2005 Operations Focus: Quality Assurance

Building, running, managing, monitoring and maintaining the network will never really take a back seat to the other operational or business functions of a communications provider, wireless or otherwise, for without the network, there is nothing to sell. But conceptually, network operators are beginning to look at their networks a little differently.

Wireless operators are seeing treble clefs where they once saw seizures, and it is music to their ears. They are seeing gaming where they saw only gigahertz and are finding it fun. In other words, they are seeing services where before they had only heard of those services' promise. And new services are what will pay for all the investment — past, present and future — that they put into their networks.

That's why starting next year, service quality management (SQM) solution providers will be riding shotgun. Analysts agree that 2005 will be a breakout year for providers of SQM — and not a bad year for customer management, service delivery and revenue assurance, either.

“Suppliers are winning some monster deals in this space now,” said Patrick Kelly, partner and co-founder of analyst firm OSS Observer.

Kelly said Tier 1 operators have signed several eight-figure contracts in the area of SQM. He forecasted that North American wireless segments will be the fastest growing, increasing from $220 million this year to $400 million by 2007.

“Spending in the mobile market will be driven by new technology upgrades that require improvements in scalability, cross domain correlation and a closer coupling into customer care systems,” Kelly said.

Demand for commercial service assurance and SQM systems also will be driven by a combination of increased competition and limited skilled resources that can administer and maintain acceptable levels of service, he said.

The need to adjust software capabilities to keep pace with network upgrades is something Telcordia Technologies also is anticipating in 2005.

“As carriers move to 3G operations, they will have to do some basic operations systems upgrades for things that will allow them to effectively operate the 3G network the same way they operate their networks today,” said Robbie Cohen, senior group vice president for wireless, cable and emerging markets at Telcordia.

Telcordia, incidentally, is one of several suppliers — along with Agilent, WatchMark-Comnitel and Lucent — that Kelly said makes the short list in bids for business in the service-assurance market. Other strong players include TTI Telecom, HP, Digital Fuel and Micromuse.

Telcordia also sees opportunity in areas such as converged billing, something you wouldn't initially associate with the company but which it addresses through the next-generation rating engine, available in its integrated services control point product.

As more content and prepaid services in the U.S. get legs, she said, there will be a lot of interest in being able to rate calls and activity in real time.

“We see 2005 as a big year for policy-based rating. Real-time rating and converged billing mediation will play a big role,” Cohen said.

She also said that the drive to SQM has already started and is reflected in the number of requests for information (RFIs) and requests for proposals (RFPs) she is seeing this year.

WatchMark-Comnitel's CEO, John Hansen, tracks the RFIs and RFPs coming from operators and says RFIs have picked up in the last five months and that RFPs — better indicators of serious interest — have picked up significantly in the last four to five weeks, particularly around SQM.

He still considers SQM a pioneer sell and says 2005 is just the beginning of growth for the technology. Real growth, he said, will come in the next three to five years. Hansen expects 20% to 25% of revenue for his company will come from SQM in 2005. The lion's share, 75%, will still come from performance management solutions, partly because of a spike in demand by operators conducting 3G upgrades.

WatchMark-Comnitel timed its acquisition of Metrica last month to coincide with the anticipated growth in performance and SQM. WatchMark-Comnitel was also attracted to Metrica because of its customer base.

Wireless data is at long last driving the demand for SQM.

“After years of promise, all of a sudden operators are spending money on it,” Hansen said.

However, he said another equally important driver is the maturity of SQM products themselves. Early in a product lifecycle, the technical staffs of the operators and vendors work out requirements for implementation.

“But as the product matures and operators start using it, more business people within the operators start seeing the value in it,” Hansen said. “That drives more feature development within the product.”

SQM is at that point, said Elisabeth Rainge, program director of next-gen OSS, billing and network management for IDC Research. She said next year will be the breakout year for SQM because it is more closely aligned with the business needs of a service provider than typical network management.

“It will become clear that SQM is a distinct expertise for the service provider staff,” Rainge said. “The operations staffs need to look beyond basic network availability and look to become the most effective face to the customer.”

SQM operates on a much higher level than network management and is really about key business indicators that contribute directly to profitability, she said, with an emphasis on the business indicators.

“There has been so much emphasis on optimization, which comes from that drive-test mentality, and a lot of money has been justifiably spent on it,” Rainge said. “But we will see a shift toward a more true OSS perspective that is more about the business processes.”

The trick for operators is to manage that shift while taking into account what is special about wireless in terms of radio reliability and availability, she said.

Another trend to look for next year will be continued consolidation in certain software segments. The wireless network planning software space has more than 30 players, some earning $5 million per year or less. That's too many, Rainge said.

“Players that are totally focused on wireless infrastructure planning will definitely consolidate,” she said.

However, not all small companies will get gobbled up in 2005. Companies that concentrate on optimization, such as Bytemobile, will hold their own against the bigger players.

“Small and medium-sized vendors who really know what wireless OSS manageability and availability is all about may actually teach the big vendors a thing or two,” Rainge said.

Yankee Group analysts looked at a narrower niche in revenue assurance and saw the time as ripe for investment by service providers. Sanjay Mewada, Yankee Group's vice president, described revenue assurance as the processes and products designed to ensure that all billable activities occurring in the network are accurately captured, rated and billed in accordance with a customer agreement.

Operators need to expand their notion of revenue assurance beyond verifying billing records, which it does today, to include quality assurance, customer assurance and business assurance.

Vendors of note in this area, according to Yankee Group, are Connexn Technologies — which recently announced it is being acquired by London-based Azure Solutions — LavaStorm, WeDo, Cape Technologies and ECtel as well as Telcordia and Amdocs.

Vendors will have sold $106.5 million dollars worth of service assurance products by the end of this year and next year will sell approximately $146.4 million, according to a late-July 2004 Yankee Group report. Services surrounding those products rang up $473.7 million this year and will grow to $509 million in 2005. By 2008, Yankee Group expects the market to generate $587.8 million in services and $354.9 million in products.

“We're generally conservative with our forecasts, but it will be a decent size market with a fairly large upside in potential growth,” Mewada said.

However, before any of this growth can occur, there have to be services for which to ensure quality and revenues on which we need assurance. That's where companies like Qpass come in.

It's a pretty solid indicator of the growth of premium data services when operators come to a company such as Qpass and ask for help keeping revenues straight so they can comply with Sarbanes-Oxley.

“When you are talking about active subscribers driving $30 million per month, that's material by anyone's definition,” said Chase Franklin, founder, president and CEO of Qpass.

Franklin expects revenue from premium mobile data services to double every quarter for the foreseeable future as more content-rich Java applications and games replace the juggernaut of ringtones as the driver of date revenue. He said one of the best-kept secrets in the industry is the explosive growth of premium services in North America.

“Mobile data in North America gets no respect from the Europeans, but that is not consistent with the facts we see occurring in the market place,” Hansen said.

With penetration for premium data services still only at arguably 10% of subscribers, the market obviously is just beginning.

“There are so many untapped subscribers out there that operators don't even have to do much innovation to see growth through 2006,” Hansen said.

He also spoke of another difference in the way North American operators and European operators address the market that will lead to more opportunity on this side of the pond. The difference and the opportunity are in mobile customer care.

“It's one of the missing links between how we offer services,” Hansen said.

In North America, there is a more seamless connection between customer care and the ability to support new products and services. Another trend in 2005 — and a sign of the maturation of premium services — will be the large media and content companies engaging entire markets of mobile subscribers rather than the subscribers of a given operator, Hansen said. This will lead to increased emphasis on content rating.

Adding to the demand will be the growth of mobile virtual network operators, each with their own needs for billing and billing support, Hansen said.

Overall, global investment in the wireless service assurance market alone will begin to close the gap with wireline investment next year. Wireless operators worldwide will spend $950 million compared with the wireline operators' $1.35 billion, according to OSS Observer.

All in all, it will be a good year for vendors in the right spot at the right time with the right products.

CUTTING EDGE

John Hansen

CEO, WatchMark-Comnitel

Real time was before its time when WatchMark was pushing the concept for network management at the turn of the millennium. Now, five years later — and after 10 years of WatchMark refining its approach — it appears that time has caught up. Real time is real.

And so is WatchMark. To be real in 2005 and beyond, a purveyor of wireless network software solutions must be a purveyor of substance. It must be a company with size on its side, history in its veins and viability in its bottom line. John Hansen was hired as CEO this past February to ensure WatchMark-Comnitel had all three. (WatchMark acquired Comnitel in November 2003.) He recently engineered the company's acquisition of ADC's Metrica business unit for $35 million in cash and 3.2 million shares of company stock. Although Metrica lost $2 million last quarter, the operational efficiencies gained through the merger should help Metrica add to WatchMark-Comnitel's overall viability.

As for history and size, the combined companies have approximately three decades of experience and support more than 300 customers. Not your average point solution.

While WatchMark-Comnitel is still trying to “swallow the whale,” as Hansen put it, he is looking ahead to 2005, which analysts say is going to be a breakout year for service quality management — his company's specialty and one that the Metrica acquisition should only make better.

“Service quality management is taking off for a very good reason. And that reason, of course, is wireless data,” Hansen said. “After years of promise, suddenly operators are spending money on it. And the reason they are is because consumers and businesses are pulling it through.

There is a lot of opportunity to get wireless data right this time, Hansen said, and the first operator that gets it right will have huge and profitable revenue growth.

“Operators are finally in a position to take advantage of that, and they know it,” Hansen said.

Having true ubiquitous access to e-mail, calendars and exchange services is just huge, he added.

“We're just riding those coat tails. And what good coat tails to be on.”
— Tim McElligott

	2003	2004	2005	2006	2007
Global wireless	$556	$705	$850	$980	$1110
Global wireline	$1290	$1290	$1355	$1450	$1540