Amdocs picks up policy piece with Bridgewater acquisition

Sometimes we forget that what “best of breed” really means is “most likely to be acquired.”

That truism was drilled home again this morning, as big-and-broad BSS/OSS player Amdocs acquired policy server specialist Bridgewater Systems in a $215 million deal.

For Amdocs, the deal brings aboard a strong platform and customer relationships in an important product area. Like many vendors with deep roots in the wireline world – including its rival Telcordia, which was acquired by Ericsson this week (CP: Ericsson deepens back-office focus with Telcordia acquisition) – Amdocs is positioning new growth around opportunities in IP and especially 4G wireless. (CP: Amdocs: Telco opportunity in supporting a 'trillion' devices and CP: Amdocs survey reveals mobile 'capacity crunch' fears, solutions).

So-called policy engines, or more acronym-specific Policy and Charging Rules Function (PCRF) platforms, have emerged as a key network element in helping operators manage and ultimately monetize traffic. Along with deep packet inspection (DPI) boxes, policy servers let service providers create and ultimately execute rules to manage the IP traffic on their networks.

It’s been a rapid evolution: such capabilities were initially used by wireline broadband vendors to manage P2P and other high-consumption traffic (so-called fair-usage), but of late the focus has been on wireless and 4G networks, where policy engines can help operators institute usage tiers and more complex service and pricing models. The market is also coming somewhat full circle: initially viewed as an element in high-level SMS architectures, PCRF products took off based on very application-specific use cases. But of late, as IP and LTE networks have moved into the mainstream, carriers (and vendors) are again looking at policy in a more general way and deploying policy servers across the network supporting a wide array of uses.

Bridgewater specializes not only in PCRF but other key IP/IMS network elements, including Home Subscriber Server (HSS) and Service Controller (AAA), all operating under the broader emerging rubric of Subscriber Data Management (SDM) tools (CP: Subscriber Data Management: Unlocking hidden data assets). The vendor claims 150 customers worldwide.

There has already been a fair amount of M&A activity in this area, and there will likely be more. Tekelec acquired SDM vendors Camiant and Tekelec last year (CP: Tekelec acquires Camiant, Blueslice Networks) and Cisco picked up Starent, which in addition to its mobile IP core capabilities brought with it a mobile policy engine (CP: Cisco on Starent: Mobile play wedge into massive IP opportunity). Other key vendors include Allot (already closely partnered with HP), Openet, Sandvine, RedKnee, Broadhop and Volubill, among others.

At the same time, large system vendors like Alcatel-Lucent, Nokia Siemens Networks and Cisco are pressuring the upstarts by coming to market with integrated PCRF elements (while also being good candidates to acquire some of the remaining best-of-breed policy players to jump start those efforts).
Earlier this year, Infonetics pegged the policy management market at just under $420 million worldwide in 2010, growing to almost $1.6 billion in 2015. It called out Openet, Bridgewater and Tekelec/Camiant as leading vendors.

For Amdocs, the Bridgewater acquisition gives it a strong solution in the PCRF area, especially targeting mobile opportunities, while dovetailing nicely with its existing strengths in OSS and billing. The policy platform will help it open doors to new IP/4G opportunities worldwide, while also giving it a strong PCRF solution to drive into existing accounts, Amdocs said in announcing the acquisition this morning (Briefing Room: Amdocs Has Signed a Definitive Agreement to Acquire Bridgewater Systems).

Amdocs said it expects the acquisition to close within the next 90 days.