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The history of telecoms in the B/OSS business is a rich and colorful one.
Three of the largest vendor players have their origins at telcos. Convergys (now CSG Internatinoal) is the offspring of Cincinnati Bell Information Systems. Amdocs, the biggest B/OSS vendor of them all, was at one time 50 percent owned by Southwestern Bell. Then, of course, there’s Telcordia, the former Bellcore, which was created by the seven Regional Bells. For a time too, Verizon Information Systems had its eyes on the commercial software market till they realized how hard it is to take a system designed for a tier 1 and scale it down to feed the smaller fish of the telecom sea.
So that’s where we are today: Telecoms have basically left the software scene with the minor exception of SaskTel’s software division, which makes a modest living selling provisioning tools to folks like CenturyLink.
But just when you thought we’d never see a telecom enter the B/OSS solutions business again, a new contender emerges from the most unlikely of places — Alaska, the frozen tundra. Cycle30 is the new B/OSS vendor’s name. And it’s a managed services subsidiary and also the IT/operations shop of GCI, the largest telecom and cable operator in the state of Alaska, with annual revenues of $630 million and nearly half a million subscriber accounts.
Don’t let Cycle30’s roots in Alaska fool you: This is no backwater operation. Some of the best brains in the business are behind Cycle30. In fact, the Alaskan connection is largely virtual anyway. While all of GCI’s telecom/cable business is in Alaska, most of Cycle30’s IT and business ops are done from its offices in Seattle and data centers in Denver and Scottsdale.
And here to explain the business plans of Cycle30 is its president and chief evangelist, Jim Dunlap. Prior to forming Cycle30 in early 2010, Jim was CIO at GCI for seven years. He’s also held senior IT roles at companies such as Campbell Soup Company and Nordstrom. Jim’s vision isn’t some rehash of the old telco-in-a-box model. In fact, it ups the ante on the traditional vendor-supported B/OSS model. Here’s the edited transcript of my recent interview with him:
Dan Baker: Jim, first off, I think readers would love to hear about the history of GCI and the genesis of Cycle30. |
James Dunlap: Dan, GCI, our parent company is rather unique among quad-play operators. It was in the telecom business long before it started acquiring cable companies, so our network heritage on the more complex telecom side has given us an experience edge over cable companies who typically get into telecom through a VoIP service.
When I first started to work at GCI, I defined a B/OSS roadmap that allowed us to deliver converged services. And we searched for a long time for solutions that were extensible over various technologies and the segments we needed to cover. Even still, we had a pretty rich set of services to deal with: local dial tone, LD, wireless, data, video, as well as business services for government and other clients.
We chose Comverse’s Kenan FX suite as our billing foundation and surrounded that with trouble management, workforce dispatch, and activation/provisioning on a technology-by-technology basis.
At what point did you decide to move from in-house IT shop to managed service provider for other operators? |
Well, just like other telecoms, GCI was looking for new revenue streams to expand its business. And throughout GCI’s history, the company has been primarily focused on the state of Alaska. So they naturally talked about acquiring XYZ cable company in Montana or an ABC wireless carrier in Washington, things that would naturally grow the footprint of the existing business. But it was at that point that I raised the usual idea of getting into the solutions business to help other operators and cable companies.
I said to our board, “Let’s take our $35 million in assets and 65 people into a wholly owned subsidiary in Seattle with a separate board of directors, and let me show you what we can do.” And so it was that GCI’s management took the leap in April of 2010.
Now this wasn‘t a spur of the moment idea on my part. I’d been thinking about the possibilities for several years. Plus, having been a customer of various B/OSS products over the years such as Convergys and Amdocs, I knew the competitive landscape for hosted services well and felt the market was being underserved.
Underserved? In what ways do you feel the market is underserved? |
I would sum it up this way: The vendors who now serve the market are not operators. Now I recognize that some of these companies have a heritage in the telecom business, but that’s a long time ago. These companies have good intentions, but unless you’re an operator and fully understand what you need to deliver the right level of service to end users, it’s not the same.
For example, the SLAs for the billing system are not delivered with a mind to provide the end customer with good service. They are written to protect the software provider. In addition, the vendors are geared to serving the tier 1 market, which means if your company has less than 1 million subs, you’re at the mercy of what tier 1 providers are willing to do with their solution.
When you build software for internal use you take the time to build in some of the nice-to-have features that a vendor may not think of or sees no benefit in creating because they’re building a more generic solution. And you’ve taken that one step further, delivering optimized processes to go with the code. |
Yes, the contrast in operating philosophies between traditional software vendor and our model is pretty striking. When you’re selling converged services, you need a highly dynamic product catalog, because your sales and marketing team is making frequent changes in that catalog.
So what does a typical software vendor give you? You get four major product releases a year and a certain number of hours of support. That’s it. Everything else you need to buy at a premium.
But as an operator CIO, I would get laughed out of the room if I suggested to my marketing organization that they were going to get only four windows a year to bring new services to market. For this reason, we built a service delivery framework that allows you to respond to market needs in a way that competitors can’t. And for the last six years at GCI, we steadily refined that process.
We understand it’s our job to improve the service of the end-to-end, order-to-cash operator with the customer. And by the way, I’m just as concerned with the order entry process — the work flow, the ease with which a CSR can look at pricing — as I am the flow through provisioning process and the complexity of inventory.
Improving the service delivery to your customer is a big deal. And the philosophy behind this goes back to my experience as the CIO of Nordstrom where they had a great culture around the belief that everything you do impacts customer service.
What markets do you consider your sweet spots? It’s kind of hard to conceive implementing something like this at a large telco. |
Dan, we’re being realistic in the markets we go after. We’re targeting prospects who have somewhere between 60,000 to 2 million subscribers. We are approaching the cable and utility space too because we think some very advanced things are going to happen in the utility space. Service bundling, for instance, is going to get pretty interesting. For instance, I may want to get a wireline service bundled with wireless and even natural gas. And for power, I may want to do time-of-day rating and charge more for kilowatt usage during the day than at night. If I have a generator, I may want to sell power back to the power grid.
One thing that’s enabling all this is that the field force of a utility or rural telco can just as easily be working power lines as hooking up DSL.
There are also many small billing service bureaus that are already serving the market you’re targeting. |
While that’s true, they work off a different business model than ours. They typically only sell software and amortize the cost of their software over the life of the contract. In this respect, our model is very unique because we have already purchased the software infrastructure that’s needed for our service.
What we are selling is a service — an end-to-end order-to-cash solution that includes all the products necessary from the minute you place an order until there’s money in the bank. And we also supply the people who operate the solution for our operator customer.
It’s curious how the B/OSS business has evolved. In the late ‘80s and early ‘90s, telecoms built their own custom back office systems. And then as COTS solutions arrived in the mid-‘90s, the balance of B/OSS power shifted to the third party vendors offering hosted and licensed software. But if telecoms like GCI/Cycle30 can offer integrated software and home-grown processes across the cloud, the tables could turn again. |
The shift is very real. CIOs like me have been groomed to believe our role in life is to buy commercial software, operate it, and put it in our data centers. But that model is changing very rapidly as more opportunities are realized through the SaaS model and clouds.
The other factor is that capital is constrained. People want to continually upgrade their services, but they don’t want to go through the time and expense of developing all that in-house or managing licensed software in-house. It’s all about economies of scale. If you are a one-service communications company, you can sometimes manage these things on your own. But the level of complexity ramps up significantly when you talk about multiple products and technologies, particularly for operators who sell converged services. You need an expensive IT shop to able to manage all that.
So yes, the old software models will steadily recede. And shared infrastructure and outsourced service models will rise.
What’s the software looks like inside your managed service? |
Well, besides Comverse for billing, our workforce management partner is TOA. For bill mailing and printing we use OSG. Then there are a handful of provisioning/activation vendors depending on what technology you need. We wrap all of that with our own intellectual property, customizations, and software we’ve developed in-house for the past six years.
We have a very symbiotic relationship with Comverse. In many ways, we consider Comverse’s sales force as our sales force. And as you know, before they didn’t have a hosted offering they could sell on the marketplace. So if the customer likes Comverse software, but doesn’t want to run it, we could be the solution. We are not in conflict with Comverse. Early on in the sales cycle it’s pretty obvious if the company has the bandwidth to go with a licensed product or needs a hosted solution.
Who mans the call center in Cycle30’s model? Cycle30 or the customer? |
Great question. Our philosophy is that most operators know their customers best and, quite rightfully, want to keep those customer relationships close. So we focus on running the billing and order-to-cash systems that support the customer-operator relationship, and generally, it seems operators are happy to handle that customer interaction. However, if an operator came to us seeking call-center operations, we have partnerships that could potentially enable us to serve that need.
For years the telecom world has worried about vendor lock-in when it comes to buying software. In your business model, the operator customer puts a lot of trust in you as its managed service provider. How sensitive are your prospective customers to this issue? |
Dan, there are many similarities between a managed service and the hosted service bureaus that have been with us for two decades or more. The main difference is a managed service gives you a far more complete package of integrated software, hardware, business processes and the people who run it all.
As I’ve said, we’ve invested $35 million and six years of experience into this service already. By comparison, the typical operator to which we’re marketing would probably invest no more than $3 million in upfront licensing and integration costs. And remember, the processes we’ve developed are highly tuned to the higher mission of improving service delivery to end customers — the best way for operators to stay profitable and reduce churn.
We think our managed service is a great fit for operators interested in staying flexible while reducing upfront capital risk. Unlike other providers of hosted services, Cycle30 runs a multi-vendor solution that lets operators select certain service components from the platform while continuing to leverage their existing system investments as necessary.
And we’ve focused a lot of time on the question of how you transition from a legacy system to our own. In fact, we are still transitioning parts of our own operation today. For instance, we just completed migrating a legacy cable billing solution to our Cycle30 platform a couple of weeks ago. And to do that, we leveraged a Sungard disaster facility in Denver and another in Philadelphia for ramping our service up and down without a dramatic increase in capital costs.
It sounds like you’ve already thought through a lot of the details that prospective customers will be curious about. So, Jim, when do you expect to win your first client — outside of GCI, that is? |
We’re working two basic customer models. And I think there’s a good chance we’ll sign a tier 2 wireless provider client in Canada or the U.S. soon. Another promising opportunity is a utilities/broadband provider. We’re also in conversation with several ILECs.
And speaking of conversations, that’s frankly a lot of what I do these days. When I sit down with another operator, we can talk all day long about the billing, product, and inventory challenges they face because our team at Cycle30 has been doing it for a living for quite some time.
Clearly what you have here, Jim, is an innovative and potentially groundbreaking solution. And I’m sure many people in the B/OSS world are eager to see how well you execute on your plans. As an impartial analyst, Jim, I can‘t play favorites. So I’ll close by wishing you and your competitors the best of luck. May the best solution win. |
This article first appeared in Billing and OSS World.
Copyright 2010 Black Swan Telecom Journal