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The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014

November 2015

Analytical Report (full version)

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Analytical Report (full version)

The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014
The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014
November 2015

The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014

November 2015

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The market for OSS and BSS systems for support of operating activities of the operators is facing serious challenges. New offers in the OTT world appear every month, while the process of introduction of new operator services can reach 1 year. In the end, traditional telecom players do not keep pace with the rapidly changing user preferences. Reduction of the time needed for launching new services on the market, as well as their variety, bundling, separate billing by traffic type and quality, new telecommunication services, increasing competitiveness and cost reduction – all this is possible only thanks to the transformation of the operator's OSS/BSS stack.

 

J’son & Partners Consulting presents the results of the updated study “The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014”

 

 

Key issues of the study

  • Analysis of the trends, drivers and barriers of the market for OSS and BSS systems for telecom operators in Russia and CIS countries
  • Estimation of the volume and structure of the market

 

 

Practical value of the study

 

The study presents a snapshot of the market. the analysts have identified opportunities and prospects for OSS/BSS transformation taking into account the current trends of the telecommunication market of Russia and CIS countries.

 

 

Target audience

 

The study is designed for telecom operators, Russian and foreign vendors of OSS/BSS solutions, system integrators and analytical agencies.

 

 

Summary of the study

 

OSS (Operation Support System) and BSS (Business Support System) solutions are intended for complex automation of operational activities of telecommunications companies within the framework of business processes, services and management functions. The functionality of OSS and BSS solutions is often intersects and interpenetrates each other, so there are many integrated solutions on the market. In this regard, to refer to the common market the abbreviation OSS/BSS is used. Standardization of OSS/BSS as well as creation of concepts for their further development at the international level is engaged by an industry association called TeleManagement Forum.

 

 

The volume and structure of the Russian market of OSS/BSS telecommunications by the end of 2014

 

According to J'son & Partners Consulting, the total annual volume of the Russian market for OSS/BSS telecommunication solutions, in comparison with 2013, has not increased and is about 34 billion roubles. It is important to note that 2/3 of them are the support costs for the existing system (OPEX), and the annual volume of procurement of new OSS/BSS solutions by the Russian operators (CAPEX) does not exceed 8 billion rubles. This ratio CAPEX/OPEX is typical for almost all operators in the world, where CAPEX accounts for about 40% of the costs (Fig. 1). However, the structure of the CAPEX/OPEX for the Russian operators is significantly displaced from the global average towards the cost for improvements / maintenance of previously implemented systems, up to 70% (it is approximately 30-50% for the global operators). It can serve as an indirect proof of the fact that the management of existing IT systems (so called “Legacy") is much less efficient. This fact raises even more questions about OSS/BSS transformation for domestic operators. Moreover, we consider not only the traditional (for major operators) evolutionary path, but also discuss options for migration to a new OSS/BSS stack.

 

 

If to talk about the general structure of the Russian market of telecommunication software, the BSS segment covers approximately 70%, while the OSS segment is 30% of the market. However, about 80% of the market in monetary terms is the operators of the Big Four (MTS, VimpelCom, MegaFon, Rostelecom), while the remaining 20% are divided between small and medium telecommunications operators.

 

As for the key and the most popular OSS/BSS systems among the Russian telecom operators, billing systems and CRM in the BSS segment have paramount importance for them. The most important and the most popular OSS modules include network management systems (Network Management, Inventory), including all the planning and network optimization tools (Planning, Provisioning, Network Performance). The remaining market share is occupied by the performance monitoring systems (Fault Management), as well as a very promising segment, the service quality management (Service Quality/Performance).

 

Drivers of the development of the Russian OSS/BSS telecom market

  • the growth of mobile broadband and telecom segments (M2M, BI/Big Data, financial services, Media) what requires from the operators greater flexibility in terms of competition from OTT, which are able to launch new products and business models on the market within weeks instead of months (see Fig. 2);
  • the need to transform the operator OSS/BSS stack, using among others "umbrella" solutions;
  • the need to reduce the costs for ownership and increase the transparency/manageability/flexibility.

 

Сonstraints:

  • the economic crisis, instability of the ruble and sanctions regime;
  • the Russian telecommunications market slowdown in general;
  • the presence of diverse multivendor legacy IT systems in ownership of the Russian operators.

 

 

The development of the market of OSS/BSS for telecommunication operators of the CIS countries

 

If to speak about the volumes of the market for OSS/BSS solutions for telecommunication operators in other CIS countries, it should be noted that it is estimated at about 30-40% of the Russian volume, or 14.5 billion rubles, based on the fact that Russia accounts for 60-70% of the volume of the telecommunications market of the CIS countries. The ratio OPEX/CAPEX, typical for the Russian market of telecommunication OSS/BSS is true for the other CIS countries. The market structure largely repeats the Russian pattern: 2/3 of the money market accounts for the BSS segment.

 

Key features of the market of OSS/BSS for telecommunication operators of the CIS countries:

  • the national markets are in most cases distributed between international telecom players, which seek to unify OSS/BSS stack within their groups;
  • the CIS countries, with rare exceptions, are lagging behind the Russian telecommunications market by 3-5 years, in many of them the share of “voice communication” revenue still dominates the share of revenue from services based on data transmission networks and Internet access;
  • local specification in marketing, sales, business, etc., on the one hand, and the strong closedness of some CIS countries, on the other, require offices with strong local expertise. Only large international vendors and the largest Russian integrators can afford it;
  • when considering the CIS countries, in most cases we are talking about small markets with a relatively low payment demand, which limits the investment opportunities of local operators in capital expenditures for the modernization of the OSS/BSS stack.

 

 

According to J'son & Partners Consulting, in 2014 the annual volume of the market of OSS/BSS for telecom operators hardly changed in comparison with the previous year and amounts to 34 billion rubles. The reasons are the economic crisis, instability of the national currency and the sanctions regime. These factors will determine also the stagnation in the market in 2015-2016.

However, the need for OSS/BSS transformation is acutely felt by all the market participants. The slowdown in the growth of traditional operator services, fierce competition from new OTT services, the uncertainty of business models and lack of experience in the development of brand new segments (M2M/IoT, financial services, Digital, Media, etc.), as well as the perspectives of the SDN/NFV concepts require the operators not only reduce the ROI, but the growth of their flexibility, universality, transparency, end-to-end business processes.

There is a serious reason to believe that in case of stabilization of the economic situation in the country we will see a burst of activity associated with the implementation of pent-up demand on the market of OSS/BSS.  

 

 

Views of the industry representatives

 

Maxim Bugaevskiy,

PJSC «MegaFon»,

head of OSS architecture, operations, infrastructure

 

What are the challenges for the operators today? What will determine the development of the market for OSS/BSS in 2015-2016?

 

The development trends for OSS systems for telecom operators will strongly depend on the strategy the company chose for the following periods: the conquest of the market, struggle for quality and subscribers, boosting consumption and reduction of operating costs.

 

I dare to suggest that the main drivers for the selection and development of existing OSS systems will be the aspects that contribute to the manageability of networks, transparency and efficiency of receiving information in consideration of reducing the costs for ownership of the systems, improving the management efficiency, providing new opportunities for operational decision-making.

 

Unification, as well as consolidation, federalization and minimization of solutions that require specialized development, the use of new virtualization technologies in telecom and IT, the widespread use of systems for analysis and processing of big data – all these items are the current requirements for the operation support systems. Separately I want to note one aspect that characterizes the modern approach to the development of OSS systems. It is an objective need when taking decisions at the level of operation, it is the need to know your subscribers and what services are important for them, where these services are necessary for them, and is the subscriber satisfied with the quality and speed. And the most important is to receive information in real-time and to be able to analyze arrays of related information, for example information about the infrastructure operation. This is the bridge that will allow you to be really close to the subscribers.

 

"MegaFon" has a program for the development of OSS systems and operating processes. We have launched our United network control center (UNCC), provided it with basic tools for monitoring and management. We continue to work towards automating processes of centralized network management using best-in-class solutions, we develop innovative technologies like SDN/NFV and Big Data to improve efficiency, flexibility, reduction of the costs for operation and ownership of such systems. It should be noted that the transformation of the systems is concurrent with the changes in operational functions to ensure effective management.

 

How much and in what perspective is the modernization of OSS and BSS stack important for you with consideration of concepts like SDN/NFV, extensive development of M2M/IoT, implementation of new services (banking, insurance, Media, digital, B2B), convergent services, etc.?

 

My professional interest includes the OSS area, so I’ll let myself give you some information only for that subject. These questions are hard to capture solely in the field of OSS, for example, M2M/IoT will present serious requirements not only to the network management, but also to the network infrastructure, communication technologies, as well as the development of technologies for IoT devices. In my opinion, efficient work in the given direction has several aspects for the operator: the creation of products, M2M/IoT, development of big data analytics, scaling solutions of OSS/BSS for supporting big data processing, reduction of the costs for support of a single IoT-subscriber, the network construction and optimization. OTT services put the same threats and opportunities for operators.

 

I also have to mention the huge impact of the SDN/NFV on the OSS development. There are two blocks of systems in the developing recommendations: traditional OSS and MANO (Management and Orchestration) block. Here is the main challenge for OSS: they have to learn to interact with MANO, to share information in almost real time. In my opinion, in the coming year with the development of virtualization traditional OSS solutions will not change critically, they will be integrated with MANO, there will be created the possibility of organizing a closed-loop automatic quality control and transformation of the network functions according to the actual needs of the subscribers. In the further future, some closer integration and transformation of solutions for supporting development and management of communication networks are also possible.

 

 

 

Tatyana Orlova,

 

«Technoserv»,

 

deputy director, directorate for integrated solutions

 

 

What tasks do operators put before you today? What will determine the development of the market for OSS/BSS in 2015-2016?

 

The current conversations about the need for OSS/BSS transformation are connected with the need to reduce the operator expenditures (CAPEX/OPEX), which is only fueled by the general market trends. The profitability of classic services is going down, and operators are trying, but still can not compensate for this drop by offer mobile broadband access, and converged packages.

 

 

Meanwhile operators can not rapidly deploy new services to compete with OTT/service providers, the "tail" of disparate legacy systems left from the turbulent times of M&A prevents it. As a way out of this situation I see the establishment of a centralized BSS stack with horizontal solutions based on an "umbrella" solution that supports omnichannel, united subscriber database, united product catalog and billing, and united order management system.

 

 

Due to the depreciation of the ruble, positions of Russian/Western solutions on the market have not changed, it has not moved towards the Russian developers, the market froze for everyone. However, Western partners have become more accommodating, willing to provide large discounts. What is more interesting is that Chinese vendors had most benefits from stronger foreign market conditions and the sanctions regime. They may increasingly begin to issue target credits in dollars. The European infrastructure vendors got, on the contrary, into a difficult situation: it has become extremely problematic for the European financial institutions to give loans to Russia. Yes, the budgets for 2016 are planned, but even now ongoing contests can simply be put on pause: the operators themselves have difficulties to justify the need for the implementation of another decision. Therefore, if to speak about prospects of the market of OSS/BSS telecommunication in 2016, everything will depend on the cost of oil and the ruble exchange rate, as well as the general condition of the national economy.

 

 

 

How specific is the Russian market of telecommunication OSS/BSS in comparison with the CIS in whole? Do they have the same characteristics and trends?

 

 

The market of telecommunication OSS/BSS-systems in the CIS countries is in many respects similar to Russian. There is the same major group: MTS, "VimpelCom", partly "MegaFon" have their daughter enterprises. So somehow they are trying to unify solutions within the group by putting the same system as in the center. On the other hand, there are independent operators who are more free to pick and choose the decisions based purely on commercial criteria ("quality/price"). Therefore, CIS implemented a lot of vendors in Tier 2/Tier3 both Western and Russian (Peter Service, Berkut, CBOSS, Orga/Redknee, West Wind, etc.). In addition, the CIS market is also strongly filled with foreign telecommunications companies, primarily TeliaSonera, Tele2, Turkcell, Telekom Austria. They also seek to unify OSS/BSS ecosystem within their groups.

 

But the overall backwardness of the CIS from the Russian telecom market is about 3-5 years, although some individual countries in terms of development are quite comparable and even somewhat can go ahead (e.g. Vivacell in Armenia, at one of the stages of its development has produced a highly progressive tariff plan). First, the CIS countries are more strongly dependant on various economic disturbances, often the population of these quite small countries is very poor. All these things limit the ability of local operators in CAPEX and the OSS and BSS network modernization. Russia lags behind by 3-5 years from Europe, the CIS is behind by about the same amount from us. In practice, this means that the telecom operators in CIS are less technologically advanced – the stagnation of “voice services” and the boom in data traffic and services on their basis, which we are seeing in Russia, has not yet come to CIS. Our voice services are no longer growing, the ARPU is falling, the costs are rising, so our operators have to optimize everything they can to improve their IT infrastructure, particularly the OSS/BSS stack. Our CIS colleagues will face such problems soon, but not now.

 

 

 

Dmitriy Sagalaev,

 

AT Consulting,

 

partner, director of BSS practice

 

 

Could you describe the key trends of the Russian market of OSS/BSS by the end of 2014?

 

In 2014 the key OSS/BSS market trend is the modernization of IT in order to improve service quality and reduce the time of activation of services. Operators launch mobile financial services, the BSS architecture is being reconstructed from billing towards CRM.

 

 

We do not observe any strengthening of Russian billing developers’ positions, even contrariwise, we see the increasing complexity of the algorithms and the degree of integration of billing systems with network elements. An increasingly important role in the creation of new billing systems is played by network equipment vendors. The share of operators that implement domestic, Russian software is very small.

 

 

 

What will determine the development of the market in 2015-2016? What tasks do operators put before you today?

 

 

In 2015-2016, the development of the market will greatly depend on the macroeconomic situation. The fixed-line market will develop due to the continued growth of the segment of commercial TV and Internet advertising, as well as the increase of capacity of data networks. Operators continue their expansion on the banking market.

 

 

All operators are focused on improving customer interaction via the creation and development of digital service channels and self-service. The process of restructuring of the BSS architecture towards customer-oriented is going on. We trace the trend of the monetization of big data gathered on network devices.

 

Operators continue to optimize the processes of development and operation of their IT systems by offloading these functions to the internal services or offering complex contracts for maintenance and development.

 

 

 

 

Detailed results of the research are presented in the full version of the report:

 

«The market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014»

 

 

  1. Introduction
  2. Definitions and methodology
  3. Qualitative analysis of the Russian market of OSS/BSS systems for telecom operators

 

3.1. Description of the Russian OSS/BSS market ecosystem

 

3.2. Key types of OSS systems

 

3.3. The OSS market structure by separate segments

 

3.4. Key types of BSS-systems

 

3.5. The BSS market structure by separate segments

 

3.6. Key segments of the Russian market of OSS/BSS systems for telecom operators

 

3.7. Section findings

 

  1. Key suppliers of OSS/BSS systems

 

4.1. Russian suppliers; their market position, advantages and disadvantages

 

4.2. Foreign suppliers; their market position, advantages and disadvantages

 

4.3. SWOT analysis of major suppliers of OSS/BSS

 

4.4. Section findings

 

  1. Key customers of OSS/BSS systems

 

5.1. Categories of customers of OSS/BSS systems and the market apportionment between them

 

5.2. Analysis of the Russian market of OSS/BSS from consumers and market participants

 

5.2.1. Analysis of the main indicators

 

5.2.1.1. Work features of OSS/BSS suppliers in the Russian market, methods of promoting decisions

 

5.2.1.2. Pricing policy and discounts

 

5.2.1.3. Main factors influencing the selection of suppliers of OSS/BSS by the key customers

 

5.2.1.4. Other features

 

5.2.2. Section findings

 

  1. Quantification of the market of OSS/BSS systems for telecommunication operators in Russia and CIS countries

 

6.1. Drivers and constraints of the OSS/BSS market development

 

6.1.1. General market drivers and constraints

 

6.1.2. Industrial drivers and constraints

 

6.1.3. Market drivers and constraints specific to Russia and CIS countries

 

6.2. Assessment of the volume of the market of OSS/BSS systems for telecommunication operators in Russia and CIS countries by the end of 2014

 

6.3. Forecast of the OSS/BSS market development, 2015 – 2017

 

6.3. Section findings

 

7. Conclusions, findings and recommendations

 

 

 

 

 

This information note is prepared by J’son & Partners Consulting. We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material.

 

The market for OSS and BSS systems for support of operating activities of the operators is facing serious challenges. New offers in the OTT world appear every month, while the process of introduction of new operator services can reach 1 year. In the end, traditional telecom players do not keep pace with the rapidly changing user preferences. Reduction of the time needed for launching new services on the market, as well as their variety, bundling, separate billing by traffic type and quality, new telecommunication services, increasing competitiveness and cost reduction – all this is possible only thanks to the transformation of the operator's OSS/BSS stack.