Wheels within wheels
Operations support systems create order from chaos
for better returns, revenue and cost savings
The OSS (Operations Support System) is not your father's billing system anymore–and those who get clear about the new era of OSS and its true costs and eventual paybacks will likely perspire less during the migration to new services and the complex issues that come with it.
The dawning of the data, telephony and interactive age in cable is widening the OSS space to include provisioning, automation, service and subscriber management, workforce management, billing and the integration of all of this into a slick, relatively effortless process. That's the concept, at least.
The reality is that the burst of OSS issues being prompted by cable's metamorphosis into a multi-service business is confounding even the experts, as the industry grapples with how the occasionally confusing and multi-faceted OSS "solution" melds into a meaningful and cost-efficient system at disparate cable operations. And operators must do all of this while adding revenue, reducing costs and containing churn.
Reducing operational costs is now top of mind at most cable systems while they seek out the next great revenue source, experts say, and is driving more operators to explore a growing number of OSS options as a way of balancing a stagnant revenue stream and adding a spark to their financials.
"OSS is a very real issue for cable because of modems, data and high volumes," says Larry Goldman, director of OSS Research for RHK Inc., a market research and consulting firm. "It's even more significant with [Excite]@Home out of business because there's more emphasis on networks supporting customers, and they all need OSS to do that."
Exactly what those needs are, and what they'll cost, is pushing a growing number of cable operators and a burgeoning group of OSS vendors to re-define and re-tool their OSS strategies.
"OSS absolutely can be an obstacle to new revenues and cost reductions, especially with phone service. If you can't turn up service, there's no revenue, so OSS must stand up on its own. It's not an option," says Scott Hatfield, senior vice president and CIO of Cox Communications.
Cox's biggest investment in OSS involves training, he explains. Yet the bulk of Cox's total spending is on the deployment of triple play services in 30 markets, which presents a massive OSS challenge.
"It will fall apart without the discipline in automation and flow-through, and OSS is magnified a million times when you do that many [revenue generating units] a year, so productivity is not trivial. The reality is that doing OSS is cost-driven and a common sense approach to reduce costs and increase productivity," Hatfield maintains.
(assumes 1 million subscribers).
With a paltry one percent increase in new subscribers each year, and competition from DBS, telcos and others, cable operators are using more than common sense to elevate revenues. They're actively searching for additional revenue sources and cost reductions, and OSS is being looked upon to help achieve both.
"One percent is not a growth business, so operators need more from existing subscribers," says Goldman. "But time to deployment [of new services] can be years, so the payback of expensive OSS just isn't there short-term. Eventually, it can pay off, however."
For most cable operators and vendors, there's a show-me-the-payoff mentality when it comes to OSS, and choosing a sensible OSS solution can be very dicey, particularly with a growing emphasis on ROI (return on investment), integration, maintenance and upgrade costs.
"There's a lot of pressure to have investments pay off," says Jeff Bernard, vice president of global marketing for Sigma Systems, a Canada-based OSS provider. "It's very real and very large, so operators must watch their business cases for ROI. The most powerful value proposition to OSS is to rapidly reduce costs and expenses. That hits them between the eyes."
Indeed, but what's also staggering them is the projected number of North American broadband customers, which is expected to increase by 12 million this year and generate $15.6 billion in revenue by 2005, according to McKinsey & Company Inc., an international consulting firm. By then, 36 percent of U.S. households will have a broadband connection.
Consequently, OSS will demand increased capital expenditures and some visionary operational strategies.
"Cash flow pressures and efficiencies are driving OSS," says Jon Wilkins, associate principal for McKinsey & Company. "It's one of the biggest operational issues and a clear CEO-versus-CFO dynamic tension among cable operators. Potential revenues are attractive, but [they] require large upfront investments and on-going costs. So do they harvest the OSS benefits thus far, or really press the advantage and make the investment in OSS? Some CFOs are still asking about potential revenues versus capital expenditures. That's the debate with management teams."
Whoever wins the debate, OSS is certain to impact a network, big time. Adds Wilkins: "The impact of OSS on the entire network is crucial. A cost impact of 10 percent more people calling for 30 more minutes is enormous. The same is true for service provisioning like truck rolls. A large part of OSS today is down and dirty, and how efficiently it can function."
Elevating OSS status from its down and dirty role to up-and-running is critical in pursuing new revenues and cutting operational costs, experts insist. Workforce management, for example, is considered a top OSS issue, and along with billing, represents much of the cost savings attributed to an efficient OSS solution, albeit with the right budget in place.
"OSS can be very labor intensive outside the billing system, and operators don't want to do that. Also, networks can be error-prone, so they're motivated to find ways of managing their OSS costs in that space," says Tom Burke, vice president of customer solutions for C-COR.net's Broadband Solutions Group.
A typical one million subscriber MSO, Burke details, can save $3 for every $1 it spends on workforce management automation. In turn, routing time is reduced by 60 percent, which saves approximately $212,000 a month. An additional $83,000 a month is saved by completing orders electronically after eliminating the check-in function.
"Gathering data manually eats up an incredible amount of management's time. That has to go away. So, whatever OSS costs, it will be less than the cost without it," Burke insists.
Maybe so, but start-up costs still rule, and the thought of investing in an all-encompassing OSS solution running several million dollars can be extremely painful, and downright scary. Yet, doing it on the cheap has its downside as well.
"If there was an OSS problem, cable would fix it as cheaply as possible. Not today," says John Hart, vice president and general manager of Acterna, a provider of service assurance and network performance OSS applications. "With telephony and data, there's more focus on network efficiencies and OSS is part of that. Intellectually, cable knows it must invest in OSS, but it's moving very slowly."
Knology Inc., a large competitive broadband service provider, is putting its new OSS through a 60-day trial period. Cox, meanwhile, is well along in its OSS deployment. "There are costs of maintenance and upgrading of OSS, but we don't consider them significant. Now, we have to engineer OSS into labor," Hatfield says.
And labor is an expensive piece of the OSS puzzle. Adds Hart: "The cost of specialized technicians has skyrocketed. There are 40 class 4 technicians making $140,000 a year. It's so specialized that when they take a vacation, it hurts the company. So automating is the Holy Grail, and OSS is the way to get there."
He's not alone in the "automation-is-king" school of thought. Most agree it's the key component to OSS and its drive to gain cost efficiencies.
"At some point, the cost of operations will be too high for their business to absorb, simply because it turns into a manual process and the risk is revenue leakage. The better the OSS integration, the better the business will run, and OSS affects every part of the operation," says Curt Champion, director of industry solutions for Convergys Inc., a provider of billing and customer care services.
It affects the cost structure as well. "The real cost is on-going maintenance and integration with other solutions, plus the initial install costs," Champion says. "People forget that OSS must be integrated and software may have to be re-written. That's where the costs are, and if not done well, those costs will dramatically increase."
Most admit that OSS's upfront and on-going expenses won't fade away and will probably increase with cable's growing attraction to the telephony and high-speed data businesses, which require even more detailed OSS strategies and subsequent costs.
"OSS is a job that's never finished," says Sally Else, senior vice president of product management for CSG Systems Inc. "You always look for the next level of efficiency. The key is having the fewest number of moving parts and the best pieces of an OSS solution. We're now seeing the real impact of OSS on operations and automating is crucial."
The impact of OSS is also being felt in the vendor community, which is scrambling to upgrade and expand its businesses to accommodate cable's growing OSS needs.
"We've had to step up to the plate and deliver OSS services. It's really become crucial for us. The new model is to implement, sell and bill for new services and that requires comprehensive OSS," says Jeff Walker, director of marketing for Motorola Broadband, which recently announced its entrance into the OSS provisioning business.
A gaggle of companies are climbing aboard the OSS train, with some re-inventing themselves. ADC Telecommunications, Alopa Networks, BroadJump, Ceon, Cisco, DST Innovis, Siebel Systems and many others are quickly filling the OSS space. Most realize, however, that partners are needed and no one can do OSS alone.
"It's important to win the business from an operator, so we must have a strategy and partnerships in place," maintains Tom Maceachern, manager of product management for OSS provider Core Networks Inc. "Many OSS vendors have overlapping solutions, so sometimes the lines get blurred. No one wins the OSS battle by themselves."
Nor is the OSS issue confined to the U.S. "Globally, there are many different OSS business models, and many are rolling out service by service. But OSS itself must be able to support the whole process. The challenge is staying current with the technology and services and using a combination of partners while working directly with cable operators," says Padraic Marren, vice president of business development for Ireland-based OSS provider Interactive Enterprise Ltd.
That may be easier said than done. "There's uncertainty around technology right now, and there are formidable opponents in the service provider's world," adds Julie Wingerter, vice president of strategies for OSS firm Net Cracker Technology Corp. "There should be no distinction between ordering, billing and activation. That's the biggest OSS challenge."
Re-writing software code, distributing revenue to third parties, intelligent use of data and reducing call center issues are right up there with billing, workforce management and integration as major OSS challenges and cost issues for cable operators. Concludes Bernard: "Every rollout is a major undertaking. There's no such thing as a single rollout of data, telephony or enhanced video. If it were simple, we wouldn't be seeing all the trials and operators watching each other."
They're not only watching each other, but eyeing the potential revenues expected from triple play services and the $80 a month per subscriber they could generate with tiered services of $28, $50, $80 and up.
"The marketplace potential of the triple play is becoming clear, but the cost of getting up-and-running is very high. It's not rocket science, but there are big, complex networks and they're getting bigger, and the economics depend on tremendous economies of scale, so there's a very strong OSS pull," says Wilkins.
Just how strongly OSS pulls on the cable industry's budgets is likely to be determined by what it gets in return. Concludes Goldman: "Once the dust settles on how they deliver services and where the payoff is, OSS will begin paying off for them and the end-cost will be low once they get there."