With the global telecom bubble bursting, growth has been sluggish, with a significant cutback in spending by telecom majors like Lucent and Nortel. Service providers who had a high cost of operational expenditure because of heavy investments made in networks during the heydays, are now looking at Indian software companies to provide offshore solutions to manage their network operations, support systems, billing software, OS integration and business process re-engineering. Akhtar Pasha says the outlook for Indian software companies catering to the telecom markets looks bright—largely due to business from carriers

Subex identifies revenue leakage within the telecom network and provides a product to plug the leakage, says Subhash Menon

Modest growth in exports & domestic market
The telecom software market in India grew to Rs 4,100 crore in 2001. Of this, exports accounted for Rs 4,034 crore and the domestic market contributed Rs 66 crore. If things go as per Nasscom’s projections, the Indian telecom market (export and domestic) should grow to Rs 12,500 crore in 2003.

The telecom software industry in 2001-02 continued to be skewed in favour of exports. Though in absolute figures the domestic telecom software industry grew more than 100 percent from Rs 66 crore to Rs 140 crore in 2001-02. In percentage terms the growth was marginal—approximately 3 percent, compared to 1.6 percent in the previous year.

The bulk of telecom revenues came from exports that include services like operation support systems (OSS), Business Support Systems (BSS), network management, billing software and embedded and equipment testing. Software players with large contributions towards exports include Wipro, TCS, Infosys, Hughes Software, Subex, MBT, Sasken, Future Software and others.

Leading the telecom services vertical was Wipro with Rs 1,099.6 crore in 2001-02, up from Rs 725.29 crore in the previous fiscal. TCS bagged Rs 753.66 crore from the telecom sector (18 percent of its total revenues), and of this, services contributed Rs 640.6 crore while the balance Rs 113.06 crore came from telecom R&D services.

Infosys’ revenue went up by 15 percent in 2001-02 from negative growth in 2000-01. The company says its revenue from telecom services stood at Rs 480 crore in 2001. Subex, a pure telecom product company reported $3.6 million in revenues in 2002 and expects to double its revenues from products to $6 million in 2003. The company recently won new contracts, where the average deal size hovers around $500,000. Hughes Software Services (HSS) reported Rs 234.86 crore in 2001-02 of which services accounted for Rs 180.64 crore and another Rs 54.2 crore came from products.

Highlights: carriers grow, OEMs gets hammered
Says Ravi Datar, senior analyst for BPO and IT services at Gartner India, “With the global telecom bubble bursting, financial pressures are driving telcos (carriers) to implement OSS, BSS and enhance network efficiency with the aim of lowering operational expenditure. It is the carriers who will drive future growth in telecom software services. On the OEM side, carriers are not excited by new technologies like 3G and GPRS as they are yet to mature and are not yet widely deployed. Plus, there are no funds to support new technologies. Because of these factors, cash inflow to OEM vendors seems to have dried up.”

Market drivers
Arun Kumar, president and managing director of HSS says, “In developed markets where high-end technologies have been deployed, the need to increase operational efficiency will drive the market. While in developing regions like APAC, the driver is system integration capability amongst open platforms.”

Technologies such as IN, SS7 and other software for TDM switching were hot a year back. The current favourite is the entire wireless gamut—EDGE, UMTS and CDMA—this is where most Indian software companies are currently concentrating their efforts. A small but extremely important segment is that of telephony-based applications, software patches for VoIP and VoIP/TDM integration. Routing/MPLS is another small, but hot area, in the telecom software scene in India. Then there are emerging application areas like IP QoS, broadband aggregation and wireless-IP integration.

Wipro Infotech designs and offers testing services of network equipment, says Deepak Jain

Kobita Desai, senior analyst for telecom services and mobile at Gartner India says, “China and India are growing economies for the telecom business in the APAC region. As new carriers get into the market, the demand for OSS, BSS and network management will grow quickly.” In the recent past, the country saw Reliance, Bharati and Hutch enter this space. To sustain themselves in the highly competitive market these companies need to invest in infrastructure, improve quality of service, network efficiency and billing solutions. These factors will drive the domestic market, says the analyst.

Trends
Expectations that consumers will adopt newer technologies as fast as they are rolled-out have crashed. The focus of key global players has shifted to leveraging existing technologies. However, the US market remains the dominant market. Kumar of HSS says, “As for the growth in APAC and Indian markets, they are growing at a much faster rate at about 13 percent compared to the US which is about 8 percent. So, Indian companies should start targeting these regions too.”

Other trends seen in the APAC:

• Large scale deployment of CDMA—especially in Korea and Japan.
• 3G is not in favour—as the technology hasn’t matured.
• Telecom exports continue to grow—as OEMs cut costs and outsource their requirements to India.

Vendor strategies

Wipro
Wipro Technologies and Wipro Infotech have combined strengths to cater to the telecom vertical. Internally, the company is divided into two teams—one works with OEMs like Ericsson, Nokia, Nortel and Motorola while the other focuses on the service provider segment, on carriers like Reliance Infocomm, AT&T and NTT DoCoMo.

Deepak Jain, general manager-IT solutions for telecom industry at Wipro Infotech says, “We design and offer testing services to OEMs for their network equipment. We also do interoperability testing and system integration. Recently, we set up a Motorola GSM network and a similar implementation for BSNL. On the carrier side, we do telecom system integration of billing systems, including designing, deploying and managing systems.”

Area of specialisation: Wireless applications, billing, equipment testing and VoIP.

TCS
The telecom practice division is among the three largest practices within TCS. Its telecom business is divided into two main segments. Network support for the OEM segment and the service provider segment. Ravi Vishwanathan, head of the telecom practice at TCS says, “The telecom practice accounts for close to 18 percent of our total revenues. In absolute numbers too, the practice has been growing, despite the telecom slowdown. This has been possible thanks to our diversified strategy where we are not totally dependent on the OEM segment.”

TCS’ strategy has been to follow a path of attaining a balance between business from OEMs and service providers. New programs are being invested in on the OEM side of the business, albeit with caution. Targeting customers who are positioned towards wireless and 3G services has been the focus. For the service provider segment, a careful partnering with best-of-breed solutions coupled with an aggressive foray into the telecom outsourcing business is the plan. The customers targeted are Tier 1 and Tier 2 telcos for large outsourcing or offshore business and Tier 2 or Tier 3 telcos for systems integration. Large OEMs and test equipment vendors would be R&D and technology customers.

Area of specialisation: Mobile data services, IN platforms and network management services.

Infosys Technologies
Infy’s strategy for the telecom vertical is to cater to both OEMs and carriers with multiple services. Nortel, Lucent and Cisco are its OEM customers for whom it develops wireless, wireline, broadband, optical and VoIP solutions. On the carrier side, it offers billing systems, unified billing solutions for wireless, wireline, Internet and mobile application, provisioning of OSS, network management systems to customers like Telstra, Belgacom and Proximus. The company also caters to start-ups like Verizon, Cable and Wireless International and Telenet.

Furthermore, Infosys provides application maintenance and business consulting for product portfolio rationalisation (since its customers use multiple systems). It also does IT implementation of enterprise applications like HR, finance and CRM.

Y Parameswar, associate vice president, Infosys Technologies says, “This year we are planning to acquire more customers in the carrier segment.” It is believed that Infosys is involved in a system integration partnership with a local company in China. Infy is putting its .NET expertise to good use in the telecom segment. Parameswar says, “We are developing telecom solutions on the .NET platform for Korea Telecom.”

The US market contributes the most to Infy’s telecom business, accounting for 75 percent of turnover. Parmeswar adds, “Going forward our strategy will be to increase the focus on big carriers like BT in Europe. We will concentrate on China, Australia and Korea in the APAC.”

Area of specialisation: Wireless, wireline, broadband, optical, VoIP solutions, OSS and network management.

Subex Systems
Subex Systems is a pure telecom player that provides application products for the telecom market, largely to OEMs. Its focus has been in the revenue maximisation space within the OSS and BSS market. Subash Menon, president and CEO, Subex Systems says, “We are the only product company that identifies revenue leakage within the telecom network and provide a product to plug the leakage. Our strategy centres around our two products—Ranger, a fraud management system and Incharge, a billing verification product.” Hutch, Bharati, BPL, Ideas and Escotel are its customers in India. Overseas customers include Sonatel, Cypress Telecom Authority, Sprint, Global and Teleglobe. Its wins in 2002 include Sonatel, Ikatel, Cora de Comstar and RPG Cellular, where the average deal size was $500,000.

Area of specialisation: Revenue maximisation (fraud management and billing software solution)

Hughes Software Services
Hughes Software Services focuses on communications software, offering products and solutions to OEMs. HSS works closely with its parent, Hughes Network Systems. The company has over 180 customers across the world. It offers BSS and OSS in integration and legacy application maintenance services to telecom service providers. HSS also plays in the application space where it provides the full spectrum of services to independent software vendors (ISVs), OEMs and telecom companies.

Area of specialisation: High speed mobile data, VoIP, broadband, switching, wireless and network management.