Telcordia deal confirms telecoms vendors still lead OSS/BSS deployment

By Peter Dykes

The acquisition of U.S. – based OSS/BSS vendor Telcordia by Ericsson was not entirely unexpected as Telcordia’s owners announced earlier this year they were looking for a buyer. The $1.15bn price tag was just over the lower estimate of $1bn most pundits thought the company to be worth, so Ericsson probably got off lightly. The deal has confirmed however that in terms of the big players in OSS/BSS, it is the telecoms vendors and not as was widely expected some time ago IT vendors which are leading the charge towards the deployment of next-generation operational and business support systems.

A while ago, when operators began to plan for all-IP network transformation, it was widely felt that the in the OSS/BSS market at least, the days of the traditional telecoms vendor were numbered. IT companies would take significant market share from the ‘old school’ vendors of products such as billing and network support systems and the infrastructure vendors would be content with network management services. For a number of reasons however, that has not proved to be the case.

To begin with, some of the traditional telecoms software vendors like Telcordia had developed OSS/BSS solutions of their own and were gaining market traction with them. Also, OSS and BSS products for the next generation of communications networks have largely been made by small, innovative companies that have focussed on telecoms-specific devices and systems. In addition, shrinking margins on infrastructure products and the advent of competition from the Far East have forced major vendors such as Ericsson and Nokia Siemens Networks to look elsewhere for future profitability.

The most obvious target in terms of those vendors’ core competencies was indeed network management; however the fragmented nature of the next-generation support systems vendor market was such that infrastructure vendors were able to strengthen their OSS/BSS portfolio’s by acquiring independent vendors of products which would support newly-transformed networks.

With the purchase of Telecordia, Ericsson has at a stroke bought it’s already impressive OSS/BSS portfolio in line with that of its closest competitor, as well as substantially increasing its footprint in North America. It is still too early to say what the impact of the deal will have on the overall OSS/BSS landscape; but a large number of vendors must at this very moment be trying to make an educated guess. The fact that Telcordia was largely U.S.-focussed might go against Ericsson when trying to sell its wares in the rest of the world as buying habits are notoriously difficult to change, so the impact on markets outside of the U.S. might not be very great in the short term at least.

Apart from changing the vendor landscape however, this deal has a greater significance for the communications industry as a whole. It underlines the fact that the telecoms industry has its own focus and its own agenda. It is separate and distinct from any other. Far from being subsumed by IT, the telecoms industry has simply taken what it needs and made it fit for new purposes. IT will continue to increase in importance and value to the telecoms industry, but it will be a very long time, if ever, before telecommunications loses its identity completely.