Vendor Services Review: Amdocs

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1 Publication Date: 14 Sep 2015 Product code: IT Clare McCarthy

2 Summary Catalyst Since forming its new services group two years ago, Amdocs business is thriving. It continues to build on its Customer Experience Solutions (CES) products and has enhanced its service offering to give telcos greater agility and flexibility as they move into a digital and virtualized operating environment. Amdocs telecoms expertise means it is in a strong position to offer IT services in this vertical and it is delivering a solid performance against competition from larger players. Ovum view Two years ago Amdocs realigned its services business to embrace advanced services offerings and process-based outsourcing. It retains a high level of knowledge-based expertise internally, but now brings this to bear through its global service delivery and support model. This makes it more competitive with its IT services peers. The company has identified a number of key components that keep it on telcos short lists for nextgeneration OSS/BSS contracts. These include its Order-to-Activation (O2A) service with predictive analytics; its BEAT software-based, cloud-enabled, testing framework; and its proactive care. Amdocs is also one of the vendors selected by Telefonica for its OSS/BSS transformation in Latin America. However, Ovum would like to see Amdocs generate a larger portion of its revenue outside the US and achieve the higher end of CEO Eli Gelman s predictions for organic growth (2.5% to 5.5%). Amdocs is a telecoms software specialist that competes favorably in the OSS/BSS space against larger software and services companies and that has an established position against network equipment providers (NEPs) such as Ericsson, Huawei, and NetCracker. The current climate favors size geographical scale and an end-to-end view across the product line and an industrialized approach to delivering carrier-grade ICT services. Amdocs acquisition of Comverse s BSS assets delivers some of the scale necessary, but it will need to do more to sustain its place at the top of the OSS/BSS table. SWOT assessment Strengths Amdocs is one of the top five IT services companies (by revenue) in the telco vertical. It provides a rich portfolio of software and services, including a full suite of core revenue management, customer management, and operational support systems products, as well as digital lifestyle services and big data analytics. It leverages these products and solutions for its consulting, systems integration (SI), and managed services portfolio. Its customer base includes tier-1 operators such as Vodafone and Telefonica, as well as many of the largest incumbent (integrated) operators and a number of major cable and satellite providers. Amdocs also works with operators in high-growth emerging markets, including America Movil, Globe Telecom, and TIM Brazil. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

3 Weaknesses Amdocs is heavily reliant on one geographical market and one account in particular North America accounts for 72.7% of its revenues and AT&T for 33.0% of its revenues. The company lacks best-practice examples from other industries verticals, something telcos value from software vendor partners. Opportunities Amdocs recent acquisition of Comverse s BSS assets will give it access to customers in highgrowth markets in Asia-Pacific and the CIS, particularly Russia. It has taken a while for Amdocs to integrate its Actix and Celcite acquisitions with the services side of the business, but both present opportunities to exploit for network optimization and network analytics though the service business unit. Amdocs BEAT is a software-based, cloud-enabled testing framework that also serves as a repository of testing methodologies, tools, and best practices. This is one of the areas that Amdocs uses to differentiate its managed services and is a well-judged offer aimed at capitalizing on telcos needs for testing and performance management in the cloud environment. Threats The telecoms IT and services sector is becoming increasingly crowded with large companies with deep pockets such as Huawei and NEC/NetCracker. Amdocs may struggle to match their scope and scale as it chases opportunities. Amdocs has made a number of major acquisitions in recent years. Integrating acquisitions can be a drain on resources and it can take a significant amount of time to incorporate them into the overall portfolio. Company background Organization Amdocs specializes in software and IT services for telcos and media companies. Its core products sit within the OSS, BSS, and telco network-control domains, but nearly all of its contracts include some form of professional or managed services component. Established in 1982 as an automated telephone directories business, it became something of the company we know today in 1993 when it developed a Unix-based billing and care offer, Ensemble; it subsequently grew it to include billing software and a broader BSS portfolio and in 1998 became a public company. It acquired Nortel s Clarify (and its CRM solution) in 2001 and Cramer Systems' OSS solution in These, plus the other recent acquisitions detailed in Table 1, form Amdocs CES portfolio, which delivers online service and support systems to telcos. Table 1: Companies acquired by Amdocs since 2007 Company acquired Specialization Date Comverse Converged, prepaid, postpaid, and July 2015 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

4 Kenan billing assets Utiba Mobile financial services March 2014 Celcite Management Solutions Actix Bridgewater Systems Network management and Self- Optimizing Networks services Radio access network analytics and optimization Service controller, policy controller, and home subscriber server, anchored by a common identity and device management system November 2013 September 2013 June 2011 Streamezzo Application development June 2010 MX Telecom Mobile payments March 2010 jnetx Service delivery platform provider October 2009 ChangingWorlds Personalization and intelligent portal solutions for mobile service providers November 2008 Jacobs Rimell Service fulfillment April 2008 SigValue Technologies Prepaid billing for mobile operators January 2007 Source: Amdocs, Ovum Between 2007 and 2011 Amdocs made at least one significant acquisition per year, and then spent two years consolidating those purchases. In 2013 it ramped up its M&A activity, buying Actix and Celcite to complement and extend its portfolio. The company s most recent acquisition, of Comverse s BSS assets, extends its product portfolio to Kenan and Comverse One and delivers a longer and more diversified list of customers, including new cable and satellite customers in Asia-Pacific, Europe, Latin America, and North America. Financials At the end of its 2014 financial year (which ran from October 1, 2013 to September 30, 2014), Amdocs reported revenues of $3.6bn. Its organic revenue growth slowed to between 2% and 3% in 2012 and 2013, but acquisitions in 2013 raised it to 6% between 2013 and The company splits its activities into two business areas: products (and software licenses) for customer management, revenue management, operations support systems, network control, network optimization, digital lifestyle services, and CES services across consulting, systems integration, managed services, and testing. Services account for 97% of Amdocs total revenues, with the remaining 3% attributable to software licenses. It sells few stand-alone products, with most customers purchasing a service or maintenance contract with the software. In 2013 the company formed a separate services unit to encompass its services portfolio; this is now called the Services Integration and Operations Group. Amdocs operates in 80 countries around the world, but North America is by far its largest region, accounting for 72.7% of its revenues in 2014 (up from 72.4% in 2013 and 69.8% in 2012). It is also home to three of its largest accounts, AT&T, Sprint, and Bell Canada, with AT&T accounting for 33% of Amdocs 2014 revenues. Emerging markets accounted for 12% of its revenues, which is slightly Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

5 down on previous years. However, the company is extending its penetration of global accounts, including Vodafone, Telefonica, and Deutsche Telekom. Before its acquisition of Comverse s BSS assets, Amdocs employed more than 22,000 staff worldwide; Ovum estimates that 15,000 of those are employed on telcos sites and in related service activities. It has support and development centers in Brazil, Canada, Cyprus, India, Ireland, Israel, the UK, and the US. Positioning in services Current positioning Amdocs has grown out of traditional billing, customer care, and OSS products. Its core strength is BSS, but, combined with its OSS assets and big data and predictive analytics tools, it offers a powerful set of solutions for telcos under the banner of Customer Experience Solutions (CES). Although its top-line revenues are smaller than those of NEPs such as Ericsson and Huawei and larger software companies such as Oracle and SAP, the playing field is more balanced when one considers revenues from services delivered in telecoms only. Previously the company was criticized for its emphasis on technical perfection and for putting high numbers of staff on client sites for the duration of its managed services projects. Now it has developed a global service delivery and support model that makes it more competitive with its IT services peers. It has compelling, business-led IT services and a more commercial off-the-shelf approach to product development and service creation. It is focused on delivering an end-to-end view of customer engagement and the insights predictive analytics can deliver for critical business processes. It is also an early mover in terms of preparing for the virtualization of the assets in its CES portfolio and its telecoms focus means it is one of very few IT services companies with a convincing and tangible telecoms story. Amdocs' customers include 15 of the world's 20 largest telcos by revenue, with AT&T, Bell Canada, Sprint, Vodafone, T-Mobile, Comcast, and TIM Brazil all purchasing software and services from the company. Global service delivery Amdocs Truly Global Operation is a network with centers worldwide that support and manage its customers mission-critical high-volume systems, infrastructure, and processes. The centers offer 24/7 support and guaranteed business continuity, leveraging Amdocs best practices worldwide and industry standards such as etom and ITIL. The centers use monitoring tools and manage Amdocs, legacy, and third-party vendors. The six centers located in Champaign, US; Pune, India; Galilee, Israel; Montreal, Canada; Sao Paulo, Brazil; and Manila, Philippines are connected centers that work on a central, unified platform and share best practices.. In addition to its global hubs, Amdocs has regional service delivery and operational centers in Melbourne, Australia; Santiago, Chile; Seattle, US; Maastricht, Netherlands; Hanoi, Vietnam; London, UK; and Limassol, Cyprus. All centers offer level-1 and level-2 support and some offer level-3 support, depending on their location. For larger customers, Amdocs places staff on Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

6 site at the telco s headquarters. The number of Amdocs staff on site varies according to the lifecycle of the service contract typically there will be a large on-site team at the start, but once the service has been tested, launched, and is in operational mode a small on-site team will remain if required. Table 2: Amdocs services business: scope and scale Scope Scale Countries with presence 80 Regional centers of excellence/competence Location of global service delivery/operational centers Location of regional service delivery/operational centers Champaign, US; Pune, India; Galilee, Israel Pune, India; Galilee, Israel; Champaign, US; Montreal, Canada; Sao Paulo, Brazil; Manila, Philippines Melbourne, Australia; Santiago, Chile; Seattle, US; Maastricht, Netherlands; Vietnam; London, UK; Cyprus Total service employees (Ovum estimate, pre-comverse)) 15,000 Subscribers under management Professional services projects 650 million 2,500, including multi-vendor projects Source: Ovum Competition Amdocs competition comes from a number of sources, including: IT service providers and SIs such as Accenture, Atos, Cognizant, HP, IBM, Tech Mahindra, and Wipro. Network equipment providers such as Nokia Networks (and Alcatel Lucent), Cisco, Ericsson, Huawei, NEC/NetCracker, and ZTE. These players all see BSS, OSS, big data analytics, consulting, systems integration, and professional services as natural extensions of their networking portfolios. Software vendors entering the telecoms vertical such as Oracle, Redknee, Salesforce, and SAP. Telcos' in-house IT departments. There are now far fewer specialist OSS/BSS vendors since Comverse, Convergys, Orga Systems, and others have been partly or wholly acquired. However, network and IT domains continue to converge and SDN and NFV are moving front and center of telcos plans to be more agile, virtualized digital enterprises. Vendors must therefore demonstrate that they have a comprehensive range of ICT services that they can manage on-premise or move to the cloud. As Figure 1 shows, in 2014 Amdocs was one of the five largest providers of IT services to telcos; Ovum expects it to hold or improve this position over the next months. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

7 Figure 1: Revenue market share for IT services companies in the telecoms vertical, 2014 Source: Ovum As Figure 2 shows, nearly all of Amdocs' 2014 revenues came from the telecoms vertical. The majority of its service revenues come from managed services. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

8 Figure 2: Proportion of revenues from the telecoms vertical, 2014 Source: Ovum Services portfolio Portfolio overview Amdocs formed what is now the Systems Integration and Operations Group in 2013 to encompass its service portfolio. It comprises the following three areas: business consulting services for vision and strategy systems integration services for transformation and implementation managed services for IT process, operations, and infrastructure management, as well as service delivery management and optimization. Figure 3 shows these three services areas as they relate to telco customer engagement. All of Amdocs services use industry standards such as ITIL, etom, CMMI, and ISO. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

9 Figure 3: Amdocs' business and IT service portfolio Source: Amdocs Consulting services Amdocs' consulting services practice provides thought-leadership workshops, consulting for business, product and technology strategy, and insights. As part of the services group realignment, the strategic business consulting group has been differentiated from the rest of the consulting services. It comprises executives with telco experience and credentials who use industry best practice to design business strategies and road maps. These align to business domains such as risk management, financial controls, customer experience improvements, customer care, and digital transformation strategy. It offers additional consulting services to ensure a seamless end-to-end offering throughout the life of a project. At the core of its business consulting services, Amdocs offers a series of methodologies such as Amdocs Scenario Optimization Modeling that provide a set of predefined, communications-focused business processes. Other services include business change and optimization (ROI, BPM, organizational change management and customer training. Systems integration and delivery Systems integration (SI) plays a central role in telcos digital transformations and product implementations. The SI area includes the planning, design, implementation, and testing of solutions, as well as customization, using the vendor s own and industry best practices and tools. Amdocs is casting off its reputation for using highly customized approaches to its customer engagements and now has an array of methodologies and preconfigured tools for change management and channel optimization across the engagement lifecycle; these allow the company to act as a prime integrator from program management and project deployment to solution implementation and operations. For example, Amdocs SI services integrate business intelligence (BI) and data warehousing (DW) layers on top of billing, customer management, and OSS and ERP data sources. This addresses the entire data lifecycle from design and implementation to operations, including DW, BI, and analytics with closed-loop feedback directing actionable insights. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 9

10 Managed services Amdocs' managed services portfolio covers five areas of service deployment and optimization of operations. It accounted for 48.5% of the company's total revenues in The managed services practice has four main areas: IT managed services Order-to-Activation Services and Order Gateway Testing Innovation new Services R&D. IT managed services As Figure 4 shows, Amdocs IT managed services comprise business operations management, multivendor support for applications development and maintenance, and support for optimization of IT and data center infrastructure. All of these are delivered via the Truly Global Operation centers. Amdocs IT managed services group supports more than 650 million subscribers worldwide and manages more than 1,500 legacy and third-party applications. Figure 4: Amdocs IT managed services Source: Amdocs Order-to-Activation and Order Gateway Because telcos' internal structures and reporting are rarely consistent across IT and business functions, problems can emerge between sales, order capture and entry, order orchestration, fulfillment, activation, and billing. Two important components of the managed services offer that address that business need are the Amdocs Order-to-Activation (O2A) service and the Amdocs Order Gateway. As Figure 5 shows, Amdocs Order to Activation Value Process Operations is designed to optimize business operations supporting processes such as service delivery, order issues resolution, and back- Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 10

11 office operations. The solution uses predictive analytics and aims to identify and prevent order fallouts and cancellations and the need for manual intervention. With O2A, Amdocs claims to reduce costs of ownership by (up to) 30%, as well as to improve time to market and business agility. Figure 5: Amdocs Order to Activation Value Process Operations Source: Amdocs Amdocs Order Gateway allows telcos to abstract orders from their original formats without the need for integration or changes to target systems or to the input processes in the channels. This service acts as a bridge between business and IT functions and addresses needs such as dynamic addition of direct and indirect sales channels and abstracting the billing layers across (non-integrated) systems and channels. Testing Amdocs offers a range of core, specialized, and automated testing servicesand has the greatest market share in terms of revenues spent on testing in the telecoms industry. As Figure 6 shows, its portfolio includes acceptance test, SI, and end-to-end tests for functional areas such as revenue assurance, web, and e-commerce, as well as performance and operational tests for non-functional areas such as data warehousing, business intelligence, data management, mobile applications, and middleware. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 11

12 Figure 6: Amdocs testing portfolio Source: Amdocs Amdocs BEAT is a software-based, cloud-enabled testing framework that also serves as a repository of testing methodologies, tools, and best practices. It leverages the company s 10 years of testing experience in the market. Testing is one of the areas that Amdocs uses to differentiate its services; the company issued 20 patents in 2014 and has a further 25 pending in BEAT is a well-judged offer aimed at capitalizing on telcos needs for testing and performance management in the cloud environment and helps telcos maintain their quality of experience and quality of service KPIs. New Services R&D Amdocs Services R&D Group models its structure on the venture capital incubator and is tasked with bringing several new services offerings to market each year. All new services build on Amdocs communications industry knowledge and add new IP technology and methodologies to its solutions. Data expertise in the telco industry enables the company to build effective vendor-agnostic services around BSS/OSS systems. The Services R&D Group has an extensive partnership network with companies that own best-inclass technology in the telecoms vertical and beyond. Amdocs platforms and technologies help mitigate the risk for these partners, and the telco customers, by extending its library of business processes and KPIs to non-telco-specific products. Software products Customer Experience Solutions portfolio Amdocs' software products form part of its Customer Experience Solutions (CES) portfolio. As previously noted, very few customers purchase just products there is usually a service component Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 12

13 attached. CES 9 was launched in February 2013 and is based on open architecture, SOA principles, and industry standardized BPM. Subsequent releases have provided products and solutions for telcos to deliver digital services using the cloud and in virtualized environments and to enhance telco operations. The product suite offers core revenue management, customer management, and operational support systems. It includes: Network control: pre-integrated multivendor products to manage subscriber and device experience as well as to control network access. Network optimization: an integrated suite of software and service for managing and optimizing radio access. Digital lifestyle services: provision of M2M, cloud-based connected home and unified communications across VoIP, social messaging, and video services. Big data analytics: end-to-end carrier-grade big data analytics platform and solutions drawing data from the network, BSS/OSS, and third-party sources. Compact CES: real-time convergent billing and service delivery for tier-3 service providers and below, MVNOs, and MVNEs. Amdocs launched the latest version of its CES portfolio, CES 9.3, in June It offers solutions that support telcos digital business transformation. Highlights of the launch included: Amdocs Commerce, which allows telcos to bundle physical and digital goods with their traditional (broadband, cable, mobile ) services to anonymous shoppers, as well as existing customers The solution supports purchase and re-contracting flows, from discovery to delivery, through a single all-inclusive catalog and customer-facing system. Amdocs Omni-Channel Widgets, which provide fast configuration with web content management systems integration and improve the efficiency of online commerce capabilities. Amdocs Omni-Channel Billing Experience, which offers interactive HTML bill capabilities. Amdocs Multiplay, which enables telcos to increase the monetization of digital content, while reducing TTM and TCO for multiplay bundles and offers and ensuring a consistent multichannel user experience. These announcements build on previous releases, when Amdocs introduced new applications for its big data analytics offer, as well as Amdocs Deep Network Analytics. The latter tunes network policies to ensure optimal quality of experience and plans network build-out investments to maximize ROI on new technology rollouts. The company has also announced enhancements to its omnichannel convergent charging (to allow data consumed by roaming customers to be serviced by the visiting network instead of the home network) and a new Order Delivery Orchestrator solution that enables the orchestration of complex enterprise orders across traditional and virtualized services. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 13

14 Business strategy Projects and clients Amdocs client list includes 15 of the world's 20 largest telcos by revenue. These are four Telefonica properties (Argentina, Chile, Peru, and Spain) and five Vodafone operating companies (Germany, Hungary, Netherlands, Romania, and the UK), as well as America Movil, BT, EE, Comcast, Cablevision, DirecTV, DT, Telkom South Africa, Telus, TIM Brasil, True, Verizon Communications, and XL Axiata. Its recent managed services announcements include: US Cellular. In January 2015 the fifth largest carrier in the US announced a five-year agreement covering order to activation, customer care, and retail interaction, as well as billing for both business and retail customers.amdocs will provide 24/7 system support, including tier-2 services and application support for prepaid and postpaid customers across 3G and 4G (LTE) networks. Telefonica Argentina. In November 2014 Telefonica Argentina awarded Amdocs a multiyear application management agreement for billing and ordering solutions, as well as interfaces to non-amdocs legacy systems. Amdocs manages, maintains, configures, and tests multiple BSS systems, including interfaces to applications from third-party vendors. Sprint. In April 2014 Sprint extended its managed services deal with Amdocs for its billing and customer care systems to include Amdocs Convergent Charging to create and monetize mobile data services.amdocs will host business processes for billing, customer care, and IT infrastructure management at one of its own data centers. The agreement also includes Sprint sub-brands Boost Mobile, Virgin Mobile USA, and Assurance Wireless. Elisa. In November 2013 the Finnish quad-play provider extended its existing managed services relationship with Amdocs to Amdocs will manage Elisa s IT systems across multiple lines of business, expanding its support of billing systems to cover additional legacy billing and third-party mediation systems. Managed services delivered will include applications development, operations, and maintenance. Vodafone. In August 2013 Vodafoneawarded Amdocs a five-year global managed services agreement for application development, operations, and maintenance services in the customer care and billing domains. As part of this strategic agreement, Amdocs established a dedicated shared service and development center to service Vodafone s local markets in Germany, the Netherlands, and the UK. Partners Amdocs uses its One Partner Program to combine products and services. It offers three levels of partnership: Platinum, Gold, and Silver, with the top level comprising joint offers, sales and marketing, and customer exposure. In July 2015 Amdocs claimed to have more than 100 partners, including large software providers such as IBM and HP; SIs such as Atos, Cap Gemini, Virtusa, Tieto, and Wipro; niche software companies such as Q-nomy; and vendors bringing regional or specific industry skills such as cvidya and Nice. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 14

15 Amdocs has a further program targeted at seed-bed innovation. Its Enreach partnership program draws on an ecosystem of start-up companies that complement Amdocs' offering to help telcos reduce their offer design and delivery times. Appendix Methodology This report was written following executive briefings with Amdocs in March and June This engagement included further bespoke briefings, industry events, webinars, and secondary research. The report also utilizes Ovum s ongoing research into the global telecoms market. Further reading Vendor Services Review: Accenture, IT (February 2015) Vendor Services Review: Wipro, IT (October 2014) Vendor Services Review: Ericsson, IT (September 2014) Vendor Services Review: Huawei Technologies, TE (August 2014) Vendor Services Review: Nokia Solutions and Networks, IT (April 2014) Author Clare McCarthy, Practice Leader, Telecoms Operations and IT [email protected] Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at [email protected]. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 15

16 no liability can be accepted in this regard readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 16

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