Applications vendors have expanded their reach into a range of carriers and communications service providers, exploiting the widespread use of mobile telephones around the world. Relying on the SCORES methodology, this applications market sizing report dissects the strategies of the top 10 applications vendors and their ability to succeed in the long run, while examining their role in helping customers provide basic and value -added communications services to transform the world.
Top Line and Bottom Line
On the top line, seismic changes are spreading in the communications vertical sending apps vendors to scramble for new products for billing, content aggregation, fulfillment and inventory management functions in order to help meet current and future consumer requirements for real-time communication.
While emerging markets will experience large-scale deployment of wireless services, carriers in the developed world will focus on value-added services such as triple play and rich content delivery to better compete with cable and satellite operators. On both fronts, next -generation BSS(business support systems) and OSS(operations support systems) applications will be critical for the delivery of features such as second round billing, mobile content and social media integration.
Despite the potential of selling new applications and features, apps vendors are scrambling for the best way to serve the often divergent interests of incumbent carriers and virtual telcos. While the former are seeking to maintain and extend their existing systems, the latter are more interested in identifying frontier market opportunities with the use of agile technology to help them roll out affordable services in an accelerated fashion .
For most apps vendors, the bottom line is whether they can retain their legacy customers that still command a huge installed base. At the same time the vendors are making a concerted effort to address the needs of virtual carriers by replicating rapid deployment from one country to another with precision and optimal results. Not everyone is going to succeed because of shifting technologies on the telecom equipment side, while some apps vendors will have a tough time extending the lifespan of their legacy systems hamstrung by their repeated acquisitions that make full integration a bigger challenge than ever.
The market for applications for communications vertical shrank 4% in 2009 as capital and IT expenditures from carriers fell as a result of eroding profit and the lingering recession undermined their ability to sign up new subscribers or expand recurring revenue streams.
Major applications vendors specializing in the communications vertical either saw flat or declining sales. The economic downturn, coupled with market consolidation both on the customer and vendor fronts, made organic growth difficult.
Large carriers continued to see cost reduction and system standardization as the biggest reasons behind their IT initiatives. Vodafone, for example, has turned to a suite of Oracle applications, including back office, customer facing and communications -specific packages for functions like billing, as the basis to consolidate and standardize 5 its IT infrastructure. The move to reduce the number of IT providers Vodafone works with could help the company achieve up to 30% in unit IT cost savings, or to the tune of one billion pounds since 2007.
Midsized carriers, on the other hand, have been investing in projects that allow them to extend their presence with capabilities such as convergent billing, mobile transaction hub as well as integrated platforms that cover every function from human resources management for their own employees to network address books for their customers.
While unbridled growth among carriers has become infrequent, there appears to be considerable opportunities for applications vendors and their systems integration partners, which are indispensable in emerging markets where they can scale local support capabilities in a compressed timeframe.
Implications Of The Great Recession of 2008-2009
As the recession forced carriers to reevaluate every aspect of their business from back-office efficiency to value-added services like mobile advertising and messaging, the repercussion has been keenly felt among applications vendors.
Because of the decommissioning of its legacy systems at major accounts such as AT&T and Sprint PCS, Convergys saw a 23% drop in its applications revenues in 2009. That prompted the vendor to rethink its entire business model culminating in the decision to sell off its human resource outsourcing business to better focus on verticals such as communications and financial services.
Similarly vendors such as NEC and SAP have made it their priority to bulk up their communications offerings through acquisitions. That led the former to acquire NetCracker and reorganized its entire communications division, while the latter acquired Highdeal to shore up its presence in real-time charging for customers in the communications space. SAP’s recent decision to acquire Sybase, which has dominated the mobile database segment with considerable presence among big telcos in countries such as China, underscores the ERP vendor’s growing commitment to the communications vertical.
While consolidation is constant in the communications vertical with the latest being India’s Bharti Airtel buying Zain in Africa, the recession has radically altered the competitive landscape for the apps vendors as they took the cues from their customers to move into uncharted territories.
Communications service providers in Asia, Eastern Europe and Latin America will continue to fuel the growth of applications vendors in the coming year as mobile phone usage continues to soar in frontier markets from Vietnam to Nigeria.
Customers in Western Europe and North America, on the other hand, will see moderate growth in their subscriber base as full recovery begins to manifest itself.
In both cases billing and provisioning applications will be augmented by network policy and bandwidth management capabilities to allow for better customer management that meets fluctuating bandwidth requirements of enterprise users.
Top 10 Applications Vendors In Vertical
The following table lists the 2009 shares of the top 10 applications vendors in the communications vertical and their 2008 to 2009 applications revenues(license, maintenance and subscription) from the vertical.
|Vendor||2009 Share(%)||2009 Applications Revenues From Communications($M)||2008 Applications Revenues From Communications ($M)|
Vendors To Watch
Apps vendors that are worth watching in the communications vertical include Acision for its mobile content solutions, Comarch for its growing presence in Poland and elsewhere in Eastern Europe, and CBOSS for its web-based operations support systems using on-demand delivery.
While growing consolidation among communications applications vendors has made disruptive players more difficult to gain their footing, startups that meld social media technologies along with innovative revenue sharing strategies from IPTV and ebook vendors and content providers could breathe new life into the market.
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Communications Market Report 2009-2014