Software giant warns of consolidation

A newly created $900m (£480m) software giant has said that the highly fragmented telecoms software space is ripe for consolidation. The news comes as Aricent, a full service telecoms software provider made its debut on Thursday.

Aricent itself, which has re-entered the market under a new name, is a consolidation of software firms. Previously the software development business of Flextronics, 85 per cent of the company was acquired in September by equity firms Kohlberg Kravis Roberts & Co. (KKR) and Sequoia Capital.

Prior to this, Flextronics Software Systems used to be Hughes Software Systems, but changed its name in 2004 when it and other assets were acquired by Flextronics. Frog design, a creative consulting firm, was rolled into the mix in the same year and has been part of the software development business since the summer of 2005.

Flextronics retains 15 per cent ownership of the company.

Trevor Strudley, director of marketing at Aricent, told telecoms.com that the company is targeting “a return to simplicity. We want to cover all aspects of software services from design to implementation to maintenance,” he said.

Strudley said that as communications technologies have grown increasingly complex, the industry is increasingly demanding an end to end software specialist with skills, speed and scale. At present, Aricent’s customer base breaks down with about 70 per cent being equipment manufacturers, 15 per cent being device manufacturers and 15 per cent being service providers.

But Strudley also warned that the telecoms software industry is likely to see consolidation mirroring that in the hardware space. Already this year a number of mega-mergers have seen the marriage of some of the top players including, Nortel and Alcatel, Alcatel and Lucent, Nokia and Siemens and Ericsson and Marconi.

“The telecoms software space has been to fragmented and niche to date, but like the PC market, the shift is tending towards commodity hardware and software,” he said.