Posted: 03/15/1999
A One-Stop, Discount Shop
What To Expect from the Lucent-Kenan Deal
By Paula Bernier and Ken Branson
Betting that carriers want everything--from switches and routers to billing systems and more--from a single vendor, Lucent Technologies Inc. recently announced plans to buy Kenan Systems Corp.
"The Lucent-Kenan deal has a huge impact for this industry," says Doug Ashton, senior vice president of equity research at Jefferies & Co., Los Angeles. "In my mind, [that deal] changed everything" (see X-File).
Full-Service Suppliers
Vendors, much like telecommunications carriers, are moving to offer their customers a full suite of equipment and services. With Cambridge, Mass.-based Kenan under its belt, Lucent now not only can offer a full palette of telecom equipment, but also key back-office systems such as billing to support the networks that use the equipment.
"The thing that makes it most attractive is now you have it all in one shop," says Jim Newman, senior vice president and chief information officer with competitive carrier ICG Communications Inc., Englewood, Colo. "That was a shrewd one."
But, he adds, Lucent is missing a strong workflow manager as it applies to order entry, and parts network inventory (physical and logical elements).
Rich Nespola, president of The Management Network Group (TMNG), a Overland Park, Kan.-based consulting firm, says Kenan helps Lucent build its "hypermarket," where it can sell everthing under one roof.
"Lucent provides integration help, billing--definitely you can see where they're going," he adds.
| "The thing that makes it most attractive is now you have it all in
one shop. That was a shrewd one." --Jim
Newman, senior vice president and |
Kenan, meanwhile, gets the international reach and deep pockets of Lucent. And, importantly, Kenan now has access to Lucent's application programming interfaces (APIs) and test beds, which gives it a cost advantage and means quicker time to market, Nespola says. If a carrier chooses a different supplier such as St. Louis-based AMDOCS Inc. to work with a Lucent environment, it could be more expensive and take longer to do the integration, Nespola says.
Charlie Thomas, president and CEO of Net2000 Communications Inc., an integrated communications provider in McLean, Va., says if Lucent can establish true flow-through provisioning to the 5ESS, that would be a significant advancement.
But John Little, founder and CEO of billing system supplier Portal Software, Cupertino, Calif., is not concerned about the Lucent-Kenan pairing. In fact, he says it's the best thing that's happened to him recently.
"Lots of people want choice, they want open systems," he says. "Now Kenan will get a lot less attend from Cisco [Systems Inc.] than it did before."
More to Come?
Still, many people expect similar deals to follow in the footsteps of the Lucent-Kenan one.
Other major telecommunications equipment suppliers probably will be looking to buy back-office systems suppliers, Ashton says. AMDOCS and Saville Systems, Burlington, Mass., are likely acquisition targets for such courters, he says.
Walt Pepple, vice president of sales and marketing at OAN Services Inc., Northridge, Calif.--which itself recently bought convergent billing system vendor EXL Information Corp., Richmond, British Columbia--agrees that similar acquisitions are likely. "Nortel [Networks, Richardson, Texas] has been looking for an international billing partner for some time," he says.
Newman says a combination of Nortel with provisioning system vendor Architel Systems Corp., Toronto, and Saville might be a good combination.
One of the big advantages Lucent-Kenan--or any large equipment supplier with a back-office system--would have over smaller back-office software and equipment suppliers is the ability to offer its customers financing, steep discounts and potentially even billing systems for free as part of a larger purchase.
"What Lucent can do is say, 'We're going to discount this OSS (operations support system) product because we want to be the provider,'" says Jason Donahue, vice president of marketing and new business development at Beechwood, a system integrator in Clark, N.J.
And that could be just the tip of the iceberg.
"Let's say Lucent has a $20 million-to-$50 million deal for network gear," Nespola says. "Lucent can throw in billing for nothing, and they could still make money."
Best of Breed
But do carriers, who talk a lot about using a combination of "best of breed" equipment and software in their networks, really want to buy it all from a single supplier? Not necessarily.
Clearly, carriers frequently require help integrating the different piece parts of billing and customer care, and with systems that tie into those systems. But that doesn't mean that one vendor needs to supply it all, carriers say.
"We've had vendors such as Nortel that can offer lots of services, but we still go outside that umbrella," Net2000's Thomas says.
Focal Communications Corp.'s No. 1 pitch to customers is diversity, says Chief Financial Officer Joe Beatty, and the carrier itself believes in diversity of network equipment suppliers.
GST Telecommunications Inc., Vancouver, Wash., which serves the western states and Hawaii, also uses a variety of support systems.
"I have Kenan for billing, TBS from MetaSolv [Software Inc., Plano, Texas] for order management and provisioning. I have Customer Connections from ISM-BC (Information Systems Management Corp., Burnaby, British Columbia) for customer care and Remedy for trouble-ticketing," says Julie Blouse, GST's chief information officer. "Nobody had an integrated system when we got started. It still isn't available today. My alternative was to purchase from the vendors, understand the gaps between the products and build internally what we call the GST Framework. That's the glue that makes all these systems talk to and understand each other."
Of course, carriers aren't on their own today as they pick and choose billing and other back-office systems from various vendors. There are plenty of businesses that offer integration services, including vendors of billing and customer care systems and other back-office OSSs, and companies expressly in the business of integration services.
"Customers that I'm talking to--the startups--their biggest thing is getting in business very fast," says Joan LaBanca, vice president and general manager of new entrant business development, Bellcore, Morristown, N.J. "They want one place for their customer record, that's their billing systems. They want to get the customer up ... and turn up billing. If I think of that flow, my customers have told me that flow needs to be integrated--but not necessarily from the same vendor. They're not pushing for one vendor, just for all of it to work together. They would be interested in a vendor that could put it all together, and who has more pieces than less, and they care about not duplicating data all over the place."
Bellcore, which also has a professional services capability, is happy to sell startup CLECs all or part of its MediaVantage Jumpstart suite, and will find a billing and customer care vendor, too, if that is what the customer wants. That's how many of the billing systems suppliers work.
"With startups, it's an issue of timing," LaBanca says. "We think that partnering [Bellcore and a billing vendor] is the best way to go. But the startup's market window is right now. When they get their venture capital, they're hot to trot."
On the billing and customer care side, Saville, a Kenan competitor, also is eager to form partnerships with OSS vendors. The software house has worked with both Bellcore and MetaSolv Software. Saville also worked with Lucent until recently. Those days are gone, according to John Kiley, Saville's senior vice president.
Then there are the straight integrators, such as Beechwood. That company will select what it believes are the best systems--back-end and front--for its customers, and takes responsibility for integrating them.
"The true value of a systems integrator or solutions provider, like Beechwood ... is not the implementation, or even the integration, but to maximize the interaction of the systems in a particular company's environment, for that environment," Donahue says.
It isn't enough, Donahue says, to make sure your systems all hang together.
Somebody has to understand how a carrier's processes work, and make sure the systems all support those processes. It is possible, he says, for a carrier to buy OSSs from several vendors, get them all working together and still fail to make the most of them. Beechwood has developed a methodology, called PRISM, which it uses to help its customers define their goals, pick the best-in-breed systems to meet those goals and integrate the systems in a way that makes the most of each system in the service of those goals.
