Will Enterprise IT Kill Off Communications Software?

“There may cease to be a viable standalone communications software industry by the end of this decade,” contends Steven Freitas, director of equity research for BMO Capital Markets. In his report, “How Enterprise IT Is Killing the Communications Software Industry,” Freitas last week predicted the communications software industry (CSI) would be subsumed by the enterprise IT industry.

“It is possible to see how IP-based services may drive consolidation that would eventually lead to four major players. With less requirements to have network-focused infrastructure, you can use more generic service delivery platforms consolidated on IT standards. That will push Oracle, IBM, and HP further down the stack in telecom,” says Simon Osborne, lead architect in strategy and architecture for Axiom Systems. “Rather than dividing OSS/BSS, you may see it all falling under IT, as the equipment is decommissioned over time,” says Osborne.

For smaller companies like Axiom, this could be detrimental, or it could be opportune.

“There still exist a lot of service providers that do not want to be consumed by the big machine that is Oracle or Amdocs; they don’t want to have a single point of contact for all solutions delivery,” says Osborne, who believes many service providers want to cherry pick the best-of-breed, innovative solutions. “With the bigger players, once the deal is done, it’s done. Some service providers will value thought leadership and personalized service. It’s up to the smaller niche software vendors to get smart with their story, and drive home the idea that they are going to better understand customers and dedicate time to serving them in a way big players cannot.”

But for some of the larger services providers, the choice to have a single point of contact might be worth more than customization and personalization. BT recently dropped the gauntlet by deciding to simplify and drive efficiency by buying into the Oracle suite. Whether such choices by larger organizations could ultimately stamp out smaller players and the cycle of innovation and change they invite, remains to be seen.

The answer lies in whether database dominance and consumption of OSS/BSS components will be enough to facilitate true application integration.

The company that stands the best chance to make a dent in the current CSI model would be Oracle. Some believe Oracle could be to telecom what SAP was to financial services. There are now fewer accounting software choices in financial services, but SAP has revolutionized the industry with standardization and efficiency. In telecom, Oracle has yet to prove whether it will successfully integrate services with CRM, billing and provisioning for more efficient service delivery.

Just this morning, Oracle yet again put a bid to acquire BEA Systems. With $8.5 billion on the table, the acquisition would bring Oracle a substantial middleware suite and service delivery platform on top of which it could integrate provisioning and other OSS/BSS components it has acquired. With its purchases of Portal and Metasolv, Oracle already possesses billing, performance management, network management, provisioning, inventory, activation and fault management.

Of course, IBM and HP will also play important roles in delivering enterprise software that drives efficiency. Both take a different tack than Oracle, as they seem content with a fault management/service assurance focus for the moment.

SAP has also gotten into the fray, as it is selling communications software, but not yet in the comprehensive and service-delivery-focused manner that Oracle is.

But the company with a fairly unique position is Amdocs. It has significant market penetration, as does its acquired Cramer assets. This gives Amdocs the ability to operate as an IT shop focused on services, as opposed to just products, like Oracle currently does.

Whether the integration these monoliths offer fosters integration significant enough to drive a true revolution in CSI will depend on what is more important to service providers: choice and personalization, or stability and efficiency.

The end result will also have a significant impact on the current standards focus that dominates the telecom industry at the moment. For example, SID and eTOM may not be as important to carriers that want to consolidate, map and integrate pieces of their environment if their database and OSSs come from the same company. If there are only three or four big players left in the industry, then interoperability to interlock systems around standard models, interfaces and functional building blocks won’t be as much of an issue.

“It could put into question the standards, and whether they are used to make proprietary components from one vendor work together, or whether the standards are used to allow multiple components from different vendors to co-exist. It’s a question of ‘replacement strategy’ versus a ‘co-existence strategy,’” says Neil Hansen, VP of business development for TierOne OSS Technologies, which works with Rogers, Telus, Verizon and AllStream.

Paul Vedam, TierOne’s CEO also cautions against premature predictions. “Ten years ago, the network vendors were gobbling up CSIs, and they went through a cycle that in the end proved ineffective,” says Vedam. “No one has proven they can maintain this model in a successful way yet. Shrink-wrapped software still hasn’t proven that it brings down the number of permutations you see in the communications industry.”

Currently, Vedam and Hansen believe that CSI vendors lack the funding necessary to implement a product at a scale necessary to truly stabilize the industry. “When you think of the term ‘enterprise software,’ you think of a simplified approach, but the key for success is ‘will,’” says Vedam. “More than funding, the big suite players have to possess the ‘will’ to push commonality and best practices. When they inevitably hit major roadblocks in attempting a ‘sea change,’ will they just dump their communications software group and move on to other things?”