Confounding connections

It's safe to say that very few telecom carrier mergers are driven by a desire to integrate operations support systems. It's not likely that any of the companies involved of late-Bell Atlantic and Nynex, MCI and WorldCom, SBC Communications and Pacific Telesis-marveled at the similarities between their companies' OSSs and decided to merge because of them.

On the contrary, those carriers and all the others that have opted to join forces lately probably shuddered at the thought of what would have to be done to facilitate an overall OSS meld once the merger was finalized. Worse yet, because of securities regulations, they probably had little or no idea what kind of shape their merger partner's OSSs were in beyond what they were told.

Post-merger OSS consolidation is not an issue to be taken lightly. It is a large part of what smoothes the edges of merged carrier operations. It can have a huge impact on the ultimate profitability of a merger. In some cases, its failure could scuttle a merger plan altogether, so it must be carefully considered and reconsidered.

When, where and why The primary questions that must be addressed in post-merger OSS considerations surround which portions of the overall OSS should be brought together, whether they should be integrated or replaced, and whether it should be an immediate or gradual integration.

"In the cases where entrenched companies are merging into a single behemoth but facing the notion of untangling and connecting legacy OSSs, the decision will be to freeze those systems and begin to create new ones," says David Hughes, regional vice president at OSS developer TCSI Corp.

Still, it can be difficult to make those determinations in the merger negotiation process if one carrier is not privy to the shape of the other's systems.

"Generally the company being bought goes into a state of semi-paralysis," says Jason Donahue, vice president of marketing at Beechwood, which offers OSS consulting and integration services to carrier organizations.

When multiservice provider Alltel Communications completed its acquisition of wireless operator 360 degrees Communications, Alltel did a full gap analysis and comparison of every system that both companies were using. The result was a best practice/best system approach to integration, which meant the removal of some OSSs on both sides was all but inevitable.

"We compared the functionality and uses of each system both companies had in place to come up with a recommendation of which system would be our target," says Tracy Wilbourn, senior vice president of business processes at Alltel. "We went into it with a general assumption that we wanted one set of systems. Going though this process is like doing one big [request for proposal] across your entire business." The snag for Alltel/360 degrees comes in the billing and customer care area, where 360 degrees has a vendor contract through 2007. "We don't anticipate a billing system conversion until that contract is up," Wilbourn says.

The idea of evaluating the situation on both sides, weighing the integration options, then proceeding piece by piece is a logical approach, says one observer.

"When one company is getting folded into another, neither party wants to throw out everything they have in place," says Betty Zakheim, vice president of marketing at OSS developer InConcert. "Being able to get the systems to work together coherently and quickly is of prime importance."

Crunching the numbers At a very basic level, mergers are about money-both saving it and making more of it.

"The first questions aren't about how good the systems are, they're about how much it's going to cost," says Hughes of TCSI. Carriers typically measure cost benefits against the feature benefits of systems being used within the operations being merged, he says.

Money is clearly what drives decisions about which systems will be saved, combined, eliminated or left alone.

"Part of what justifies a merger is the synergies the carriers are going to achieve by consolidating the processes," says Donahue of Beechwood. "One of the key rationales for mergers is cost savings, and a big way to achieve cost savings is in OSS consolidation. If the two companies don't do that consolidation, the merger won't always work."

For Alltel and 360 degrees, the financial issues that had to be addressed were about total cost of ownership and operational efficiencies that could be gained. Interestingly, the carriers found that cost savings were not always guaranteed when systems were combined or replaced by a single, overarching process.

"The choice of when to make the transition was driven by what the business needs were and what the cost benefits were," Wilbourn says. "In some cases, not making a change was fine. There was an underlying perception that it had to be more expensive to have two systems than to have one, but when we got into it we figured out that wasn't a fair assumption. Sometimes the cost of going from two to one can eat up any benefit."

Although operational integration issues were evaluated as the merger was being negotiated, they were never considered show stoppers, Wilbourn says, adding that very few mergers are made or broken because of OSS concerns.

"Generally the perspective is that it makes good business sense, the systems will be figured out," she says. "It's an assumed cost of doing the merger."

Delicate procedures In many cases, carriers are working internally to get their own OSSs in line before a merger ever occurs, or in some cases, because they are trying to make themselves look like attractive takeover candidates.

"Many CLECs will start with the assumption that they're going to get acquired and will therefore have an integration issue," says Jeremy Davis, president of OSS developer InConcert.

For ICG, a competitive local exchange carrier that acquired Internet service provider Netcom, the OSS integration issue is complicated by the fact that the different core networks of the two companies carry different types of services. The ICG core is used for traditional telecom services, while the Netcom backbone is being overhauled to carry voice over IP, says Ken Hunter, senior vice president and chief information technology architect at ICG Netcom.

"In terms of OSSs, that has implications on how we lay out and integrate the architecture," Hunter says. "OSSs have to be built from the foundation to assimilate that. We're in a much better position to do something like that because we don't have all the legacy systems."

According to Hunter, that is at least part of the reason ICG Netcom is working to get its OSSs in line. "It better positions us to be bought," he says.

Probably the most difficult part of consolidating OSSs is that business can't stop when it happens.

"You're almost pulling out the spine of someone's body, then asking them to stand erect," says Peter Kos, vice president and general manager of the Americas for TCSI.

Just as carriers must continue to provide their customers with uninterrupted, quality service when they are conducting network infrastructure upgrades, they must also guarantee no interruptions when they are combining OSS forces. That means the process necessarily takes time. "The post-merger consolidation seems to take awhile because it's so ugly to put them together," says Jay Sweringa, president of ADC Apex. "While the business is moving 100 miles per hour, it's hard to turn the wheel."

Step by step The process of merger negotiation, finalization and OSS consolidation can be compared with that of buying a house, according to Bob Marino, president of billing and customer care provider Convergys. First there is the search, then the evaluation of the results, then the decision, then the closing.

"Sometimes the timelines are compressed and some of the due diligence occurs after the fact," he says.

Carriers can approach each of those steps a number of different ways, most of which involve multiple operations software developers and systems integrators.

At the TeleManagement World conference in Dallas last month, several software vendors were showing off how their specialized systems can work together in a sort of linked OSS chain (see figure on page 22). The effort was part of the TeleManagement Forum's Catalyst projects and demonstrated how a carrier could logically construct a flexible and compatible OSS comprised of components such as order management, service provisioning, service assurance, network management, billing and customer care (Telephony, Oct. 19, page 22).

That kind of internal symmetry could go a long way toward making an ultimate OSS merger smoother.

"Until all of those parts are in place and finished, service isn't ready," says Dana Brown, vice president of marketing at MetaSolv Software, which provided multiple components in the OSS demonstrations at TeleManagement World. "You have that integration so you can see what it takes end-to-end to fill a request. The whole idea here is to create an environment where you can put everything together."

OSS developer Architel provides a software suite that encompasses order management, inventory management and activation into a single system. Still, the vendor can break that system apart to address the specialized needs of specific carriers. "You can't assume that the impact is from only one element," says Dan Vermeire, vice president of marketing at Architel. "The only thing we can do to be prepared is to provide flexibility at every point."

Integration needs can also be addressed, at least temporarily, by gateway systems normally used to exchange information between trading partners, Vermeire believes. "We added an intelligent workflow component so it has the ability to do data translations based on business logic. Now the gateway can be useful within one company with disparate systems."

When Alltel was finalizing its merger with 360 degrees, the step-wise evaluation it followed to determine which systems should stay and which should go helped streamline the overall process and let it get to the job at hand, Wilbourn says.

Beechwood specializes in helping a carrier with just that: pulling all the disparate systems a carrier is grappling with together, in addition to consulting with carriers earlier in the process to determine which systems are redundant, which are outdated and which can be salvaged or combined. Outsourcing that piece of the process-which most carriers do-can help provide some semblance of order to a merger operation.

"Even in a state of chaos it's still possible to be marching down an organized path," Donahue says.

The customer question Post-merger OSS integration isn't just an internal issue. The customer, many say, should be a chief concern at all times. "If you can find a graceful way to meet customer expectations, then you're ahead," says Kos of TCSI.

Therefore, the systems closest to the customer-on the service activation and billing endpoints of the network-are important considerations in the process. Some believe it is possible to keep those operations somewhat separate even in a post-merger world.

"Just because you've merged at a high level doesn't mean you need to merge below that," says Bob Marino, president of Convergys. "The key is making it transparent to the end users-they don't want to hear that they have to call someone else."

Although the issues of integrating OSSs may not be enough to derail a merger from a financial perspective, its failure could be very damaging from a customer service and public perspective.

"Mergers and acquisitions are completely changing the issues of this market," says Davis of InConcert. "It has to be addressed so that it doesn't affect the customer. What should be top of mind is that customers aren't put in jeopardy by the merger."

The proper, timely and cost-effective integration of all the operations systems that are so crucial to both of the networks involved in a consolidation is clearly a step in the process that must be carefully evaluated before, during and after the process of a merger.

"I don't think the OSS is the largest factor in the merger, but it shortly becomes an important element of long-term success," says Marino.