Transcript CSPs - Analysys Mason

Webinar
Telecoms software professional services multi-client briefing:
moving to a more sustainable ICT industry using professional
services
Presenter: Glen Ragoonanan
7 December 2011
2
Contents
Executive summary
Market definition
Market strategy perspective
Market share and forecast
Recommendations
© Analysys Mason Limited 2011
3
Opex increased as CSPs met the scale of the increase in
subscribers with more outsourcing and turnkey projects
Figure 1: Telecoms market financials, worldwide, 2007–2010
[Source: Analysys Mason, 2011]
2.0
1.8
Figure 2: Year-on-year growth in telecoms market financials,
worldwide, 2007–2010 [Source: Analysys Mason, 2011]
7
20%
6
15%
5
1.2
4
1.0
0.8
3
0.6
2
0.4
0.0
2008
Revenue
Opex
2009
Capex
2010
Subscribers
Opex increased in 2007–2010 to meet the demand
of more subscribers to new services, notably of
more 3G subscribers in India and China.
Worldwide, CSPs’ net revenue grew proportionally
with subscriber growth, thus ARPU remained flat.
5%
0%
–10%
2007–2008
0
2007
10%
–5%
1
0.2

Year-on-year growth
1.4
Subscribers (billion)
USD (trillion)
1.6
Revenue

2008–2009
Opex
2009–2010
Capex
Subscribers
Capex savings from 2009 were invested in 2010,
as CSPs implemented new technologies to
increase competitiveness. However, growth in
capex was mainly in the fourth quarter of 2010 and
has continued into 2011.
© Analysys Mason Limited 2011
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Telecoms software professional services market share
summary, 2010
Infosys
Analysys Mason forecasts that the worldwide
Technologies
16.7%
Other
42.0%
10%
Total revenue:
USD4.66 billion
Dell
2.3%
Tieto
15.1%
HCL
NueStar Logica Technologies
11.8%
5.7%
8.6%
IBM
60.1%
Total revenue:
USD4.98 billion
NEMs
36%
Nokia
Siemens
Networks
15.5%
Total revenue:
USD47.85 billion
CSG
Systems
6.1%
Oracle
5.0%
Convergys
Telcordia
Technologies SAP 3.9%
3.6%
2.6%
7%
NEC/
NetCracker
Technology
Huawei
4.9%
12.9%
IT suppliers
10%
Amdocs
27.5%
Other
51.3%
Other
Motorola
9.0%
3.5%
CSIs (regional)
10%
HewlettPackard
37.5%
3%
telecoms software professional services (TSPS)
market will grow from USD47.9 billion in 2010 to
USD65.4 billion in 2015, at a 6.4% CAGR.
ISVs
20%
Total revenue:
USD9.31 billion
Year-on-year
growth rate: 11%
CSIs (global)
24%
Total revenue:
USD11.57 billion
Ericsson
31.3%
AlcatelLucent
22.9%
Total revenue:
USD17.33 billion
18%
Accenture
14.7% Tata
Consultancy
Other
Services
41.6%
9.7%
Tech
Mahindra
9.4%
Wipro
Technologies
Atos Origin
Capgemini 8.4%
7.8%
8.2%
8%
© Analysys Mason Limited 2011
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Worldwide, the telecoms software professional services
market is forecast to grow at a CAGR of 6.4% in 2011–2015
Figure 3: TSPS revenue, worldwide, 2010–2015 [Source:
Analysys Mason, 2011]

Analysys Mason forecasts that the worldwide
telecoms software professional services (TSPS)
market will grow from USD47.9 billion in 2010 to
USD65.4 billion in 2015, at a CAGR of 6.4%.

Cost reduction is driving strong growth in TSPS, as
CSPs move from traditional ‘operate and build’
options to outsourcing and hosting.
70
65.4
61.0
60
56.8
53.1
Revenue (USD billion)
50.3
50
47.9

40
30

In 2011, transformation, new technology projects
and managed services will drive TSPS growth. In
2012, TSPS spend is expected to be more cautious.

From 2013, radio access network maturity (LTE,
femtocells and Wi-Fi) will drive associated TSPS,
coupled with cost-reduction transformations and
new services and business models that will further
competition and develop new revenue streams.

Pricing pressure from supplier competition is a
growing inhibitor in the TSPS market.
20
10
0
2010
2011
2012
2013
2014
CSPs’ need to increase revenue for investments to
stay competitive is another strong, long-term driver
for the TSPS market. New services from new
technology and systems will enable this driver.
2015
© Analysys Mason Limited 2011
6
Market drivers and inhibitors
Figure 4: Drivers and inhibitors in the worldwide telecoms software professional services market [Source: Analysys Mason, 2011]
Inhibitors
Drivers

Cost reduction

CSPs’ desire to retain control

CSPs’ need to increase revenue

Marginalising services

New technologies

COTS product maturity

Competition between CSPs

Scepticism about vendor
neutrality

Transformation

Perpetual legacy

Multi-vendor complexities

Risk management

Competitive TSPS pricing

New business models
© Analysys Mason Limited 2011
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Contents
Executive summary
Market definition
Market strategy perspective
Market share and forecast
Recommendations
© Analysys Mason Limited 2011
8
Infrastructure solution categories
Figure 5: Infrastructure solution categories [Source: Analysys Mason, 2011]
Professional services
Service fulfilment

Service assurance

Inventory management

Fault management

Service activation

Performance management

Discovery

Service management
Network
operations centre
(NOC)






Network management system (NMS)
EMS
EMS
EMS
Software
EMS




Mobile
Business
services
Residential
broadband
Business consulting
Design consulting
Product-related services
Systems integration
Custom development
Outsourced operations
Hosted managed services
CLI management
Network data aggregation
Configuration
Multiple interfaces
Product-related services
as part of a software or
hardware deployment
PSTN


NGA


GSM, CDMA,
UMTS, LTE
IP VPN,
Ethernet
xDSL,
cable
DWDM,
GPON, FTTx
Legacy, circuit
switching
Hardware and equipment

End users
Installation
Configuration
Customisation
Lifecycle management



Switching and routing
Evolved packet core
Mobile RAN
Optical transport
© Analysys Mason Limited 2011
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Telecoms software market segmentation
Figure 6: Telecoms software market segments [Source: Analysys Mason, 2011]
Business
consulting
Design
consulting
Service delivery
platforms
Real-time charging
Mobile content
management and
delivery
Telecoms
application servers
Mobile device
management
Professional services
Product-related
Systems
Custom
services
integration
development
Outsourced
operations
Hosted managed
services
Billing
Customer care
Service fulfilment
Service assurance
Rating and pricing
Customer
interaction
Order management
Service
management
Partner and
interconnect
Business
optimisation
Mediation
Customer
relationship
management
Subscriber
management
Inventory
management
Activation
Engineering tools
Fault and event
management
Performance
monitoring
Workforce
automation
Probe systems
Network management systems
Mobile
Residential
broadband
Business data
services
PSTN
© Analysys Mason Limited 2011
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Contents
Executive summary
Market definition
Market strategy perspective
Market share and forecast
Recommendations
© Analysys Mason Limited 2011
Telecoms software professional services: worldwide market shares 2010
11
CSPs focused on reducing costs and staying competitive,
which increased TSPS spend in 2010
Economic uncertainty

CSPs spent tactically on services such as billing
consolidation in order to increase efficiency.

CSPs continued to focus on opex reduction, which
increased outsourced network management contracts.


TSPS is under price pressure to accommodate CSPs’
need to reduce costs.
Headcount reduction in CSPs drove TSPS in developed
markets, particularly in Europe. Accenture was the biggest
winners in Europe in 2010.
Increase in M&A activity



New technology deployments

CSPs invested in competitive mobile (3G/HSPA and LTE)
and residential (optical NGA: GPON, FTTx) broadband
infrastructure. This boosted TSPS, particularly SI.

New technology deployment and management provided
outsourced network management TSPS opportunities.

CSPs accelerated the delivery of mobile broadband data
services with hosted app stores and SDP in order to
acquire subscribers, increase revenue and recover
spectrum licence investments (e.g. India: 3G, USA: LTE).
Vendors’ M&A activity focused on increasing customer
numbers, TSPS capabilities and local presence. For
example, Ericsson acquired Telcordia, increasing its
products and services in NA, and Tridge Group and
Optimi, increasing its presence and capacity in Europe.
High margins in the TSPS market are driving vendors’
M&A activity, gradually leading to industry consolidation
Atos acquired Siemens IT Solutions and is launching a
new cloud service offering from this acquisition.
Core versus non-core CSP business functions

CSPs are using TSPS for non-core processes and
operations providing the TSPS are low-cost and comply
with CSPs’ SLAs. Network management became a noncore activity in 2010.

CSPs are restructuring their business to differentiate their
core business functions from those that are non-core.

Core business functions and strategic targets benefit from
outsourcing non-core activities.

Small new entrants identify few core functions.
© Analysys Mason Limited 2011
Services are at the top of the telecoms vendor value chain
because of high revenue margins
Increasing
revenue margin
Solution
support
Services
Integration
$$$
Deployment
Product
Support
Design
Consulting
Multivendor APIs
Third party
Software
$$
Security
Multivendor applications
Middleware
Virtualisation
Hardware
Vendor-specific APIs
Single vendor applications
App modules
HA
Operating System (OS)
Management
Telecoms vendor value chain
Managed
services
Network (mobile, IP, optical) equipment, storage, servers, etc.
$
Servers
NGA
ATCA
SAN



End-user devices
End-user
devices
(laptops, smartphones, tablets, dongles,
set-up boxes, DSL gateways, femotcells)
$$$$$$$
18683-223
Source: Analysys Mason
Commercial in confidence
The burst of recovery in 2010 is a knee-jerk tactical reaction
by CSPs to cost and organisational restructuring

CSPs have invested in new technologies and outsourcing contracts to address two agendas simultaneously:
cost reduction and increase in competitiveness to increase revenue.

New technology projects were primarily to compete with or respond to competitors, particularly LTE roll-out in
Australia, Singapore and the USA.

This is reflected in the increase in capex and opex in 2010.

For TSPS, numerous multi-year managed-service contracts will provide CSPs and suppliers, respectively,
with predictable opex and revenue. The volume of such multi-year managed-service contracts being awarded
year-on-year is uncertain.

CSP spend in the fourth quarter of 2010 has continued into 2011, however the uncertain economic climate in
the fourth quarter of 2011 could lead CSPs to regress into cautious spending in 2012.

CSPs will require more stringent business cases before investing, not solely the availability of technology.
Figure 7: Simplified investment lifecycle for a typical CSP [Source: Analysys Mason, 2011]
Assess/evaluate
new opportunities
Invest
Recover
investment
18683-223
Commercial in confidence
TSPS could break the mould of the traditional ‘business
as usual’ telecoms industry – a scenario analysis [1]


This scenario analysis model will be based on three types of CSP:
Reactive CSPs

Proactive CSPs





largely in a ‘business as usual’ mode

proactively evolve to new business models,
taking advantage of new opportunities to
increase revenue

balance assessment of market opportunities,
business planning and realisation of revenue
according to business plans

use smart outsourcing and hosting of trials
and non-essential assets and processes to
reduce costs

use TSPS and revenue-sharing models to
accelerate delivery of new services and
improve efficiency in order to increase
revenue.
reactive to competitors’ investments and
positioning
concentrating on traditional services
little outsourcing – keep control of assets and
operations post implementation.
Progressive (semi-active) CSPs

progressively, but cautiously, explore new
business models

have longer business-planning and decisionmaking cycles

use TSPS to accelerate new service
launches and to transfer risk of complex
projects and operations

use outsourcing and hosting to reduce costs,
but retain some control.
18683-223
Commercial in confidence
TSPS could break the mould of the traditional ‘business
as usual’ telecoms industry – a scenario analysis [2]
Figure 8: Scenario analysis model [Source: Analysys Mason, 2011]

USD
The forecast in this
report assumes that
the majority of CSPs
will be ‘progressive
(semi-active)’ for the
next five years


Proactive CSPs
Costs and
revenue diverging
Opex contained
Capex predictable
Time
Progressive CSPs
USD


Costs and revenue
converging
Opex increasing
Capex uncertain
Time

Reactive CSPs

USD

Three types of
CSP models
over the next
15–20 years
All start from the
same baseline
traditional
telecoms model
Increasing use of TSPS



Costs exceeding
revenue
Opex increasing
Capex uncertain
Time
Note: ‘costs’ refers to CSPs’ total costs (capex + opex)
Revenue
Costs
Opex
Capex
18683-223
Commercial in confidence
16
Forces controlling the evolution of service layer
infrastructure
Figure 9: Telecoms software evolution [Source: Analysys Mason, 2011]
Future strategy: minimise
pain of future legacy

Reduce number of platforms and
suppliers

Select industry standards and
technologies

Police a group-wide architecture
Build / Own

Double-sided business models
Telecoms infrastructure,
and systems

Mobile data and Internet services

Social networking
Virtualisation, NFC, security, …

Location and personalisation
Billing
Control or constrain change
SDP
Legacy systems and services:
minimise cost and change


Host
Mobile
Customer
DWH care
IMS
FMC

Tied to legacy network infrastructure

Regulatory constraints
Operate
Embrace and drive change
OSS
FTTx
10–20-year lifetime – ageing
hardware and software platforms
Essential to legacy services used by
established customer base: supports
current but declining revenue
New services and
business models: agility
and flexibility are
everything
Outsource
New technologies and
processes: agility and
flexibility are everything

Time to market

Customer insight

Cost reduction

Agility and flexibility
Group strategy?

Increase revenue

Operational excellence

Service leadership and innovation

New revenue streams
© Analysys Mason Limited 2011
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Contents
Executive summary
Market definition
Market strategy perspective
Market share and forecast
Recommendations
© Analysys Mason Limited 2011
18
Market summary by sub-segment [1]
Figure 10: TSPS revenue by sub-segment, worldwide, 2010 – with market summaries [Source: Analysys Mason, 2011]
Systems integration (revenue: USD12.3 billion)
7%
Outsourced operations (revenue: USD12.3 billion)

SI projects to enable new technologies, upgrades and
transformation to reduce opex drove this sub-segment.


Global CSIs continue to lead this sub-segment,
followed by NEMs. Hewlett-Packard and IBM offer
SI services, based on their multi-vendor skills,
partnerships and certifications.


CSPs will always have multi-vendor
environments, owing to organic evolution
leading to silos.
5%
Product-related services
(revenue: USD8.9 billion)
NEMs continued to lead this sub-segment,
followed by global CSIs.

26%
The significant increase in spend in this
sub-segment is attracting other suppliers.
Total revenue:
USD47.85
Vendors win these high-value specialist
product-related projects owing to their IPR.

ISVs led this market, with product-based professional
services offerings (their core business model).
Amdocs was again the most-successful vendor in terms
of combining its product and service portfolios. Oracle is
the only other ISV that is aggressively pushing into the
TSPS market with ‘pre-integrated’ solutions.
Hosted managed services
(revenue: USD5.3 billion)
26%
19%


5%
8%
34%
CSPs’ focus on reducing opex significantly increased
the size of this sub-segment.

11%
4%
Only marginally behind the SI sub-segment in 2010
(~USD64 million difference).

4%
Growth in this sub-segment was low as
forecast because CSPs regard outsourcing
as lower risk than hosting.

Hosted app stores, SaaS (billing, interconnect) and
cloud storage require no initial capital. They drove
growth by reducing CSPs’ costs.

NEMs again led this segment, followed by global
CSIs and ISVs.
© Analysys Mason Limited 2011
19
Market summary by sub-segment [2]
Figure 11: TSPS revenue by sub-segment, worldwide, 2010 – with market summaries [Source: Analysys Mason, 2011]
2%
Design consulting (revenue: USD3.9 billion)
Business consulting (revenue: USD2.5 billion)

NEMs again led this sub-segment, followed by global
CSIs.

Design consulting is typically bundled into the project
management framework of technology projects.


Suppliers are devaluing this service in order to
attain larger SI and managed services
contracts.
5%
Custom development
(revenue: USD2.6 billion)
19%

This sub-segment had a boost in 2010 from
customisation and legacy integration in a number
of departmental COTS transformation projects.

Global CSIs again led this sub-segment, performing
custom development for risk-averse CSPs and gaining
significant revenue with application development
management (ADM) services.


This sub-segment declined as CSPs focused on
internal restructuring in order to reduce costs.

5%
–5%
This service is visible to senior CSP
decision makers and influences CSP
strategic planning and investments.
Total revenue:
USD47.85
11%
34%
Global CSIs again led this sub-segment, with their
independence and technology-neutral approach
to business transformation.
26%
8%
ISVs perform product-focused design
consulting.

26%
Low-cost resources are typically used.
© Analysys Mason Limited 2011
20
Systems integration, outsourced operations and hosted
managed services remain the high-growth segments
Revenue (USD billion)
Figure 12: TSPS revenue by sub-segment, worldwide, 2010–2015
[Source: Analysys Mason, 2011]
20
18
16
14
12
10
8
6
4
2
0
2010
Business consulting
2516
(CAGR 3.0%)
Design consulting
3944
(CAGR 6.6%)
Product-related services
8877
(CAGR 5.8%)
Systems integration
12331
(CAGR 7.2%)
Custom development
2616
(CAGR 4.6%)
Outsourced operations
12268
(CAGR 6.9%)
Hosted managed
5300
services (CAGR 6.9%)
2011
2012
2013
2014
2015
2562
2618
2695
2793
2922
4139
4410
4741
5097
5430
9316
9753
10346
11044
11775
13170
14026
15147
16227
17445
2758
2954
3108
3197
3283
12854
13559
14621
15871
17128
5504
5772
6160
6725
7413

Business consulting will grow the least as
vendors continue to devalue these services
and CSPs focus on tactical cost-reduction
projects and managed services.

New technologies (LTE, FTTx, cloud, M2M and
m-payments) and transformation projects to
deliver new services and reduce cost will drive
design consulting growth.

Product maturity will increase flexibility and
streamlined implementation projects will drive
growth in product-related services.

CSPs’ multi-vendor and legacy integration
challenges will continue to drive systems
integration in the longer term.

Custom development growth will slow as CSPs
migrate to COTS products and their legacy
dependencies decrease.

Opex reduction and risk transfer will continue
to be strong outsourced operations drivers.

No capex risk, and new services and business
models, will drive hosted managed services.
© Analysys Mason Limited 2011
21
Contents
Executive summary
Market definition
Market strategy perspective
Market share and forecast
Recommendations
© Analysys Mason Limited 2011
22
Recommendations for CSPs

1
CSPs should consider:

balancing tactical (cost reduction) and strategic (evolving value chains and digital economy paradigm)
TSPS planning and investments to make cost more predictable and support new services investments
to support the growing market demand from digital consumers.

developing and owning their own long-term transformation programmes using structured continuous
service improvement programmes (CSIP) that capitalises on suppliers’ knowledge and skills to drive
measureable, phased transformation projects in the long-term programme.1

replacing home-grown or customised systems with COTS solutions to reduce go-to-market time and
operational complexities.

outsourcing functions non-core functions unlikely to provide competitive differentiation, and provides
flexibility for the CSP to drive to scale to market demand and consumer growth.

establishing risk-sharing partnerships with suppliers for strategic ventures such as offering cloud,
mpayment, mhealth, M2M or security services.

hosted managed services for new services (such as cloud, M2M, mpayment, mhealth) to eliminate
capex, reduce opex reduce time-to-market and transfer the risk to the supplier.

building managed services partners (MSPs) with preferred (Tier 1) and auxiliary (Tier 2) suppliers to
streamline supplier management and procurement.

evaluating the value of TSPS that augments core business functions and the competitive value of
outsourced non-core functions that complements core functions.
The transformation projects referred to here is mainly driven by departmental transformational projects, such as billing consolidation or migration, which
are part of larger, long-term transformation programmes, such as BT’s 21CN initiative.
© Analysys Mason Limited 2011
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Recommendations for all supplier types

Suppliers should:

focus on cost reduction (current priority), new services and new business models in developed markets

focus on time-to-market and managing growth in emerging markets, particularly APAC and CALA

aim for long-term outsourced operations and hosted managed services because they provide
predictable revenue streams regardless of economic instability

perform evaluations at the end of projects and managed service contracts in order to learn valuable
lessons and help improve service offerings and performance KPIs

provide TSPS that transfer CSPs’ perceived risks to the supplier

aim to penetrate global Tier 1 CSPs to provide a means of entry into emerging markets, as such CSPs
expand their operations in these regions

aim to be trusted MSPs rather than just suppliers

increase localisation of resources and assets in order to reduce cost and counter increasing price
pressure from competing suppliers (particularly Huawei, Infosys, TCS, Tech Mahindra, Wipro and ZTE),
as they attempt to accommodate CSPs’ cost-reduction objectives

consider strategic acquisitions in order to absorb competitors and gain a competitive advantage

consider strategic partnerships with other suppliers that do not compete with their core skills

develop TSPS offerings that roadmaps CSPs’ existing business to support new business models such
as cloud, e-commerce, M2M, mpayment and mhealth services.
© Analysys Mason Limited 2011
24
Glen Ragoonanan
[email protected]
Analysys Mason Limited
Bush House, North West Wing
Aldwych, London WC2B 4PJ, UK
Tel: +44 (0)845 600 5244
Fax: +44 (0)20 7395 9001
www.analysysmason.com
© Analysys Mason Limited 2011
25
Contents
Annex
NMS market overview
Detailed market definitions
© Analysys Mason Limited 2011
26
Overall NMS market summary: the prolonged effects of the
economic downturn continue to impact the market
Figure 13: NMS market shares by revenue, worldwide, 20101
[Source: Analysys Mason, 2011]
Other
17%

Ericsson
21%

The residential broadband market segment grew
by 42% year-on-year, while the mobile segment
declined by 5%. The business services market
segment grew by 3%.

Ericsson continues to lead this market, but
retained, rather than increased, its market share.

Alcatel-Lucent continues to hold on to second
place, thanks to its xPON and backhaul solutions.

Huawei retains third place. Like other NEMs in
this market, its revenue growth is beginning to
normalise at a 6% year-on-year rate. China’s
national broadband roll-out accounted for most of
Huawei’s residential broadband revenue growth.

NSN remains in fourth place. Its professional
services business continues to outpace its
equipment business.
ZTE
5%
Cisco
Systems
8%
AlcatelLucent
19%
Nokia
Siemens
Networks
13%
Huawei
17%
Total revenue: USD4.4 billion
The NMS market grew by 3%. This is less than the 5%
growth we forecasted last year, primarily because of the
prolonged effects of the recession.
1
Significant vendors in the ‘other’ category include: NEC, Motorola,
Juniper Networks, GENBAND, Tellabs, Ciena, ECI Telecom and Tekelec.
The network equipment manufacturers’ (NEMs’)
network management systems (NMS) market
generated USD4.4 billion in revenue in 2010, up
by 3% from USD4.3 billion in 2009.
© Analysys Mason Limited 2011
27
Overall NMS market 3-year summary: ZTE entered the top
six in 2010 as Nortel departed the telecoms market
Figure 14: NMS market shares by revenue, worldwide,
2008–2010 [Source: Analysys Mason, 2011]

The NMS market grew by 3%. This is lower than
the 5% growth we forecasted last year, primarily
because uncertainty surrounding the recovery
from recession is delaying most CSPs’
infrastructure investments.

Most NEMs had a fairly flat year in terms of
revenue in 2010.
100%
90%
20%
22%
21%
Market share of revenue
80%
70%
Ericsson
Alcatel-Lucent
19%
18%
18%
17%
17%
Huawei
60%
50%
40%
14%
Nokia Siemens Networks
Cisco Systems
16%
14%
13%
7%
5%
8%
20%
7%
5%
5%
ZTE
10%
19%
17%
17%
Other
2008
2009
2010
30%

Nortel Networks

0%

Total revenue 2008: USD4.65 billion
Total revenue 2009: USD4.28 billion
Total revenue 2010: USD4.41 billion

Ericsson’s NMS revenue grew by only 1% in 2010,
despite its acquisition of Nortel businesses, as
revenue continued to decline in Europe, the Middle
East and Africa (EMEA) overall.
Huawei again led the residential broadband and
business services segments. Alcatel-Lucent is
marginally behind, but achieved revenue growth in
the mobile and residential broadband segments.
ZTE’s year-on-year revenue growth continues to
be strong. It grew by 26% in 2010, largely thanks
to gains in the mobile market segment in EMEA.
Cisco achieved 21% year-on-year revenue growth
because of increasing ASR take-up for IP-NGNs
and the large femtocell deal with AT&T in 2010.
© Analysys Mason Limited 2011
28
Other significant NEMs strategic directions






Ciena and GENBAND grew inorganically as a result of their Nortel acquisitions. Ciena’s revenue almost
doubled (it increased by 93% in 2010).
NEC’s PASOLINK has been the cornerstone of its success in this market. It has also benefitted from its
movement towards a unified multi-technology NMS (MS5000), which harmonises its hardware (NEC) and
software (NetCracker) arms.
The revenue growth in Motorola’s mobile business slowed following NSN’s announcement in July 2010
that it intended to acquire the business. This drove Motorola to focus on its fixed telecoms business, which
specialises in optical and DOCSIS access technologies and IPTV. Motorola Mobility’s recent announcement
that it intends to acquire Dreampark demonstrates its focus on IPTV as part of its broadband portfolio.
Juniper Networks’ revenue grew as a result of its success in the North American market and effective
partnerships with other NEMs and ISVs, such as NSN and IBM. Cisco continues to be a direct competitor
to Juniper.
Tellabs and ECI Telecom are focusing on mobile broadband infrastructure.
Tekelec’s legacy assets continue to support its revenue, but its acquisitions of Camiant and Blueslice
Networks are driving an increase in next-generation initiatives to support these fast-growing policy
management solutions.
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Factors that affected the NEMs NMS market in 2010
CSPs delayed infrastructure investment decisions
in the third quarter of 2010 because of uncertainty
surrounding the economic recovery. CSPs focused
on optimising their infrastructure to reduce capex
and opex (particularly in Western Europe). NEMs
announced fewer infrastructure contracts in 2010
than in 2009.

Spending returned in the fourth quarter, which
enabled the NMS market to achieve 3% net
growth in 2010.



Several Tier 1 CSPs awarded multi-year fixed and
mobile network projects in the fourth quarter, such
as Bharti Airtel’s expansion in Africa and Sprint’s
‘Network Vision’ project in the USA.
CSPs focused on residential broadband in 2010,
while delaying mobile investments.
Mobile broadband was a growth area for NMS –
particularly in NA. CSPs are investing in 3G and
HSPA/HSPA+ networks, LTE trials, and some
femtocell trials and deployments.
Figure 15: Conceptual NEMs revenue trend, worldwide,
1Q 2010–4Q 2010 [Source: Analysys Mason, 2011]
Revenue

1Q 2010

2Q 2010
3Q 2010
4Q 2010
Notable infrastructure investment areas were:

NGA contracts, such as national broadband
networks in Australia (Alcatel-Lucent) and
China (Alcatel-Lucent and Huawei)

IP-NGN upgrades

mobile broadband

optical submarine backbone and transport

new technologies, such as VDSL2, femtocell
and LTE trials and deployments.
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NMS market summary by region, 2008–2010: EMEA’s share
continues to be squeezed as the APAC market grows
Regional summary for 2010:





spending increased in NA – for example,
Verizon invested in an aggressive LTE
roll-out in 39 markets
Western Europe, which accounts for
two-thirds of EMEA’s telecoms spending,
continued to be undermined by the recession
spending continued to grow in APAC – China
and India account for the most spending in
the region
CALA achieved 3% revenue growth,
compared with our 4% forecasted growth.
Figure 16: NMS revenue by region, worldwide, 2008–2010
[Source: Analysys Mason, 2011]
Market share of revenue

100%
80%
we expect the modest growth in spending
reported in all regions during the fourth
quarter of 2010 to continue in 2011

spending will continue to be cautious in
EMEA, while CSPs in the USA will push
forward with mobile broadband investments
36%
37%
39%
36%
33%
7%
21%
8%
21%
8%
23%
2008
2009
2010
60%
40%
20%
0%
APAC
EMEA
CALA
NA
Total revenue 2008: USD4.65 billion
Total revenue 2009: USD4.28 billion
Total revenue 2010: USD4.41 billion
Key: APAC = the Asia–Pacific region; CALA = Central and Latin America;
EMEA = Europe, the Middle East and Africa; NA = North America.

Regional outlook for 2011:

33%
spending will continue to grow in APAC’s
emerging markets

CSPs in developed APAC markets such as
Japan and New Zealand will make some
infrastructure investments late in 2011 to
rebuild following natural disasters

spending in CALA will grow slowly, but will
be constrained slightly by the delayed effects
of the economic downturn.
© Analysys Mason Limited 2011
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The economics of supporting traffic demands will drive
multiple fixed and mobile network investments
Figure 17: Comparison of the network economics of mobile
networks [Source: Analysys Mason, 2011]

The volume of mobile traffic per connection will
grow at a 37% CAGR in developed markets during
the next five years, from 182MB per month in 2011
to 892MB per month in 2016.

Several CSPs in developed markets have dropped
flat-rate mobile data tariffs, recognising that they
jeopardise the sustainability of their business.

However, end users are increasingly using Wi-Fi
hotspots in order to inexpensively gain a better
mobile broadband experience.

This will drive communications service providers
(CSPs) to invest in unified multi-technology
network management systems (NMS), to manage:
Traffic volume
Network cost
Network costs
outstrip revenue
Revenue
Time
Dominated by voice

small-cell technologies: femtocells and Wi-Fi

high-capacity transport networks for data
offloading: IP, metro-Ethernet, FTTx, VDSL2
and macrocells (LTE and HSPA+)

low-cost (rural) access and transport: fixed
wireless (WiMAX), microwave backhaul and
xDSL).
Dominated by data
Fixed-mobile convergence is an evolving reality with
unified multi-technology NMS more prevalent.
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Worldwide NMS forecast, 2011–2015: new technologies will
inject growth into this very mature OSS market
Figure 18: NMS revenue, worldwide, 2010–2015 [Source:
Analysys Mason, 2011]

The worldwide NMS market is forecast to grow
from USD4.4 billion in 2010 to USD6.0 billion in
2015, at a 6.4% CAGR.

LTE roll-outs are the major driver for investments
in mobile NMS. They will drive accelerated growth
in North America (NA) and developed Asia–Pacific
(APAC) markets until 2013, and a sustained, lower
growth rate later in the forecast period.

Growth will return to the NMS market as a result of
economic recovery and deployments of new
network technologies and IP services.

European CSPs continue to have cost controls in
place, which will restrict investments in network
equipment and NMS during the next year.

Packet technologies, IP services and cloud
investments will drive growth in business services
NMS and residential broadband NMS markets.

PSTN and legacy services will continue to decline,
but will have sustained maintenance revenue
during the next two years as VoLTE matures.
7000
6014
6000
5703
5400
5013
Revenue (USD million)
5000
4647
4410
4000
3000
2000
1000
0
2010
2011
2012
2013
2014
2015
© Analysys Mason Limited 2011
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Drivers and inhibitors in the NMS market
Figure 19: Drivers and inhibitors in the NMS market [Source: Analysys Mason, 2011]
Inhibitors
Drivers

Growth in connected devices

Increase in demand for mobile
services and new technologies

Regulatory actions encouraging
competition

Spectrum scarcity



Pricing pressure

Slow economic recovery

Increase in network sharing
Infrastructure consolidation – FMC
and cloud
Cost reduction by retiring legacy
networks
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Recommendations for CSPs

CSPs should consider:

moving to unified, multi-technology NMS as part of their NGN or OSS transformations.

the risks and rewards of extending the life of legacy NMS and hardware while transforming other parts
of the business.

network optimisation and policy management options to curb network growth investment rather than
allow traffic to grow exponentially and become unmanageable.

the value of the NMS vendor-specific data that may be lost through the use of inefficient, customised,
non-standard NBI, because such data can enable them to provide a better quality of service for end
users – particularly in competitive markets.

enhancing the flexibility and interoperability of their NMS in order to improve efficiency and thus reduce
operational cost, resolution times, provisioning times and network auditing times.

the ability of their established NMS to integrate with other network and IT management systems in order
to provide a comprehensive cloud management solution for delivering, monitoring and managing IaaS
cloud services.
© Analysys Mason Limited 2011
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Recommendations for NEMs

NEMs should:

enhance established mobile NMS to enable them to manage multiple RAN technologies, including LTE
with self-organisation network (SON) capabilities, because CSPs will expand 3G networks with
HSPA/HSPA+ in order to provide mobile broadband services.

continue to use a unified multi-technology approach to NMS as fixed and mobile technologies converge,
and offer CSPs options to normalise mobile and fixed broadband traffic across their networks. In
addition, unified multi-technology NMS can protect and/or increase NEMs hardware sales.

work more closely with ISV partners to develop standards-based northbound interfaces (NBIs) to service
assurance and service fulfilment OSS in order to provide CSPs with better end-to-end provisioning, QoE
monitoring and service management. Alcatel-Lucent’s certified 5620 SAM-O standard NBI OSS
adapters, which interface with Tier 1 ISV OSS, are leading in this area to date.

consider the growing importance of policy management in helping CSPs to maximise their IP
infrastructure capacity, and thus the proportional importance of IP NMS managing the PCEF and
interfaces with policy servers (Gx) and charging systems (Gy and Gz).

consider the risks and rewards of extending legacy (circuit-switched) technology and NMS.

not expect telecoms spending in Europe to recover from the recession as quickly as in other regions.

target the growth in emerging markets (particularly in APAC) to gain increased and sustainable business.

align the role of NMS to effectively support IaaS cloud management.
© Analysys Mason Limited 2011
36
Contents
Annex
NMS market overview
Detailed market definitions
© Analysys Mason Limited 2011
37
Definitions of telecoms software professional services [1]
Table 1a: Definitions of telecoms software professional services and its sub-segments [Source: Analysys Mason, 2011]
Segment or
sub-segment
Telecoms
software
professional
services
Definition
Specialist services that CSPs use for transformation projects (such as optimisation, re-engineering and
restructuring), and for operations and support. Our definition of telecoms software professional services includes
only those services that support telecoms specific software (such as OSS, BSS and SDPs). It excludes:

services that are not telecoms-specific, such as network integration and outsourced IT (enterprise IT), or relate
to non-telecoms-specific software (such as ERP or financials).

services supplied from equipment manufacturers, such as product engineering and testing.

the installation, training and lifecycle management services related to telecoms equipment deployments (also
known as network roll-outs), including post-implementation support services We exclude such hardwarespecific services because they are specific to NEMs and do not apply to ISVs or CSIs.
We sub-divide telecoms software professional services into the following seven categories. We acknowledge that
in turnkey projects several of these service sub-segments can be consolidated in a single transformation project
or managed service contract.
Business
consulting
Business consulting provides advisory services in the areas of business process, workflows, organisation issues
and strategic planning, such as how to enter a market or how to package a service. This includes, but is not
limited to: transformational strategy; business case development and ROI modelling; business process reengineering and optimisation; organisation restructuring and optimisation, as well as change management;
assisting CSPs to develop new products and services to deliver to their subscribers, ranging from tariffs to valueadded services; go-to-market strategies; regulatory compliance review and reporting requirements; and marketing
and campaign strategies.
© Analysys Mason Limited 2011
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Definitions of telecoms software professional services [2]
Table 1b: Definitions of telecoms software professional services and its sub-segments [Source: Analysys Mason, 2011]
Sub-segment
Definition
Design
consulting
Design consulting provides advisory design services prior to a telecoms network, software and/or systems
implementation in the areas of OSS, BSS and SDP architecture, network planning and optimisation and data or
information models. These services typically contribute developing requirements for procuring the systems and
software needed. This category includes, but is not limited to: network planning and optimisation designs for both
fixed and mobile networks; OSS, BSS and SDP, and integrated architectural design; developing technical
requirement for tender documents; high-level migration plans and roadmapping; analysis of established systems;
data modelling; high-level interface definitions and designs.
Productrelated
services
Product-related services are the installation, training and lifecycle management services related to a specific
telecoms software deployment. This category also includes professional services related specifically to a
supplier’s own product and is the exact product-related services definition we use in other telecoms software
reports. Services related to third-party products are part of the systems integration sub-segment.
We exclude support services for hardware products, to ensures that only telecoms software professional services
are compared for all suppliers.
Custom
development
Custom development refers to telecoms software that is written specifically for an individual CSP, typically as a
result of their ownership of legacy and proprietary systems, software or interfaces. It includes any development
that requires coding to meet an unusual requirement, such as the development of a customised application store
on an SDP or Microsoft .NET platform, an API for interfacing with legacy or proprietary systems, and data
migration scripts. This is internal development that is typically performed by large CSPs – a market that we will
quantify separately from the market in which suppliers currently participate. This includes some ADM.
© Analysys Mason Limited 2011
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Definitions of telecoms software professional services [3]
Table 1c: Definitions of telecoms software professional services and its sub-segments [Source: Analysys Mason, 2011]
Sub-segment
Definition
Systems
integration
Systems integration concerns the services required to manage and deliver major telecoms software projects in
the OSS, BSS and applications areas to meet CSPs’ specific requirements. These are services that are beyond
the boundaries of a single product or suite (which is covered in the product-related services segment), and
involve other systems in the CSP environment in order to meet the project’s requirements. This category includes,
but is not limited to:

integration with third-party (other vendor or proprietary) data sources, systems and interfaces.

data loading and migration.

customisation and configurations of software extensions and modules (without coding) to provide
customised software features and capabilities, such as network equipment adapters, point-to-point
interfaces and EAI Integration.

detailed requirements, technical specification and detailed design.

integration testing, not normal unit and functional system testing.

project management services.
Services related to third-party products (not owned by the supplier) are included in this systems integration subsegment.
Systems integrations continue to drive coherent system architecture across the various telecoms software
segments (OSS, BSS and SDP). We will separate the systems integration services into the various software
segments in a separate report.
© Analysys Mason Limited 2011
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Definitions of telecoms software professional services [4]
Table 1d: Definitions of telecoms software professional services and its sub-segments [Source: Analysys Mason, 2011]
Sub-segment
Definition
Outsourced
operations
Outsourced operations are the professional or specialist services provided by external suppliers’ human
resources to operate and maintain a CSP’s assets, which can include all related operational responsibilities. This
involves the transfer of operations from a CSP to external suppliers. In this scenario, the assets (systems and
software) are owned and reside in the CSP’s environment and the supplier manages the network from a CSP colocated site or other local or regional (for example, regional NOC) site. This includes business process
outsourcing (BPO).
Such services typically include responsibility for onsite operations and related activities in a particular country or
region. Billing and customer care outsourcing services are included, where the CSP owns the systems. Planning,
optimisation and design elements of managed-service contracts are considered in the respective other
categories.
Hosted
managed
services
Hosted managed services are managed and provided by the supplier using its own infrastructure in its NOCs.
The NOCs will typically provide multi-vendor and multi-domain (mobile, fixed and content or media) management.
This differs from outsourced operations, whereby the supplier is responsible for the systems and software in
addition to the human resources that are performing the remote management from the supplier’s NOC. This subsegment excludes field and onsite operations, which form part of the outsourced operations sub-segment.
This category includes billing, customer care, network management and SDPs and services (including softwareas-a-service (SaaS)).
© Analysys Mason Limited 2011
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Definitions of supplier types
Table 2: Definitions of telecoms software professional service supplier types [Source: Analysys Mason, 2011]
Supplier type
Definition
Network equipment
manufacturers
(NEMs)
NEMs are vendors that develop and implement core and access telecoms network equipment, as well as
devices such as routers, switches, CPE, MPLS switches, DSLAMs, multiplexers, optical devices, mobile
switches and base stations. NEMs also develop telecoms software for all of the equipment that they
develop.
Independent
software vendors
(ISVs)
ISVs are vendors that develop telecoms software independent of the network and IT equipment. ISVs’
businesses are focused on providing licences for their software products and additional services, such as
maintenance.
IT suppliers
IT suppliers are manufacturers of IT equipment (such as PCs, laptops, servers, SANs and NASs), which
also develop telecoms software independent of network and IT equipment, like ISVs.
Global consulting
and systems
integrators (CSIs)
Global CSIs do not develop any hardware or software for commercial resale, and have a notable presence
in all major geographical regions. ‘Pure-play’ systems integrators (such as Accenture) account for the
majority of suppliers in this category, but it also includes pure-play consultants (such as KPMG).
Regional consulting Regional CSIs do not develop any hardware or software for commercial resale, lack a notable presence in
and systems
all major geographical regions, and generate less than USD800 million in annual revenue from telecoms
integrators (CSIs)
software professional services. Such suppliers also tend to have a low regional price point.
© Analysys Mason Limited 2011
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Industry and TSPS factors influencing possible change in the
telecoms landscape [1]

Strong labour laws in parts of Europe are being countered by rebadging of CSP staff to outsourced suppliers.
This provides a way for CSPs to optimise their organisations without legal implications.

Sprint can break the mould of the desire of CSPs in the USA to retain control to move to more cost effective
operations, with its Ericsson managed-services contract and Network Vision transformation (Alcatel-Lucent
and Ericsson).



LightSquared’s fifteen-year deal with Sprint will see, over the first eleven years, about USD9 billion paid to
Sprint to build and operate (very probably outsourced) LightSquared’s nationwide wholesale LTE network.
Sprint will also receive an estimated USD4.5 billion in credit to use LightSquared’s network. This is a huge
shift in US CSP operations.
Voice revenue is declining. Monetising data services is increasingly difficult because of growing competition
between CSPs with similar data services. This is slowly driving up capex and opex, and thus squeezing
margins.
Exorbitant spectrum costs, coupled with rigorous regulation, are inhibiting CSPs’ revenue growth.

New technologies are becoming difficult for CSPs to roll out on their own and most LTE and optical NGA
projects are being deployed using an infrastructure sharing or wholesale model.

CSPs still seek revenue growth from greater subscriber numbers. Having more subscribers does increase
revenue, but is also increasing opex in proportion. This is not the case for competing over-the-top and Internet
players that use cloud architecture. More than 90% of over-the-top and Internet players use automated
ordering, billing and self-care, and outsourcing of non-core activities (payments and ordering are also
outsourced by some).
© Analysys Mason Limited 2011
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Industry and TSPS factors influencing possible change in the
telecoms landscape [2]


There is increased interest from investors in successful MVNO and data centre businesses, which are
primarily outsourced and hosted models.
KPNI’s MVNE platform (Magnum) is being delivered by Huawei in a managed-services model and allowed the
successful launch of its Ortel Mobile branded MVNO in Spain in four and a half months.

NA and Western Europe are expected to lead changes in the telecoms industry landscape. However, CSPs in
CALA and developing APAC are using TSPS to accelerate innovation and change in their traditional telecoms
businesses and could be poised to outpace NA and Western Europe with this approach. India has the fastest
3G roll-out worldwide to date and is rolling out LTE in some cities, while the UK has yet to trial LTE.

Cloud computing can provide both cost reductions and new revenue streams for CSPs, but requires them to
change their business models.

Verizon’s USD1.4 billion acquisition of Terremark will increase its revenue and corporate customer prospects,
but it has not yet made any announcement of using Terremark’s cloud architecture and business model to
enhance its ‘business as usual’ model.

Telefónica’s cloud initiatives are targeting cost reduction to combat year-on-year opex increase.

CSPs’ investments in new technologies and services are still mostly reactive – in response to competitors.

Suppliers are opening up to risk- and revenue- sharing TSPS models to encourage CSPs (by deferring capex
spend) to move to new business models, as a more cost-effective option to develop new revenue streams.

Suppliers are involved in cross vertical M&A and partnerships to ramp up their capability to deliver and
support new business models.
© Analysys Mason Limited 2011
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NMS overview
Figure 20: Interfaces supported by NMS [Source: Analysys
Mason, 2011]
Service fulfilment
Service assurance

Inventory management

Fault management

Service activation

Performance management

Discovery

Service management
EMS

Northbound
GUI
NOC
Our definition of NMS includes the following
software products:

element management systems (EMSs),
which interface directly to a particular type of
network equipment and provide an NBI and
basic network management functions

domain managers and NMS, which interface
with the EMS to provide network
management functions for different types of
element in a given technology domain.
Southbound
Vendor 1
Vendor 2
Vendor 3

NMS solutions reside between the OSS
applications and the network elements in a given
domain, and are typically single-vendor solutions.

We include licence, maintenance and support
revenue that NEMs derive from the sale of network
management software to manage their equipment.

In addition to the NBI, NMS provide a GUI to
support some of the basic network management
capabilities, such as configuration, fault
management, accounting, performance and
security management in a single-vendor domain.
© Analysys Mason Limited 2011
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NMS segment definitions
Table 3: NMS market segment definitions [Source: Analysys Mason, 2011]
Segment
Definition
Network
management
systems (NMS)
NMS enable basic element management and network management for the NEMs’ equipment and support
northbound interfaces (NBI) to multi-vendor service assurance and service fulfilment systems.
Mobile NMS
Mobile NMS solutions can manage circuit-switched, packet-switched and radio technology infrastructure.
They provide the core OSS infrastructure for operating and managing mobile network switching and network
elements. This includes domain managers and EMS for packet technology. Femtocell deployments that aim
to increase mobile coverage are covered in this segment.
Business data
services NMS
Business data services NMS provide high service-level metrics to large enterprise customers with complex
network service configurations and customisations. These are typically IP network services, such as Internet
access, hosting services, IP VPN, Ethernet, managed IT services and wholesale carrier services. These
NMS solutions include both GUI and CLI management, which can be managed either centrally or distributed.
Residential
broadband NMS
Residential broadband NMS manage residential network infrastructure. They provide an NBI, and service
assurance and service fulfilment systems for automating service activation and configuration processes.
These NMS are evolving to support the new residential broadband (IP) service offerings that are becoming
mainstream propositions, such as IPTV and residential VoIP. Femtocell deployments that compete with fixed
broadband, and are not intended to improve mobile coverage, are covered in this segment.
PSTN NMS
Legacy systems from equipment vendors meet the network management requirements for legacy PSTN
equipment and fixed circuit-switching technology. Most CSPs will keep them until they retire their PSTN
equipment and move to convergent NGN as a natural network evolution.
Product-related
services
Product-related services are the bundled installation, configuration and customisation services that are
required as part of the deployment of the network elements (hardware) and NMS solutions (software).
© Analysys Mason Limited 2011