, Director of Global Marketing, Cramer Systems
Though many observers believe that Cramer Systems is a prime target for acquisition (see sidebar: Acquirer or Acquired?), Mr. Curran insists that “Cramer is not for sale, ergo we must be a consolidator ourselves in the grand scheme of things.” How Cramer might execute an acquisition strategy remains unclear considering the relative size of the company. However, Cramer’s philosophy centers around development and not acquisition of “cheap technology,” says Curran (see There’s Consolidation, and There’s Consolidation). Cramer is generally opposed to component or best-of-breed approaches to OSS solutions, and suggests what the sector needs is a player modeled after solution providers like Siebel Systems which often plays a role in integrating, coordinating and defining processes that bring horizontal communications to vertical organizations. Curran suggests this approach has been validated as Cramer will soon announce that it has displaced its two largest competitors at accounts in Europe and the United States.

George Jimenez, CEO, Ace-Comm
Ace-Comm, known best for its mediation technologies, is one of the few public companies in the OSS sector. Mr.Jimenez has specific plans to raise the presence, capability and value of his company. “There were hundreds of millions invested in technology companies in various segments of the OSS space. A lot of those are on life support today, but they created some very compelling technology…One of our premises is that we can take what’s been done and integrate them, embed them and operate them together to make a more compelling offering.” Jimenez points to several drivers behind this strategy. First, he says Ace-Comm’s customers are asking it to bring more to the table as a trusted supplier of OSS in general – not specific to mediation or billing alone. He also says that from a valuation perspective “size matters, so our objective is to bulk ourselves up and be a substantial player.” The end game, says Jimenez, is to make Ace-Comm particularly attractive to a much larger acquirer as the industry consolidates. Ace-Comm already has an established global presence and footprint to lever and has begun its acquisition activity with the recent purchase of biller Intasys. With this acquisition Jimenez stressed a focus on gaining technology, customers and strong managers.

Julie Wingerter, vice president strategy, NetCracker Technology Corp.
NetCracker is a company that often flies under the radar, but it's built a tier one customer base steadily while expanding its product capability. Critical to its strategy, explains Ms. Wingerter is to “get the customer up and running as fast as possible” and “get rid of conflicting objectives by having someone else in the middle.” In other words, she says, a full service OSS provider has to bring significant professional services to the table, along with a product suite. NetCracker's recent acquisition of AVD, a professional services firm, represents this philosophy. AVD “was doing 100 percent of its work for NetCracker,” explains Wingerter. The company wanted to insure this professional services partner would not “do work for other vendors just at the point when we needed those resources available to us.” NetCracker is also developing talent in Russian universities and has begun a similar program with the Massachusetts Institute of Technology. “If we were to make another acquisition,” says Wingerter, “I would expect it to be in the services area, though we are not actively engaged in any discussion right now.”

John Lochow, CEO, Syndesis Ltd.
While developing our monthly Q&A with Syndesis (see Pipeline September 2004) Mr. Lochow made it clear he has big plans for the company. If and when the market is favorable, an IPO appears to be in Syndesis' future. Though some view Syndesis as a specialized, stand-alone product vendor focused on activation and discovery, the company's vision and capabilities are greater. With carriers looking for fewer moving parts and more functionality, Syndesis product road map is aimed toward a near-future intersection. The company sees a crossroads where networks are smarter, service delivery and assurance are automated, the need to assimilate new technologies is further intensified, and management of network-to-service relationships is critical to it all. It believes its platform is best suited for these requirements and Telecom Italia, SBC and Bell Canada have agreed with their checkbooks. Syndesis pursues very large deals – relative to OSS – with tier one carriers and places a heavy focus on customer service and cooperation to build entrenched relationships. Observers are split almost 50/50 on whether Syndesis succeeds on its own as a small-cap, public venture or is itself assimilated into a larger entity that would desire its technology and customers.

Billers
Large billing companies are likely to play a role in sector consolidations. Amdocs, for example, has demonstrated a willingness to make aggressive acquisitions and aborted an attempt to acquire Architel in the late 1990s. Acquisition chatter around trade shows always seems to include Amdocs, CSG Systems, Convergys and Intec Telecom Systems, though none has yet stepped up to make a major OSS acquisitions, focusing such activities instead on billing and billing-related companies. Analysts suggest, however, that billing is better business than OSS , and the economic reasons for a major biller to dive into a crowded OSS market are not yet apparent.

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