Hot on the heels of the company’s latest acquisition, Intec’s Mike Frayne and Kevin Adams outline the organisation’s strategy in the OSS market
Telecommunications has had a rough ride over the past two or three years, and while signs of a recovery are coming through loud and clear, it is those companies who held their nerve in difficult market conditions, and continued to invest for the future, that now stand to reap the greatest rewards. Intec recently added to its track record of growth with the acquisition of ADC Telecommunication's Singl.eView retail billing software division. The company's Executive Chairman Mike Frayne, and CEO Kevin Adams, spoke to European Communications about the thinking behind the acquisition and the role they see for Intec in the OSS market.
LM: What was the initial thinking behind your decision to acquire Singl.eView?
MF: Retail or transactional billing is the biggest part of the OSS market – about 65 per cent of the whole sector – and it has the highest level of senior executive mindshare, because it directly affects both the major revenue stream and the customer relationship. To grow the company in the way we wanted to, and to secure ourselves a position as a truly Tier 1 OSS vendor, we really had to be in retail. Intec already dominates interconnect and mediation, and probably has the largest customer base in real-time charging/active mediation, so retail was also a logical next step from a product portfolio viewpoint.
LM: Had you, in fact, had feedback from customers who wanted you to offer retail/transactional billing?
MF: We have had requests from customers over the years, particularly from some of our most well established customers who like the way we look after them, and also from some of the new IP billing customers from our recent acquisition of the Digiquant business.
But the drive to do this acquisition was primarily internal, as a result of our perception of the need to elevate Intec into the top tier of vendors. We think that a lot of the smaller and niche vendors will have a very difficult time over the next few years, and the lack of newsflow and good financial results from many of them is already evidence of this.
LM: So was it also a matter of better positioning yourselves with a wider offering in a recovering marketplace?
MF: We do see a slow and steady recovery, and now is clearly a better time than in the previous two to three years to be executing on our growth ambitions. But we also have a long-term strategy to grow and develop by acquisition, as well as organically, and this is primarily another step in that plan, albeit a big one!
LM: Did you look at any other contenders, aside from ADC? MF: We have looked at many, many OSS companies over the past few years, and only acquired a very few of them, as we have strict criteria for acquisitions, in terms of product quality, financial performance, cultural synergy and long-term potential. There are not many major players in retail, and we are clearly not in a position to acquire one of the larger vendors. Singl.eView was well timed for us, as it was affordable, and a good business that we felt comfortable with.
LM: Were there any other factors that led you to choose Singl.eView?
KA: Singl.eView is first and foremost a great product – we think probably the best current tier 1 retail billing and transaction management system on the market. It's modern technology, architected for high volume and real-time processing, and capable of handling any kind of service and payment method. The feedback we had during due diligence from customers and partners was very, very positive, and gave us a lot of confidence to go forward. It's also highly configurable, but without a massive services overhead, so total cost of ownership is low, relatively speaking. It's beaten all the major players in various recent major deals, such as Tele2 and Deutsche Telekom, so we know it's right up there with the rest of the tier 1 solutions in terms of performance and functionality.
Singl.eView also has a solid customer base of well-known customers, in fixed, mobile and 3G. That not only gives us a day one revenue stream, it also brings referenceability in our sales campaigns, which is absolutely crucial today.Singl.eView has a strong professional services operation – almost twice as large as Intec's – because of the nature of retail projects. We'll have almost 700 PS staff, and around 300 developers in total – that's a big capability to offer the industry.
Culturally we felt it was also a good fit, with a strong management team and very good people in all areas. We already have people from both sides working well together, and the chemistry is good.
LM: Does this acquisition fundamentally change Intec?
MF: Yes and no. Absolutely yes in terms of market position, capability and visibility – it takes us immediately into the top three or four OSS product companies in terms of software revenues, technical capabilities and customer base. You can't double the size of a business and not think it will be a massive change. But, on the other hand, it wont change our fundamentals – strong focus on customer care, good business performance, and the best products. Everyone says these things but it's what we built Intec on, and our growth and success, right through the bad years, is the evidence.
LM: Could you detail exactly what you believe Singl.eView will bring to Intec, and how it fits with your existing offering?
KA: In terms of fit, it is very good. We have about a dozen common customers already, including real innovators like 3, so we know the products work well together, not just in theory but in really demanding production sites. Retail naturally fits right alongside interconnect, and both are fed by mediation, so the fit is obvious. Technologically, the architectures are very compatible, and we are already exploring some very interesting technical synergies, both ways. There is a minor overlap with the acquired Digiquant (Intec DCP) products in a couple of areas, but they are really targeted on different problems, and it's not an issue in the opportunities we see.
LM: So, how will the acquisition benefit existing Singl.eView customers; your current inter-carrier billing and mediation customers; and possible new customers?
KA: Intec has a big customer base, about 400 customers, while Singl.eView has 70, and the crossover is not huge. So there is clearly a great opportunity to cross-sell products both ways. All telcos need billing, both retail and interconnect, as well as mediation and now, real-time charging, so we feel we have a very strong, logical architecture to offer to both new and existing customers. Singl.eView has a great reputation, but it's clear that uncertainty over its position and future has held it back. Those issues are gone now, and we have had a lot of encouraging responses already from customers and prospects. People know that Intec is a solid business with good customer care and a real commitment to product investment – something like $30m next year – and they can see that we have bought Singl.eView to take it forward. We've already committed to the existing roadmap, and we'll be looking to extend that going forwards.
LM: Have you had much reaction from your own customers, and existing Singl.eView users, yet? And what has been the feedback from the marketplace in general?
MF: Early days to say too much, but really very encouraging so far. We've been to see most of the major Singl.eView customers, and talked to a lot of Intec customers, and the response has been overwhelmingly positive. People know it's a big deal to take on, but they also know we've done it before, and we keep our promises on commitments for product delivery and support. In general I think there's a lot of demand for a technically strong retail solution that's flexible and doesn't cost a fortune to implement and maintain.
LM: What, in your view, are the advantages and disadvantages to the operators of a 'one-stop-shop'? Is there a danger, for instance, that by creating powerful, large suppliers (who might push the smaller guys out of business), operators will be locked into a narrow choice of solutions?
KA: It's a longstanding argument – best of breed or one stop shop. I guess Intec has been both of these things, so we are in a pretty good position to answer that one. Having focus on one product – say mediation – is great because you know what you sell, and you have to sell it. Life is straightforward, and you can focus on building a really strong product. We've bought several one-product companies now, and the benefits are typically a lot of skill and a great product. But it is also limiting and a bit risky, as markets sometimes turn down, and you are exposed as a one-product vendor. As a vendor with multiple products, particularly if they are a logical fit together, you have more technical strengths to bring to customers, and more ability to build them a coherent systems architecture without an 'integration tax.' There is some downside to customers if one supplier dominates, but in reality it rarely happens. There is enough innovation in the software business to ensure that there will always be some guy in a backroom building a great product and keeping the big guys honest. In fact, that's probably what keeps the major vendors awake at night!But there is another factor, too – the growing demand for a 'solutions' approach. We have customers saying 'we want to offer this new next-generation service, bundled with these other things, and with various payment options – how do we do it?' Intec can now solve those problems in a complete way, without a lot of multi-vendor hassle and integration worries, and we are seeing some very interesting business come through.
LM: Broadening out to the OSS/BSS market in general, do you believe the marketplace is now in a period of recovery, and if so, how will it compare to its heyday of two or three years ago?
MF: It will be a long time before we see the craziness of 1999 and 2000 again. Vendors were creating completely unsustainable business models based on IPO or VC cash, spending $10 for every $5 they earned, and the carriers were caught up in a race for market share and spectrum at any cost. Life may be harder work now, but at least the good companies are making money and building a long-term future. There are still a lot of damaged businesses out there, and many won't make it. One of our messages to customers is always to look at the underlying financial strength and performance of vendors before committing to them. You need to see a five year roadmap and business plan in our view.
LM: Would you say that OSS/BSS systems are now more central to strategic telecoms thinking?
MF: Absolutely – in the marketplace we all have to face today, operational efficiency, margins and customer service are king. Good OSS can deliver in all those areas and the forward thinking players are looking very hard at their architectures and OSS cost bases. Some companies spend truly scary amounts on legacy OSS, and we think a lot of it could be scaled back with the right new technology choices. But it's a big decision to move away from a system that works, even if it costs an arm and a leg to maintain. Another factor is new revenue streams – things like content, messaging and games. These are where the future growth and margins are going to be, and carriers want a growing share of consumers' disposable income. Working in this space almost inevitably implies new OSS spending, because many legacy systems just aren't up to it, and it's very high on the executive agenda right now.
LM: So, how do you see the future for OSS/BSS, in terms of its role in the broader telecoms picture? What will it have to do to adapt to the inevitable changes in technology, user demand, and a possible shake-down in the operator market?
KA: We are really excited about the future, both for the industry and Intec. There's a lot going on and many new opportunities, particularly in emerging markets and new technologies. We are adapting Intec, and our product portfolio, to address the opportunities we see, and to adapt to the changes that will come. Yes, there may be some operator fall out, and vendors too, but the overall trend is still growth, and you have to take the long view. There's a lot of innovation right now in new services, pricing strategies, and technologies and that makes for a fun industry.
LM: Do you have any plans for further acquisitions? And where do you see Intec in, say, five years time?
MF: We've done eight acquisitions in four years, and they have made a massive contribution both to our growth and to our ability to deliver what customers want, so we can't see any reason to change tack. But we have strict criteria for what we will acquire, and a long-term plan for what we might move into. Our medium term ambition is to be clearly the number one OSS products company, and Singl.eView takes us a long way towards that. We also aim to continue consolidating the market where possible and, of course, you can't control when opportunities arise.
Beyond that, who knows? [l=www.intecbilling.com/]http://www.intecbilling.com/[/l]
Lynd Morley is editor of European Communications