The Service Fulfillment Sector of the OSS by Larry Goldman

Key trends in serviceKey trends in service provider business models and servicemodels and service fulfillment

May 28, 2008y ,

Global Telecom Software Market Analysis www.ossobserver.com

Key trends

• Communications service providers are investing in new revenue growth from data-enabled gservices.

• Consumers and businesses are willing to spend more when specific needs are met with great ease.

• Competition cuts traditional revenue streams and forces CSPs to not only in basic services but in support for those servicessupport for those services.

Global Telecom Software Market Analysis

Agenda

• Communications industry trends• Industry basicsIndustry basics• Future of OSS• Service fulfillment and network engineeringService fulfillment and network engineering

CSPs under pressure

• Data networking opens up the network to many more suppliers of services

• CSPs facing important issues in offering services and capturing a large share of the revenue enabled by their networks

• Their networks are the CSPs greatest asset. Managing the network for increased revenue and profit is a great challenge.

Industry financials

$2,000,000

$1,000,000

$1,500,000

$2,000,000lli

$500,000

2003 200 200 2006

Revenue $1,228,611 $1,292,202 $1,464,692 $1,569,830

Capex $181,392 $200,710 $241,406 $263,371

2003 2004 2005 2006

Opex $787,847 $840,578 $963,239 $1,009,666

EBITDA $440,764 $451,625 $501,453 $559,982

Source: OSS Observer

Revenue distribution

Business Services 10% 10%

Mobile 41% 45%

2005 2006

Mobile 41% 45%

Residential BB 5% 6%

PSTN 33% 28%

Services growth

Services Growth

$600$800

$1,000$1,200

2005 2006 2007 2008 2009 2010$0

$200$400$600

$ Billio

2005 2006 2007 2008 2009 2010

Mobile (CAGR 13%) $598 $712 $826 $933 $1,027 $1,109

PSTN (CAGR ‐15%) $484 $444 $400 $302 $302 $219

ResBB (CAGR 19%) $78 $93 $112 $134 $158 $183Res BB (CAGR 19%) $78 $93 $112 $134 $158 $183

Business (CAGR 10%) $150 $161 $180 $200 $220 $240

Regional growth

Regional Growth

$500$600$700$800$900

$0$100$200$300$400$500

$ Billion

2005 2006 2007 2008 2009 2010

NA (CAGR 2%) $460 $468 $478 $489 $499 $509

EMEA (CAGR 7%) $595 $651 $711 $765 $807 $847

ROW (CAGR 9%) $409 $449 $496 $542 $586 $625

CSP revenue by tiers - 2006

TierDefinition Number Tier revenue

1 > $10 billion 30 $938 billion

$1.6 Trillion 2 Between $1 billion and

$10 billionAbout 70 $277 billion

3 Between $100 million and $1 billion

About 300 $60 billion

4 Less than $100 million Over 2,000 $50 billion

Tier 3, 6%

Tier 4, 3% All $1.3 trillion

Tier 2, 23%

Tier 1, 68%

OSS perspective

Commercial software spend is 1% of revenue

$1,200$1,400$1,600$1,800

$400$600$800

$1,000$1,200

$ Billion

$0$200$400

Revenue Opex Capex IT spend Commercial S ftSoftware

Deploying OSSDeploying OSS

Global Telecom Software Market Analysis www.ossobserver.comGlobal Telecom Software Market Analysis

Most OSS choices at

Challenge100 CSP’s with over $1B annual revenue

choices at department

250 major business units ve

1000 operating ust m

entities

10,000 OSS-using departments

Get systems to impact the business as a whole

BusinessImpact

CChangeBusiness

ImpactCompetitiveAdvantage

IncreaseRevenue

Customer Experience

ReduceCosts Efficiency

Department Business CorporationOrganizationalScale

13OSS Market Analysis 13

UnitSource: OSS Observer

What drives spending

• New services are the most important driver for new spending.

» Focus on top line revenue growth» Focus on offering new services as a general pattern of business» New services embrace both entirely new functionality, e.g.,

location services, as well as bundling existing products

• Cutting / limited operating expenses (especially when tied to new services)to new services)

• Cutting capital commitments – mostly a US issue• Systems consolidation – losing momentum y g

2006 IT spend

$71 billion IT spendComm products

Product prof svcI l IT

Combined$16.2 billionCommercial

HW & OS

Internal IT39%

Software

20%SI18%

Future of OSSFuture of OSS

Future of OSS

Service Service Delivery PlatformService Delivery Platform

Service Layer

Application Server

ISC/SIPDiameter

Presence, 3rd Party Access, Messaging, Location, …y

MGCF+MGW

IMS Control Layer

Transport

Diameter

xDSL CableUMTS GSMCDMA PSTNWLAN

IP Core Circuit SwitchedMGCF MGWTransport

Access Layer

SIP SIPSIP

3G Mobile Dual Mode Fixed Access Legacy Voicey

IMS Client Layer

Future of service fulfillment

CustomerCare

Billing

OrderManagement

PartnerCSPsg

Inventory / NRMEngToolsEng

ToolsInventory / NRM Activation

ActivationActivation

VoIP IPTVeMail GamingConferencing

Service Assurance

NetworkNetwork

Service DeliveryPlatformIMS

Content

NetworkSource: OSS Observer

Convergence requires managementg

Management• Personalized services

Systems impacts• Micro market• Personalized services

• Authentication• Service charging

• Micro market segmentation

• Transaction billingService charging• Revenue sharing /

partner payments• Real-time

authentication & ratingC id tit• Automatic service

registration• Capacity management

• Common identity system

• Product catalog• Capacity management Product catalog• Bandwidth

management

• Resource planning

FulfillmentFulfillmentMarket

Telecom software

Service AssuranceService FulfillmentCustomer CareBillingService Delivery PlatformsPlatforms

Service Mgt

Fault & Event

Performance

Rating & Pricing

ChargingPartner &

InterconnectInventory

Order MgtCustomerInteraction

Probe Systems

Activation

Mediation

Eng Tools

Content Mgt

Telecom Apps Server

BusinessOptimization

Workforce AutomationSubscriber Mgt

Network Management Systems Device Mgt

Mobile Residential Broadband

Business Data Services PSTN

Middleware

Overall service fulfillment

$3,500

$2,500

$3,000

$1,500

$2,000

$1,000

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012

Fulfillment (CAGR 10%) $2,030 $2,233 $2,483 $2,760 $3,042 $3,330

Different segments

$1 000

$1,200

$1,000

$600 $ m

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012$-

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012OM (CAGR 10%) $551 $607 $672 $743 $819 $902 Inventory (CAGR 14%) $534 $600 $700 $812 $926 $1,039 Activation (CAGR 13%) $404 $471 $541 $619 $690 $759 Eng Tools (CAGR 3%) $542 $555 $570 $587 $608 $629

Services

$1,200

$1,400

$1,000

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012

Mobile (CAGR 15%) $588 $648 $746 $878 $1,035 $1,190 PSTN (CAGR -2%) $260 $254 $253 $248 $243 $232 Business (CAGR 8%) $533 $596 $644 $698 $740 $785 Res BB (CAGR 12%) $649 $734 $837 $932 $1,025 $1,123

Engineering tools forecast

CY2007 CY2008 CY2009 CY2010 CY2011 CY2012Eng Tools (CAGR 3%) $542 $555 $570 $587 $608 $629

Changing role of engineering toolsg g

• Prepare networks for delivery of services, particularly converged data servicesy g

• Prepare networks to rapidly activate new customer service

• Support installation, maintenance and customer support

• Industry is shifting from discreet tools for different engineers to a more integrated view of inventory,

i i d ll f lfill tengineering and overall fulfillment process

Engineering

• CSPs need to leverage their strongest asset, their networks, in order to capture as much customer spending as possible.

• OSS and particularly network engineering plays an important role in preparing networks to deliver services easily and efficiently.

OSS Observer

Thank you

OSS Observer StaffAnalystsLarry Goldman ChicagoLarry Goldman – ChicagoPatrick Kelly – BostonPeter Mottishaw – UKRoz Roseboro - Chicago

Check us out at www.ossobserver.com

Business Supportinfo@ossobserver.com

PO Box 1319Janita Goldman – client services

PO Box 1319Sugar Grove, IL60554+1.630.466.9223

Jan Feasterjan.feaster@ossobserver.com+1.817.267.6637

1.630.466.9223

Global Telecom Software Market Analysis www.ossobserver.com

The Service Fulfillment Sector of the OSS by Larry Goldman

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