Inventory management once was a specialized application in the operating support system arena, with companies like Cramer Systems, Granite Systems, MetaSolv Software and NetCracker competing to help telcos galvanize that particular part of their OSS infrastructures. However, with Oracle's bid late last month to acquire MetaSolv, three of those four companies — the exception being NetCracker — have been consolidated into much larger software firms, and all indications are that the OSS market, once a pool of feisty guppies, has quickly become the domain of a few, big hungry sharks.

“That's certainly true in the major OSS application spaces,” said Rob Rich, an independent consultant who has long followed the OSS market. “These bigger companies are essentially trying to build software suites.” The main benefit of OSS software suites could be that pre-integrated suites would allow carriers to save integration costs and implementation time, Rich said.

The drawback could be that the largest telcos have not yet demonstrated a preference for buying broad OSS suites. But like so many other sectors in the telecom industry, prospective OSS vendors may have no choice other than to consolidate and scale upward right along with the consolidation of service providers into ever larger corporations. Oracle's $219.2 million cash offer for MetaSolv followed other deals that have gradually made the OSS market a landscape of heavy hitters, including Amdocs' acquisition earlier this year of Cramer and Telcordia's deal to buy Granite two years ago.

“Unless it's a very specialized OSS application, carriers just feel safer buying from a larger company,” Rich said.

Telcordia officials have been saying for a long time that OSS point solutions must evolve to become part of more integrated suites to survive, and Michael Anderson, senior vice president of marketing and strategy for Telcordia, said a vendor's ability to scale to meet the needs of large carriers is nothing new.

“Tier 1s do not take a lot of risks and often would prefer not to work with a small vendor unless it is backed by a larger one,” he said.

Competitively, Anderson said Telcordia expects to see a lot of new marketing activity from the likes of Oracle and Amdocs, but less overall competition in the market with point competitors such as MetaSolv and Cramer consolidated. And though all three companies have acquired smaller inventory management players, Anderson also sought to distance Telcordia from Oracle and Amdocs, saying that Telcordia's acquisition of Granite was a natural move by a company that was already a leading OSS player, while the other deals were efforts by a database company and a billing vendor, respectively, to gain a foothold in the OSS market.

The database software industry is keenly aware of Oracle's aggressive worldwide sales efforts, but Anderson said selling OSS solutions “is not as simple as putting on a different coat.”

Larry Goldman, an analyst with OSS Observer, wrote recently that Oracle's OSS deal was part of a larger and more deliberate move into telecom. “In the past year, Oracle has changed from a company with no discernible focus on telecommunications software to a leading supplier,” he said.

Curtis Holmes, president and CEO of MetaSolv, said in announcing the acquisition by Oracle that the deal was a necessary competitive move. While network operators worldwide are pursuing OSS transformation projects, he said, carrier consolidation and generally soft spending have made it difficult for a large number of companies to effectively compete. “The deal is great timing as the industry goes through a massive transformation,” Holmes said. “This deal will allow us to accelerate our strategic mission. We're really able to expand our profile in the global marketplace.”

There may have been other factors, however, in the timing of MetaSolv's decision to forego its independence. Holmes said the company had been seeking a buyer for several months and had talked to numerous prospects, and Rich noted that MetaSolv was a rarity among small OSS players in that it was a publicly traded company, with all the pressure that entails. “When you are public but small, you still have to deal with Sarbanes-Oxley and all the other encumbrances that go with being public,” Rich said.

It remains to be seen whether or not the OSS market will see any more empire builders. Rich said Microsoft is likely to keep investing in service delivery but stay out of most OSS segments. However, there may be room for more start-ups in the wake of current consolidation. Rich said venture capitalists may be hesitant to invest in the sector if the only outcome for small firms is acquisition, rather than the bigger payday of an IPO. But angel investors and serial entrepreneurs could fill the gap. Also, the big research and development programs of the much larger companies ironically could yield spinoffs that make the OSS market a greenfield once again.

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