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The OSS/BSS products have come a long way and so has their market in India. The industry has seen them gradually evolve from being manually operated switch management systems to creating automated interfaces. Post the period of spurt in demand for systems with VAS compatibility, the focus is now on open, interoperable OSS/BSS solutions. This focus-shift can be attributed to the fact that carriers and service providers have come under greater pressure to increase revenues and decrease operating costs in order to survive, leading to a greater demand for OSS integration.

The highly segmented Indian OSS/BSS market is set for a facelift. Industry experts say consolidation in this space is inevitable. Some industry pundits predict that with 3G, WiMax and MNP all coming into play, OSS/BSS vendors will be forced to strengthen their profiles to be able to offer a wider range of services.

The global OSS/BSS market is a highly competitive arena with about 400 players. The consolidated revenue for the OSS/BSS market stood at about $15.5 bn in 2008, recording a CAGR of 7% for the past five years. In spite of the economic downturn that plagued the businesses across the world last year, this market is projected to maintain the same growth rate and touch $22 bn in revenues by 2013. The Indian OSS/BSS market generated about $500 mn in 2008 and is expected to grow at about 17% till 2013 to reach $1,100 mn approximately.

This field is diversified in terms of profitability as only the big players have been able to make sustainable profits in the last five years, which leaves a lot of scope for M&A. The top ten players in the field control about 45% of the market. In spite of clear divisions, there is still no dominant leader as most companies cater to niche markets and offer specialized services.

Ready for a Deal?
The Indian telecommunications market has become crowded not only with cellular operators but also with a number of small OSS/BSS service providers. With many OSS/BSS vendors entering into this space, competition has really intensified, putting forth a need for newer solutions. Till date, the M&A activity on the OSS/BSS front had not been so profound, purely because OSS/BSS was not seen as a critical component in the Indian market, but today the scenario has changed. OSS/BSS is now a crucial component in the telecom ecosystem as more and more vendors are now investing in this market looking at the buoyant demand.

"The Indian OSS/BSS industry is attracting a lot of vendors and operators to invest in this market. New vendors are entering in the market by acquiring local vendors, giving them a head start in the market. A recent example of this is the Lifetree and Tecnomen deal. We should see a number of M&A deals happening in the year to come," says Nikhil Jain, COO, Elitecore Technologies.

According to Amit Goel, CEO of consulting and research firm Knowledgefaber, the time is ripe for the Indian OSS/BSS market to make use of the opportunity that the new technologies and services bring along. Goel feels that this is the best season to go ahead with M&As as big vendors like IBM and Oracle have a brewing interest in adding new feathers to their caps. "The big players want to bite bigger shares. If IT services of an operator is outsourced to them, they would like to delve deeper to be able to offer more services," he says.

Agreeing that consolidation in this space is on the anvil, Pushpendra Mankad, senior VP, Comverse Asia says, "As a company we need to concentrate on meeting the needs of our clients (and those of new entrants) who will in turn be focusing on monetizing the large investments they are making in next generation networks. We feel planning the spending cycles , thus, contemplating the prospective M&A moves by our competition might be distracting."

An expanding market share in India could definitely be a strong rationale for M&As but, by and large, since M&As in the OSS/BSS space are largely driven at a global level, M&A trends in other markets will play a vital role in vendors' decision making. "While it is true that the Indian market is highly competitive, most OSS/BSS vendors are international so we are not sure if there would be acquisitions just related to the Indian market," explains Anandan Jayaraman, chief product and marketing officer, Connectiva Systems.

Globally, over the last three years, the entire OSS/OSS space has been in the midst of consolidation. This is driven by the needs of service providers to rationalize the number of vendor relationships as well as the strong need from business users and executive sponsors to move away from silos of fragmented systems to a seamlessly integrated enterprise application that can connect the customer experience to provisioning, fulfillment and billing.

Why Now?
Experts see some important ingredients that are adding to the flavor of mergers in this segment. Shrinking margins of the vendors are posing a threat to the very survival of some of the vendors. And as Jain of Elitecore says, in today's markets, companies can't wait for years to build competencies and reach other markets. "M&A helps them do all of this in the quickest possible way," he adds

Goel says there are other factors besides building competencies; the industry is also seeing good valuations for the companies. "The valuations at this point of time are really showing up well, so it makes sense to go in for an investment like this," he says. So does the market promise big money transactions? That may not really be true. The market can not assure big deals as the Indian market itself is a little over $500 mn strong. "But, definitely," says Goel, "Deals will be in the revenue multiples, ranging anywhere between 3-10x, of the revenue," adding that it will be difficult to comment who will buy whom.

New Tech & Models
OSS/BSS vendors in the Indian market have good opportunities ahead with 3G services coming up, and mobile number portability along with new service providers introducing innovative services. Vendors with competent product suites can still follow the organic model. But players that require more functional capabilities in their product portfolio in supporting service providers' needs with regard to advanced next generation services, might turn towards inorganic methods and might even shop outside. "Vendors catering to a niche segment might extend to other segments to leverage the upcoming trends in the Indian market. As the players get stronger inorganic shopping can also be a method for them to grow exponentially. Network equipment providers and technology providers handling outsourcing businesses might try to incorporate the high-level BSS/OSS functionality by acquiring specific vendors in the respective areas," says Suntec CEO, K Nanda Kumar.

The industry consolidation and geographic expansion will also act as a strong driver for cross-border M&As. Inorganic growth is likely to continue as the preferred route to bridge gaps in network and service capabilities as well as to expand into new geographies and customer segments, says Pandurang Desai, vice president & head, India, Middle East & Africa CSP, Wipro.

As always,emerging markets are quite attractive to OSS/BSS vendors. In order to leverage the upcoming opportunities and to increase wallet share, vendors may continue to spread out and improve their existing portfolios, and thereby meet the service providers' growing need for flexible and quick service launches and multi-play services deployment. Such a scenario might further strengthen the M&A trend in emerging markets like India.

Indian information technology companies like TCS, Infosys Technologies, Wipro and Satyam have been buying smaller IT service outfits in Europe, Latin America, and Asia to gain global customers, says Jain.

Heena Jhingan
heenaj@cybermedia.co.in

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