OSS Observer reviews Service Assurance market

Over the next four years, the service assurance market will expand by $1 billion, reaching $3 billion by 2011. Vendors jockeying for position through acquisition and product development have caused a shift of the leader board.

According to a new service assurance market review by OSS Observer, M&A activity has changed the competitive landscape in this space by giving large vendors such as IBM a bigger stake. Due largely to its acquisition of Micromuse last year, IBM is now among the top five vendors with a 7% market share, tying it with Tektronix and Telcordia and putting it just behind HP (9%) and Agilent Technologies (12%). These top five make up 43% of the service assurance market.

Spirent, JDSU and Vallent are all at 4% while Alcatel-Lucent and CA are at 3%. The remaining 40% belong to the other 30 small vendors or niche vendors with a non-significant share.

Patrick Kelly, partner and co-founder at OSS Observer and author of the report, said the overall market continues to grow, currently between 7% and 9%. “It will be a little stronger over this [next] period because of the convergence opportunity. There have been a couple of significant deals beyond BT’s 21CN project such as Telstra that tare awarding pretty sizable contracts to suppliers,” Kelly said.

Despite consolidation in the North American market putting the hurt on companies such as Telcordia, which have relied primarily on business from the RBOCs in the service assurance area, Agilent, which also has large RBOC presence, was able to maintain its 12% market share lead. Agilent's declining business with its NetExpert product was offset by gains in revenue assurance with its new AssureME product, Kelly said.

While M&A activity such as IBM’s helped juxtapose the market leaders, others grew more organically, such as Tektronix, Kelly said. “Tektronix’ growth has been mostly organic. It executed on its Inet acquisition very well and has been able to expand business in both North America and Europe.”

Tektronix scored big with multi-million dollar deals at Vodafone and Cingular for GPRS and UMTS. HP also so strong demand for its OpenView products for the business data, mobile and residential broadband markets.

Partly for the reason mentioned above, Telcordia lost market share. Other reasons, according to the report, are that it has shifted investment more to it service delivery product line and consolidation has put heavy pricing pressure on vendors who deal with the likes of AT&T and Verizon.

Although the decline in PSTN spending was less than expected, broadband will be getting a bigger share of the spending. It is expected to grow from 14% of the service provider budget in 2006 to 20% in 2001.

The report also evaluated suppliers and broke down their areas of strength by geography and functionality.

In the report, Kelly said, “If [communications service providers] hope to have any success in the marketplace on new services such as VoIP, IPTV and mobile video, service assurance deployments will need to occur prior to the introduction of the service not after the early adopter’s stage.”