Operations Support Systems (OSS) encompasses a broad range of applications and services. Although definitions vary, OSS typically includes applications geared toward customer acquisition, service provisioning, asset management, network management, customer care, and billing. Increasingly, these applications are becoming more interdependent and carriers are beginning to realize how important world-class OSS is to effectively eliminate competition.
The OSS segment of the telecommunications industry is experiencing tremendous growth. The increasingly competitive telecommunications market, both wireline and wireless, has increased carriers' awareness of the importance of OSS. As a result, companies are investing millions of dollars in their OSS in order to improve operations and create a competitive advantage.
In terms of aggregate spending on OSS, projections differ, mainly because there is no consensus on the exact definition of OSS. Nevertheless, the Yankee Group, an internationally recognized leader in research and consulting services, predicts that the OSS market will grow to almost $60 billion worldwide in 2001 before falling off slightly. The slight decrease in spending is the result of more companies choosing to build, rather than buy, certain components of their OSS.
Customer Care & Billing Overview
OSS Telecom Technology currently focuses on one aspect of OSS, customer care and billing (CCB) systems. At its highest level, a CCB system provides a carrier with the means to bill its customers for service. However, bill generation is but one aspect of a complete CCB application. The data captured by the billing system provides valuable information to both the carrier and the customer on how services are used, what additional services are necessary, how services can be used more efficiently, or even how effective particular promotions or operations have been. Today's CCB systems collect, collate, manage, and report this valuable information to management, usually in real time.
CCB systems are also vital in terms of customer service and satisfaction. By having real time access to customer information, customer service representatives can better respond to customer needs in a timely and efficient manner. In addition, modern CCB systems can turn the monthly bill into an invaluable marketing tool; this is important since the customer's bill is the only regular contact a company has with its customers. As a result, a great deal of attention is typically place on a company's CCB applications.
Telecommunications Customer Care & Billing Market Segments
To better understand the market for CCB applications and services, it is useful to consider the market by segments. With respect to OSS Telecom Technology, three main criteria for market segmentation are particularly important: geographic, technological, and subscriber. Within these segments, the number of operators will be examined, since it is operators who buy and use CCB systems.
Geographical Market Segments
The available market for CCB products is not limited to a single country. The market for CCB applications and services is indeed global. Literally every country on earth has some type of telecommunications infrastructure in place. However, the degree of teledensity within countries and the number of competitors within countries varies greatly. Therefore, it is useful to segment the available CCB market into global regions.
OSS Telecom Technology has identified five individual regions: Europe, North America, Latin America, Africa, and Asia. Together, these regions account for the entire world, and OSS Telecom Technology's potential customers.
Technological Market Segments
Another useful way to look at the overall market is through technology. In this case, the total market was segmented based on whether the operator is a wireless service provider, a wireline service provider, or a provider of both. The number of wireless operators is greater than that of wireline operators. This is to be expected given that in many developing countries wireless is the most cost-effective type of infrastructure. In addition, competition has been active in the wireless market longer than it has been in the wireline market.
Subscriber-Based Market Segments
The last type of market segmentation to consider is subscriber-based. The distinction by subscriber size is important because operators' needs, with respect to CCB applications, typically change with subscriber levels. Tier 1 operators would typically tend toward in-house development of their CCB applications. Tier 2 operators and Tier 3 operators are more likely to opt for a third party CCB application. OSS Telecom Technology's primary focus is on Tier 3 operators, which represent the vast majority of available operators.
Post-paid Customer Care and Billing
The total available market for Customer Care and Billing (CCB) systems worldwide is projected to be $6.9 billion per year in 2004.
A measurement of total available market is the compilation of the number of telecom operators that will replace their billing system and the number of new billing systems coming online each year. Half of all billing systems are replaced on average every four years. With over 3,500 Tier 2 and Tier 3 telephone operators currently in operation, and a projected 1,500 new Tier 2 and Tier 3 operators coming online over five years, this means that over 4,300 billing systems will be needed in the next five years.
Prepaid Intelligent Networking (IN)
OSS Telecom Technology has projected three primary products in its forecast:
The post-paid CCB systems will be sold to the number of Tier 2 and Tier 3 operators listed above, specifically, new operators and those who are choosing to replace their current system. Prepaid IN systems have a much broader market opportunity given the small penetration of Prepaid IN in Tier 2 and 3 providers. Operators in developing countries project that over 50% of all calls will eventually be prepaid, while developed countries may reach 35%. This growth, coupled with the fact Prepaid IN is an add-on, increases the number of new systems operators will purchase.
Current prepaid solutions (non-IN based) are expensive, require duplicate switch fabric, and will not be built out to support such a high level of subscriber base. In addition, the operator must support Intelligent Networking capability to support IN functionality over the long term to maintain competitive advantage. All GSM operators currently support IN functionality, and all other operators will certainly implement IN by the year 2005. Very few of the Tier 2 and Tier 3 prepaid solutions today are IN based. This means that the entire Tier 2 and Tier 3 operator base is a potential market for Prepaid IN over the next five years, with over 5,000 operators expected to be in operation by the year 2005. The average price for a Prepaid IN solution for Tier 2 and 3 operators will be $1 million.
OSS Telecom Technology Target Customers
Within OSS Telecom Technology's stated primary and secondary markets, OSS Telecom Technology has developed a “Stepped Target Market Strategy." This strategy is based on two key elements:
OSS Telecom Technology's first installation base consists primarily of GSM operators in the range of 25,000 subscribers and under. Through a stepped strategy, OSS Telecom Technology is moving in three directions:
This strategy currently puts OSS Telecom Technology in the Tier 3 (less than 100,000 subscribers) market, with each step carefully planned to be sure we do not overreach. It is key to this strategy to maintain all customers as long-term partners and referenceable sites. We want to under-commit and over-deliver in each step of this strategy.
By repeating this strategy, OSS Telecom Technology, over a five-year period, will offer a wide variety of convergent solutions to Tier 3 and then Tier 2 (100,000 to one million subscribers) telecom operators.
The outlook for the future appears positive. Telecom markets will continue to deregulate and the number of operators will continue to grow to 5,500 in 2004, representing an additional 1,700 when compared to 1998.
With the increase in operators, the demand for OSS has also increased. OSS are the systems on which the telecom operator's business runs. At the core of OSS is billing for telecom services, which is provided by Customer Care and Billing Systems (CCB). CCB systems enable accurate, timely, flexible, feature-rich billing of services. The additional competition in the marketplace has made OSS and CCB systems, in particular, a key source of competitive advantage for many players. CCB systems have become increasingly sophisticated, incorporating features such as hot-billing (where users receive billing information on demand), Internet billing (billing data disseminated over the Internet), multi-service billing, loyalty programs, and “friends and family” type services.
The Stepped Target Market Strategy has been used to develop geographic markets by first developing the geographic market closest to home and expanding as one develops experience. With a large center of excellence in Asia, this was the first market to utilize. Asia and Europe are predominately GSM. As a result, moving from Asia to Europe makes perfect sense. Latin America is expanding the installed base of GSM systems. Therefore, OSS Telecom Technology has made its first step in Latin America and will move forward from there. In addition to Asia, the U.S. and Europe were early targets for consulting services because much of the technology and new solutions are developed in these regions.
OSS Telecom Technology's target market is focused on providing OSS solutions to both Tier 3 and Tier 2 operator worldwide. The priority of issues which drive the purchase decision for Tier 3 operators is slightly different than for Tier 1 operators. Understanding these priorities is key to developing the OSS Telecom Technology value proposition within its target market. A list of drivers is given below to compare Tier 3 priorities against Tier 1 priorities as part of the selection criteria for selecting a vendor. These priorities are important to consider when differentiating OSS Telecom Technology from Tier 1 CCB vendors.
OSS Telecom Technology's position relative to these drivers:
This positioning strategy differentiates OSS Telecom Technology from Tier 1 CCB vendors. This leaves a number of other CCB vendors which are targeting Tier 3 vendors. The approach of these vendors is to lead with price and minimize service functionality. OSS Telecom Technology believes that most Tier 3 operators desire a full service vendor or a partnership at an affordable price. OSS Telecom Technology intends to be that vendor
The economics of the telecommunication, Internet, and cable markets support thousands of companies. These companies include direct service providers, hardware suppliers, software suppliers, consultants, and numerous other supporting organizations. However, for the purposes of this report, it is useful to focus only on the companies that provide CCB applications and services.This industry segment is the main focus of OSS Telecom Technology.
Products will be sold through direct and indirect channels. The mix is split evenly between the two. Indirect channels include:
OSS Telecom Technology is currently developing relationships with indirect channels including:
The following are quota assumptions for Direct and Indirect Channels per salesperson. As OSS Telecom Technology develops more experience and presence in marketing, our efficiency in sales will increase.
One of the key responsibilities of marketing is lead generation. The following methods are used for lead generation:
Competitor Financial Performance
The market for billing and customer care has enjoyed solid growth for the past six years. Companies that compete in this market were direct beneficiaries of this growth, as were their shareholders.
Analysis: LHS Group and Saville System
Although OSS Telecom Technology faces numerous competitors in the CCB market, two are worth a closer look. LHS Group and Saville Systems are important because their historical growth and performance mirror OSS Telecom Technology's projections. Both of these companies focus exclusively on CCB systems and related consulting services, both derive a majority of their sales from the telecommunications industry, both are active in international markets, and both have grown their revenues to over $100 million in approximately five years. LHS Group's market capitalization grew at a CAGR of 201% from June, 1997 to June, 1998 while Saville's market capitalization grew at a CAGR of 119% from December, 1995 to June, 1998. The stock market, as measured by the S&P 500 stock index, only returned a Compound Annual Growth Rate (CAGR) of 30% from June, 1997 to June, 1998 and 28% from December, 1995 to June, 1998.
With the increasing demand for OSS and CCB systems, many OSS/CCB software providers have entered the market.It is estimated that there are over 50 vendors for billing and customer care systems worldwide. There is an increasing move by computer and switch vendors, system integrators, and telecom operators (e.g. IBM, Siemens, EDS, Deutsche Telekom) to develop in-house billing and OSS solutions for customers. They are formidable competitors with deep pockets, large existing customer bases, and significant influence on customer decision-making. In addition, the majority of players (both large and small) are extending product service portfolios to provide all services, i.e. Internet, mobile, cable, fixed, and convergent services. OSS Telecom Technology will compete in this market by providing high-value products and services at competitive prices.