What’s hot in telco spending? Probably not much, you’d say, and you’d be substantially correct in that view. But not entirely. There is one area that’s seen growth in spending according to a report cited in an article on TelecomLead, and that’s OSS/BSS. I think what’s even more interesting is what telcos are saying might be the driver of this spending growth. The actual report isn’t free so I won’t cite it directly, and that will limit how much insight we can draw from it, particularly with respect to the details.
Why would OSS/BSS spending grow when the big driver of telco change, 5G, has at this point largely tapered down? If we summarize what Analysis Mason said in their own report, they’re seeing conspicuous strength in two areas, “customer engagement” and “network automation and orchestration”. Why those areas, and why not others? Those are the real questions here, and one I hope to address based on what I’m hearing from the telcos. As always, we have to start from the top.
At the top, among the C-suite people, the overriding issue telcos face is shareholder value. Any major public company is answerable to shareholders, which means Wall Street analysts have a major influence, along with fear of corporate raiders. Telcos aren’t much at risk to raiding, but they do have major concerns about what their shareholders think, and you don’t have to do much analysis to realize that generally the big telcos aren’t seen in a particularly favorable light.
Profit per bit is, in some ways, an inexact measure of the ability of telcos to earn a return on their infrastructure, but it is at least a loose measure of that ability. For a full decade, telcos have been saying that profit per bit has been declining, largely owing to the explosion in consumer broadband and its extreme price sensitivity. As profit per bit comes under pressure, so does return on infrastructure, for the same reasons. That means that there’s pressure on telcos to minimize investment, which minimizes costs, which improves profit. The fact that OSS/BSS systems seem to be bucking this trend is an indicator that for some reason, CxOs believe that there’s better ROI potential from OSS/BSS investment.
The predicted spending gains aren’t even across all the elements of OSS/BSS. As I’ve noted, there are two segments that seem likely to experience more growth. But why, on that same report, do we have those twin up-spending areas, when what might seem related areas of “service design and orchestration” and “automated assurance” are growing very slowly indeed? To answer that, we have to draw on operator comments and analysis.
Profit and ROI depend on the relationship between sales and costs. Operators would love to raise revenues, but it’s pretty clear at this point that their ardent desires in this area collide with inherent conservatism. I want to see more money, but I don’t want to sell anything different, seems the mantra. Clearly that doesn’t put much pressure on to increase service design and orchestration spending. If you look at what a “new” service usually means to a telco, it’s a different sales/billing model applied to the same services, services of connectivity. Yes, maybe turbo buttons. Yes, maybe usage pricing? No to anything more radical. And guess what is involved in tweaks to service sales and billing? OSS/BSS.
Automation would seem to be a good way to address costs if you’re stalled in revenue neutral. All of the “automation” categories aren’t hot, though. What’s the difference between “Network automation and orchestration” and “automated assurance”? The former is hot and the latter is not, according to the report. I’m told by telcos that the former group relates to aspects of network operations and management, meaning infrastructure, and the latter relates to the per-customer care and recovery tasks. They say that the reason why the former might be hotter in terms of investment is that per-customer service intervention is never a good idea. What you want to do is fix problems in infrastructure, presuming that if your capacity planning was proper and everything is working at the infrastructure level, then services should be working and won’t need “assurance” at all. Any service problem is customer-visible by definition, and a failure you’re coming from behind to fix, they say.
How does this square with “customer engagement” as a hot button? Well, telcos tell me, there’s a difference between “engagement” and “assurance”. Engagement is about selling, which makes money, which is good. Assurance at the service level, to reprise the point, is about remediation of something that may be fundamentally beyond remedy, something that’s already sapped confidence. Prevent network problems and services don’t need to be assured.
Operators I’ve talked with agree that their OSS/BSS spending is going to look better than their spending on network infrastructure. Most don’t exactly divide their OSS/BSS spending the way the report does so I can’t make a complete correlation, but they do offer some general comments that could be useful.
In the view of these telcos, the situation they face isn’t unlike that of other tech companies when new customers and increased ARPU are hard to come by. They want to manage customer relations to optimize what could be obtained in either area, and they want to control costs. Capital projects are obviously a target for the latter but the real plumb is opex, which first is higher than capex for most operators, second opex improvements arising from enhanced response to network issues could reduce churn, and finally, it’s easier to address opex (even transformationally) than capex because the target areas are more contained and don’t involve very long-lived assets.
One problem with this whole vision is that infrastructure isn’t typically linked to the CIO except in the service sense. Network operations is the whole network-management-FCAPS-stuff, which operators say is rarely part of OSS/BSS. Some think it should be, though. Ten years ago, the majority of telco planners told me that the OSS/BSS needed modernization or outright replacement. Today only a fifth say that. The fact is that OSS/BSS has actually transformed more effectively, say the telcos, than network operations has.
And that may be the real message of the report. OSS/BSS is still perhaps the least glamorous piece of telco technology, but it may be rehabilitating itself in terms of modernarity. It may also be benefitting from the one-stop-shop trend we’re seeing in both the telco and enterprise network spaces. Over three-quarters of telcos say that they have one primary OSS/BSS provider, and less than one third say that they have any unified network operations provider. Yes, there’s a shift away from multi-vendor networks that will, if it continues, reverse this, but in the meantime the OSS/BSS ugly duckling may have already turned into a swan.
