- Consolidation is taking BSS by storm as telcos seek AI-native orchestration and new charging models, said Tecnotree’s Prianca Ravichander
- There’s not much room to grow in BSS alone, as 70-80% of customers are locked into legacy systems, she said
- Tecnotree, which received a takeover bid this week, hopes to enter “a much bigger game” of AI infrastructure
OSS/BSS is proving to be yet another M&A hotbed in tech. Prianca Ravichander, chief marketing officer and chief commercial officer at Finnish BSS vendor Tecnotree, said the consolidation is a “symptom” of the need for AI-native orchestration – that’s hard for individual BSS players to achieve.
As telcos integrate AI into the back office, they want event-based charging to better respond to real-time customer activity. Traditional charging models were based on offline rating, but now it’s all about “handling charging based on interactions that are happening directly on the channel” and offering “unique experiences” to customers, she explained to Fierce.
“You can’t do it alone as a charging provider,” Ravichander said. “Pushing your own product as an isolated module is going to cause fragmentation, which is expensive.”
She also noted the BSS market is much smaller than the industry thinks, with 70-80% “locked into lifecycle legacy systems” where customers just find it too costly to swap out their old networks and clean up technical debt.
“It’s such a difficult capex investment to do in these times for very little or no guarantee almost on return, right?” said Ravichander. That leaves a “realistically contestable market of around 20-30%” that’s driving consolidation.
Tecnotree and the takeover offer
Tecnotree’s the latest BSS fruit ripe for picking. The vendor this week received a takeover offer of €131 million from a consortium led by Tecnotree's CEO and some private equity firms.
In Ravichander’s view, the offer is an opportunity to “really move into a much bigger game in terms of infra” and tap into more AI infrastructure revenues.
“This allows us to step away from this 2%, 4%, 6% single-digit growth market. Every AI company in the world is enjoying you know 16x multiples,” she said. “If you’re a good IT company, I would say you need to be trading at minimum like 5x to 16x or 20x of revenue minimum if you’re doing anything worth any salt.”
BSS M&A activity heats up
Tecnotree’s takeover bid is just a drop in the bucket of BSS M&A activity. Earlier this month, Amdocs acquired charging vendor Matrixx for $200 million. NEC’s acquisition of CSG Systems, Qvantel’s deal to buy Optiva as well as Hansen’s agreement to buy DigiTalk are some other notable BSS deals that happened in the last three months.
John Abraham, Digital Enablement and Monetization lead at Appledore Research, thinks the BSS industry is in a prime position to grow through “middle layer” vendors like Tecnotree.
“While much of the attention is on the tier-1 BSS vendors, the middle layer is becoming a segment to watch given the lack of many full stack BSS vendors and presence of large number of mid and small sized CSPs who typically prefer to work with smaller vendors,” he told Fierce. “Tecnotree is well placed to play in this segment.”
The private buyout would provide Tecnotree “greater latitude” to focus on specific growth markets and segments without chasing short-term revenue, Abraham said. But it’ll take time for the revamped strategy to bear fruit.
“This is likely to be a medium to long term story requiring careful positioning and articulation of their value proposition, which explains their interest in taking the company private,” he said.