A CERTIFIED MESS

Upstart vendors seeking Bell contracts face more than just competition: They also must submit their products to OSMINE, a labyrinthine software certification process controlled by a single third-party firm, Telcordia Technologies. Though a crucial step in getting products to market, to many vendors OSMINE remains a mystery--one that could portend a multimillion-dollar, yearlong hiccup in their business plans.

Making sure his company's equipment interfaces correctly with Bell companies' legacy operations systems represents only about 20% of Dave Boland's job. However, that limited amount of time is worth millions of dollars and several months of pre-market time to his firm, newcomer Equipe Communications.

That's because modifying new equipment to work with the existing systems — some of them 25 to 30 years old — requires Equipe and other vendors to submit their equipment, product specifications and even key competitive information to a private, third-party firm, Telcordia Technologies, and an enigmatic software certification process called OSMINE. In an era when monopolies were supposed to have been history, Telcordia's status as the sole creator of Bell company operations and management databases gives it complete ownership of the OSMINE process, in which vendors can pay up to $2 million per product to participate and which can last six to 12 months or more.

As if that did not make OSMINE daunting enough already, the process is often overlooked and misunderstood by unwitting, funding-hungry start-up vendors that sometimes are left scrambling to complete the procedure late in their sales cycles.

If they had Boland on their team, they might avoid such nightmares. The senior product manager for Equipe has escorted products through OSMINE certification several times with different companies, most notably vendor giant Lucent Technologies. Like an NFL quarterback who knows not only his playbook but also the tendencies of his receivers and the cracks in opposing defenses, Boland navigates the OSMINE process with an assurance few others can. “I know what paperwork needs to be completed and filed, and I know who to see to make sure the process keeps moving and we don't lose product time,” he said.

Other young vendors may not have it so easy. Start-ups that once seemed to hold the key to a telecom revolution these days appear destined to grapple — and sometimes die — amid webs of legacy business practices and industry politics. This is not only the lot of CLECs: As the market dwindles to a few players, it also remains the burden of vendors that once saw the entrepreneurial carriers as their primary customers.

Now those vendors must increasingly re-adjust their goals with one specific and daunting group of target customers in mind: the Bells. Though big Bell contracts represented the ultimate vendor sales goals in the past, many newer vendors thought it would take them years to break into that market segment, a belief with which they were comfortable.

“In the bubble environment, vendors could look at RBOCs as their last market targets,” said Simon Leopold, an analyst for Merrill Lynch. “They saw CLECs first, IXCs second and RBOCs as the ultimate wide-scale deployment once they had gained steam and refined their products. RBOCs still represented the golden ring, the idea being once you got a big RBOC contract, you were in for good. But vendors knew it would be easier to sell to start-up carriers because they made quicker buying decisions and had no legacy networks with which to integrate.”

Maintaining a pyramid marketing approach with Bell companies at the peak also allowed start-up vendors to spread their product developments and investments over the course of several years while they banked some modest revenue and prepared for the requirements bigger and more complicated deployments would present.

However, the CLEC market decline turned the pyramid upside down and threw some vendor business plans and cost projections out of whack. “A lot of new vendors told their initial investors they would target CLECs but then had to go back and say they were targeting RBOCs,” said Leopold. This has put them into an intimidating faceoff with larger, more experienced vendors such as Lucent, Nortel Networks and Alcatel Network Systems, which have long enjoyed a chokehold on Bell company equipment budgets.

Along with this towering new strategic hurdle comes the technical obstacle of OSMINE. To be considered for deployment in Bell company networks, these vendors must ensure their products can reliably interface with the mammoth snarl of important — and sometimes proprietary and arcane — support systems and databases originally devised by Telcordia, once a research lab called Bellcore owned equally by the seven original Bell holding companies.

OSMINE stands for Operations System Modification for Intelligent Network Elements. But this does not begin to explain what it means to vendors in terms of dollars and time — or hint at the significant amount of business Telcordia gets from the program without really trying.

The technical work involved in OSMINE — basically, the coding of software to enable interoperability between network elements and management systems — was once internal to the Bell companies. As they deployed network elements from different vendors, they did most of the necessary system interface development themselves. They also worked in cooperation with Bellcore, which in those pre-Telecom Act days was considered the industry's unbiased testing facility and did not compete with other labs and software firms for business as it does now.

But about 10 years ago, the Bell companies acquired a competitive mindset in anticipation of market deregulation. Among other things, they decided to shift the cost and responsibility of integrating new network elements to the vendors. As a vendor, if you wanted to be in the business of providing equipment to Bell networks, you had to ensure system compliance on your own dime and your own time.

In 1996 the Bell companies divested their equity in Bellcore, which was acquired by privately held research conglomerate SAIC. By 1998, Bellcore had changed its name to Telcordia. Still, despite its own new identity as a competitive vendor, as the primary author of Bell support systems, Telcordia held onto OSMINE work as a significant revenue producer for its business.

Dennis Tinley, vice president and general manager of customer solutions for Telcordia, said he cannot discuss the amount of annual revenue the company gains from OSMINE because Telcordia is privately held. However, Merrill Lynch's Leopold estimates that Telcordia receives about $100 million annually, with up to 50 vendors submitting roughly 100 total products to the process every year. Large vendors such as Lucent and Nortel account for about 60% of that windfall, but the other 40% is contributed by significantly smaller and newer vendors — the likes of Equipe, Telica, Sonus Networks and ONI Systems.

These vendors may pay $1.5 million to $2 million to certify a piece of equipment such as a Sonet multiplexer, and the process could take 12 months or more in the extreme. However, Tinley said, the cost and time involved depends on many variables, including the scope of the interface development, the complexity of the product, the carrier being targeted and the scale of the potential deployment. “It should take six to eight months, though it's sometimes longer and sometimes shorter.”

“How long the process takes and how much you have to spend depends on how many systems you need to interoperate with,” added Boland. “Vendors with certain products might need to support more systems. Our [ATM switching] product only needs to interoperate with a couple of systems now at our target customers.”

Boland said Equipe got the OSMINE ball rolling in September with an initial phone meeting with Telcordia to discuss its product and plans, intentionally entering the process roughly six months before it planned general commercial availability of its switch. “It should really happen concurrent with your product development,” said Boland. “Right now, we get a monthly update on how things are going, and we should finish the program in Q2.”

Though Equipe is having a smooth experience so far with OSMINE, it seems popular sport in the vendor community to complain about the cost and time involved in the process. One vendor official, who declined to be identified or provide specific examples, bemoaned the process, saying Telcordia was “bureaucratic and unorganized” about conducting itself.

However, Tinley paints a different picture of the process. He separates it into four steps, starting with a “request for work” filed by a vendor. “Then, we review the equipment and create a scope of work based on the system requirements, and we make a proposal to them for the cost and length of the project.”

Third, the vendor formally contracts with Telcordia to have the software work done. Lastly, the interfaces are implemented and tested, and the program is completed. Some vendors complain that the process does not go as smoothly as this four-step plan sounds, but several companies refused to go on the record when asked about specific concerns or incidents that may have happened during OSMINE certification.

“It involves a lot of paperwork and organization,” Boland said. Aside from request-for-work forms and itemized project plans, the vendor has to issue nondisclosure agreements to Telcordia and any carriers the vendor might invite to peek at the product while it undergoes OSMINE certification. All parties — the vendor, Telcordia and the target customer involved — must sign a master agreement detailing the necessary work. Along the way, Telcordia may ask for more product specifications if the need for more interfaces is discovered. Most often, products facing OSMINE certification must be sent to Telcordia's offices in northern New Jersey, though vendors also can arrange to have Telcordia engineers dial into their equipment at remote locations to administer modifications.

The cost of certification is derived directly from the scope of the work. “Certainly, $2 million is not much to some vendors when you look at what they spend on acquisitions, though it could be a bigger deal to a small vendor,” Leopold said. Because the price tag varies by product, Tinley said he could not detail how Telcordia determines the cost for vendors to participate in the OSMINE process — and as a private company with a lock on the OSMINE business, Telcordia is under no pressure to explain or change its pricing practices.

Another common complaint is that OSMINE is not well-publicized so vendors do not hear about the requirement until after their product development expenditures are planned virtually to the dollar. However, Tinley said Telcordia works hard to promote OSMINE awareness — as well as early entry into the program. “We urge parallel development — working on the OSMINE program as you are working on product development.”

Ultimately, complaints about OSMINE awareness, process duration and cost ring hollow, Boland said. “If a vendor files for the process late or is not ready for it, it is the product manager's fault. It is something they have to know about — plain and simple — if you want to compete for business from Bell companies.”

“Many companies that came from a data background didn't see OSMINE coming, those that came from a telco background did,” Leopold added. “ONI and Ocular Networks [recently acquired by Tellabs] stressed OSMINE early on. Corvis and Sycamore didn't, though I can say it's clear how these companies have been affected.”

ONI Vice President of Marketing Peter Evans agreed, saying his personal experience with OSMINE at Nortel Networks and the telecom experience of others at ONI has been a “definite advantage” during OSMINE certification.

Boland said that vendors encountering the process for the first time must learn to get used to it because the OSMINE adventure does not end with a product's initial trip through the program. “It can be an ongoing thing — as the customer wants changes or wants the product to interface with more systems, it will cost you more to interoperate with new systems over the life of the contract,” he said. “As your customer list grows, you will also encounter a lot of new systems in different companies. You may have to go back to Telcordia again and again.”

Many vendors still wonder about the fairness and security of the OSMINE process, according to Leopold. For instance, do the biggest companies get preferential treatment because they might spend more on the process?

Tinley said this is not the case. “We can handle all of the companies that come to us on equal footing. They are all priced and scheduled the same way, and we assess needs daily to make sure no one gets stuck in red tape.”

If the process favors anyone, it favors the experienced, like Boland. “If you have more leverage, you may be able to speed up the paperwork or the coding at different stages,” he said. “It is more a matter of who and what you know, rather than who you are as a company.”

In terms of securing competitive product information, non-disclosure agreements remain the primary guard against corporate espionage infiltrating the process. “Telcordia can't invite anyone in without the vendor's consent, and the carrier needs the vendor's permission to go in,” said Boland. “Telcordia obviously has to know who the targeted customer is, but this all happens under NDA.”

Leopold said the biggest problem for new vendors getting their feet wet with OSMINE is that they misunderstand the implications of the process. “You don't have to be afraid of it. It's not a pure, black-and-white validation of a technology. It is only an assurance for your target customers that your technology will work in wide-scale deployments. This is something that has to be proven one way or another.”

Still, with the number of vendors filing for OSMINE increasing and technology development becoming more rapid and complex, how well can one company can continue to administer the process and make the necessary product adjustments? Tinley said Telcordia has seen a jump in program participation since the CLEC market decline began, and vendors have scrambled for Bell business.

Demand will continue to increase, Leopold said, as will the prevalence of equipment dissimilar to the traditional network elements and operations systems in Bell company networks. Development of increasingly intelligent and complex products such as softswitches and optical routers will test Telcordia's ability to manage the process efficiently and could force change in what to this point has been a Telcordia monopoly on OSMINE work.

“We try to extend our expertise as technology evolves to make sure we can support new technologies,” Tinley said. “We encourage companies to share their product road maps with us.”

Future technology support is the one hope for vendors seeking an alternative to working with Telcordia, Leopold said. He said there could be a window of opportunity within the next few years for new software firms to specialize in developing OSMINE-like interfaces for specific products as Telcordia gets loaded with new filings.

But Leopold added that past attempts to circumvent Telcordia's OSMINE monopoly have failed. Bell companies either could not find firms that were up to the task or eventually lost interest in seeking alternatives in favor of focusing on other core business issues.

Though other companies can attempt to build OSMINE-like interfaces, there may be no alternative to having Telcordia do most of the work. As the company that built most of the original systems, Boland said it remains best positioned for the job.

As companies consider alternatives to OSMINE and better ways of handling it, one scary fact remains: Even if a vendor completes all the necessary paperwork, the product is adjusted with all the correct interfaces and the bill is paid to Telcordia, OSMINE certification is no guarantee that a vendor will win the contract for which it is vying.

“That's a whole other matter. That's when the selling really begins,” said Boland. And that is when the enigma of OSMINE may begin not to seem like such a daunting proposition after all. Just think of OSMINE as the multimillion-dollar ante to telecom's biggest poker game — if you don't pay to play, you might as well go home. And in the end, you may go home empty-handed anyway.

VENDOR PARTICIPATION IN OSMINE 2001 (Figures are estimated)

Alcatel	No data
Ciena	More than $10 million
Cisco Systems	More than $20 million
Corvis	$0
Fujitsu	Less than $20 million
Lucent Technologies	$20 million to $25 million
Marconi	No data
NEC	Less than $2 million
Next Level Communications	Less than $3 million
Nortel Networks	$13 million to $19 million
ONI Systems	$7 million to $9 million
Redback Networks	No data
Sonus Networks	No data
Sycamore Networks	$0
Tellabs	$13 million to $19 million
Tellium	$0
Source: Merrill Lynch