BUSINESS STRATEGIES OF TELECOMMUNICATIONS SOFTWARE VENDORS ...
BUSINESS STRATEGIES OF TELECOMMUNICATIONS SOFTWARE VENDORS
Pasi Tyrväinen, Eetu Luoma and Lauri Frank, University of Jyväskylä, Finland
operations support system (OSS), business support system (BSS), market segmentation, business
strategies, market evolution
The telecommunications industry provides communication and information services, i.e. delivery of
voice, data and media over different networks, including computer networks, mobile and telephone
networks, and television networks. The word ‘Telco’ refers to various telecommunications companies,
whose fundamental business activities are to maintain its network infrastructure and operate the
services based on the networks. A currently dominant view is to divide the telco's day-to-day
operations in to vertical processes of service fulfillment, service assurance and billing (Kelly, 2003;
TMF, 2005). Further, the view sees the processes to divide according to the horizontal layers of
customer management, service management and network management (see figure 1). The operations
support systems (OSS) and business support systems (BSS) are software systems for managing
vertical processes across horizontal layers.
Industries are generally noted to evolve in vertical disintegration and integration cycles (see e.g.
Macher & Mowery, 2004). The deregulation of the telecommunication industry has led to the
outsourcing of OSS and BSS development activities, for example, to spin-off companies and to other
software vendors (Terplan, 2001). The evolution has further resulted in an establishment of a primary
software market for OSS/BSS. Initially, the competition on the OSS/BSS market focused on software
for controlling and monitoring networks, that is, on the network management layer. The current
emphasis is on supporting the processes close to the customer interface (Thomsen, 2006) that creates
an entry initiative for companies currently providing this kind of software for other industries.
Currently, the OSS/BSS market can be divided into 14 market segments (see figure 1).
The aim of this paper is to investigate the present strategies carried out by the current actors in the
OSS/BSS market. The scope of our strategy analysis is on the positions and likely action of the actors
and entrants, resulting in evolution of the market structures. The investigation is done by analyzing the
OSS/BSS vendor data for the years 2000 and 2005 (Dittberner, 2007), and relating the derived
information to the market playground presented in Figure 1. The results are of strategic value for the
companies currently acting or considering entry to this specific market, and also give insight to the
theory of vertical disintegration of industries.
It is characteristic for OSS/BSS software to automate one or many of the vertical telecom processes.
The software is usually supported by middleware (such as database, integration and application server
software), and it manages data either at the customer or network interface. Thus, in order to enter and
compete in the OSS/BSS market, an actor must possess knowledge on the above mentioned properties:
vertical processes and interfaces. Our tentative analysis indicates that there are five essential strategies
for entering and competing in the OSS/BSS market:
1. Telecom specific niche strategy. This refers to the strategy of companies operating only on the
OSS/BSS market and concentrating only on one market segment. The companies deploying such a
niche strategy must possess distinct knowledge or strong customer relationships. Market entry using a
niche strategy seems to be usually connected with the introduction of a new network technology (e.g.
WiMAX) or middleware.
2. Cross-industry niche strategy. Some software market segments have common properties with other
industries. For example, sales or billing processes are generic enough to be supported with similar
software in telecommunications and other industries. A company thus might carry out a cross-industry
niche strategy, providing similar software also to other industries than the telecom industry. As,
however, the network interfaces remain telecom specific, market entry is most feasible with this
strategy close to the customer interface.
Figure 1. The vertical processes and horizontal layers of Telco processes, based on TMF(2005), and
15 OSS/BSS market segments in shaded boxes.
3. Telecom specific vertical strategy. To be able to provide software for managing vertical processes
(fulfillment, assurance or billing), a vendor is required to have special knowledge on both, the
particular processes and the network interfaces related to this vertical. This kind of a strategy is typical
for the established firms on the OSS/BSS market. A company might, for example, offer mediation,
offline billing, real-time charging and interconnect billing software that integrates into a solution for
the billing vertical.
4. Telecom specific layer strategy. This refers to a strategy focused on supplying software to one of
the horizontal layers (customer, service or network management). Established companies would likely
be close to the network management layer, whereas new entrants are likely to appear close to the
5. Horizontal platform strategy. This aggressive strategy is deployed mainly by the software industry
heavy-weights. Here, a software vendor has market presence through middleware platform and
pursues to expand to telecommunication specific segments. Usually, such companies obtain missing
pieces, knowledge on processes and interfaces, through mergers and acquisitions. Within the past two
year, more than two dozens of OSS firms have been acquired by major generic software companies,
including Oracle and IBM.
Common trends in the telecommunications industry seem to be customer-orientated operations and
outsourcing of secondary functions, including software development. As the telcos are currently
upgrading and replacing their OSS/BSS infrastructures to suit the new network technologies and
services, the five described strategies enable identifying the initial positions as well as the likely
courses of actions of the OSS/BSS vendors. Our analysis of the strategies can further be used to
predict the evolution patterns of the OSS/BSS software market.
Dittberner (2007). OSS/BSS KnowledgeBase. Vendor financials 2000 and 2005.
Kelly, M. (2003). The TeleManagement Forum’s Enhanced Telecom Operations Map (eTOM).
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Macher J. T. and Mowery, D.C. (2004). Vertical Specialization and Industry Structure in High
Technology Industries. Advances in Strategic Management, Vol. 21, pp. 317-356.
Terplan, K. (2001). OSS Essentials - Support System Solutions for Service Providers. John Wiley &
Sons, New York, NY.
Thomsen, O. (2006). The Lean Approach. Wireless Personal Communications 38. pp. 17–25.
TMF GB921. (2005). Enhanced Telecom Operations Map (eTOM) - The business process framework.
Version 6.1. TeleManagement Forum, Morristown, NJ.