Global Outlook - Increasing focus on OSS/BSS

OSS/ BSS , December 15, 2009

At a time when the economic climate has been more than challenging for many industries, the global communications industry has been remarkably resilient. Service providers are firming up plans to deploy new technologies like long term evolution and Wi-Max, migrating to IP networks and positioning themselves to deliver new services like video.

The major change in the communications industry has been the introduction of IP-based networks. With the advent of next-generation services such as Wi-Max and bundled offerings, consumers are demanding that services be delivered faster, be of higher quality, and in more creative bundles. With next-generation networks and technologies such as IP multimedia subsystem, new services can be more easily bundled and accessed by consumers.

However, as operators make the transition to these networks and start offering new services, they need to deploy flexible operational/business support systems (OSS/BSS) that will support these services. As a result, the complexity in the OSS has been increasing and there has been a continuous deployment of OSS/ BSS stacks to support new services.

Over the past few years, OSS/BSS have evolved from being mere back-end support to a "part-of-the-service". Telecom operators are either undertaking large transformation projects or a more measured approach to augment and update selected operational processes and systems. Regardless of the methodology involved, telecom operators across the globe have invested large sums of money in revamping their OSS/BSS. The growth in investments in these systems is being driven by increased investments in data services, competition in Europe and North America, wide-scale UMTS deployments, and a focus on customer experience.

Market size

OSS and BSS revenues are expected to grow from $15.36 billion in 2008 to $20.3 billion in 2013 at a compounded annual growth rate (CAGR) of 8.1 per cent, according to a report by research firm Mindbranch. Revenues of traditional OSS functions like performance management, provisioning and service activation and inventory management are expected to grow from $7.7 billion in 2008 to $11.5 billion in 2013 at a CAGR of 8.4 per cent while those of traditional BSS functions will grow from $7.7 billion to $8.8 billion in the same period.

According to the report, "Next Generation Network OSS/BSS Markets and Forecast 2009-2014", by Research and Markets, traditional OSS functions will grow faster than traditional BSS functions.

Inventory management is expected to register the maximum absolute growth in terms of revenue among the traditional OSS functions followed by provisioning and service activation and performance management.

While billing and customer care revenues will decline, mediation will be almost flat and revenue assurance will emerge as the fastest growing BSS function. Regionwise, the Asia-Pacific (APAC) region will witness the highest growth in terms of revenue and percentage while the Caribbean and Latin American (CA-LA) region will top in terms of growth rate.

North America will continue to remain the largest market for BSS solutions. While this region will have fewer new network rollouts, it will continue to generate substantial customer additions. APAC and CA-LA will witness hectic activity on both new network rollouts as well as customer additions while the Europe, Middle East and Africa region will show modest activity on both these fronts. The share of the services component in revenues will increase from about 37 per cent to more than 55 per cent.

Key trends

Much of the growth in the OSS/BSS segment will be driven by operators deploying these systems as they roll out next-generation networks. Due to this, operators are looking at a unified system across their line of operations to enable them to offer new services, reduce costs and have an integrated view of all the service subscriptions from a customer.

As a result of this continuous investment in OSS/BSS, vendors in this space are witnessing strong sales pipelines with few signs of any back-office projects being put on hold. According to industry experts, the billing, rating and charging market outlooks are likely to remain healthy, driven in part by the need for real-time back-office support for nextgeneration networks (NGN) services.Moreover, the ever-increasing demand for bandwidth has driven the shift from legacy batch-oriented processes to a realtime services-oriented architecture that will enable telecom operators to make smarter business decisions.

Traditionally, BSS (typically including billing and customer relationship management) has always been separate from OSS (such as service activation, provisioning and fault management), with separate business processes and people. For instance, while BSS has always been managed by the IT department, cost-focused OSS has been run by network operations. Moreover, there is an individual system for each service offered by wireless carriers, which creates a one-to-one OSS relationship between services and support systems.

However, given the major transformation that the telecom industry is undergoing with operators migrating to IP and providing multimedia and entertainment services, the gap between OSS and BSS is a key issue for service providers as well as their customers as it undermines the attempts of service providers to roll out next-generation services and to provide tailored customer service. This gap has resulted in decreased time-to-market for new services, faults between ordering and activating services, and low user satisfaction.

A key trend in this space is the movement within the service provider community to bridge the gap between OSS and BSS. Increased competition, customer demand and the need to do more with less (cost reduction) are key factors driving operators to evaluate the BSS-OSS gap and increase their spending to close it.

With service providers using combinations of technical integration and business process management to close the gap, there is a sustained momentum in this direction. Many have turned to TeleManagement Forum's widely used eTOM (enhanced Telecommunications Operations Map) model. The TeleManagement Forum is also helping service providers align their end-to-end BSS and OSS architecture, processes and information through its shared information/data model, OSS/J and other standards.

Service providers such as British Telecom, AT&T, France Telecom, Telecom Italia, Telstra and Belgacom are all currently implementing projects to transform and consolidate their networks, systems and processes in order to deploy services in the market faster and improve customer service. Telecom operators are also sectionalising their OSS/BSS and are taking a portfolio of systems from a single vendor that may address an entire function such as revenue management or rating and billing. This trend of transforming from legacy to NGN has seen ongoing investment over the past four to five years and this strategy has led to the growth of products and services around VOIP, IPTV and video.

Telstra, for instance, is in the process of reducing the number of business and operational systems –­ originally 1,252 systems –­ by 80 per cent in the near future. Similarly, Comverse, a key OSS/BSS vendor, has recently completed the replacement of multiple systems for Russian carrier MTS, which involved migration of 33 million customers in eight days. By streamlining the number of systems in the back office, the telecom operators' integration burden gets substantially reduced. As a result, some operators have witnessed a reduction of as much as 30 per cent in opex.

Key players

On the vendor front, the competitive landscape has undergone a significant change with rapid consolidation taking place over the past few years. For instance, Axiom Systems has been acquired by Comptel, Ceon by Convergys, Jacobs Rimell by Amdocs, and Oracle has completed its mammoth acquisition of BEA Systems.

In addition, large hardware vendors like NEC and Alcatel-Lucent purchased Netcracker for a reported $300 million and acquired service management software vendor Motive respectively. AlcatelLucent has also teamed up with Convergys in a non-exclusive agreement to integrate its Infinisys billing system.

IBM, Oracle, Telcordia and Amdocs now dominate the sector compared to a few years ago when the market was fragmented with many small independent software vendors. According to research and consulting firm Gartner, Amdocs has been the leading vendor for telecom operations management systems for years. In 2008, the company controlled 7.4 per cent of the worldwide market, making it the world's leading vendor with revenues of $1.6 billion.

The road ahead

Since OSS/BSS is all about delivering a means to drive down costs and to protect and generate more revenue, this sector is likely to be a key focus area for operators. As mobile operators look to play a bigger role in the broadband space by offering bundled fixed and wireless broadband access, the ability to manage these services will be critical from the perspective of OSS/BSS deployment.

Going forward, with the increase in software-as-a-service and managed service offerings, operators may opt for these commercial models to control expenditure, but the extent to which such offerings are taken up remains to be seen.

As the imperatives to improve customer experience, deliver new services, bill and bundle in creative ways, and slash capex and opex remain, telecom operators are unlikely to be able to manage without continued investment in their back offices. However, vendors will need to cope with longer sales cycles, a tighter focus on cost efficiency and the imperative to offer their systems in flexible and agile ways.

Once considered a backwater of the telecom industry, OSS/BSS has now assumed a crucial role. Clearly, this sector is likely to continue its growth momentum in the near future.


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