Russian Revolution

Vanilla Plus Magazine, March/April 2004

With a background in analytical mathematics, Andrey Morozov, president and chief executive at CBOSS Association, worked in government-oriented information systems before 1992 when he joined the first mobile carrier in Moscow, Moscow Cellular Communications (MCC). Having started as a leading programmer and gradually gaining promotion to R&D Department manager, he guided the in-house development of the MCC billing system. Subsequently, Morozov became one of the founders of the CBOSS company. In many respects it is thanks to him, the once small CBOSS enterprise has developed into an international provider of IT solutions for telecom business.
With more than 1,800 employees and 44 products CBOSS Association is now an international telecom software vendor. CBOSS' main products are Convergent pre- and post-paid Billing and Customer Care, Intelligent Services, Analytical Systems and Internet Solutions. Founded in 1996, CBOSS has implemented 703 installations for telecom operators, servicing a total of 38 million subscribers in 18 countries on four continents. The company currently has 135 customers around the globe.
The company's strategy is based on the idea of generating premium-quality, integrated "turn key" solutions. CBOSS' positioning as a system integrator is founded upon business alliances with internationally renowned firms, from Ayaya Communications to Xeroх.
VanillaPlus recently talked to Mr. Morozov to find out his view of the market in general and the prospects for CBOSS.
V+: Although CBOSS has strong presence in its domestic and neighbouring markets it has done little business outside its home region. What plans do you have to grow the company geographically?
AM: It's not exactly true to say we've done little outside our home market. We have already undertaken some actions in order to expand geographically. For example, in the last year we have negotiated some important contracts with foreign customers - including delivery of our solutions to GSM-carriers from Norway (Teletopia Mobile Communications), Jordan (XPress Telecommunication), Laos (Lao) Telecommunications and Lao-Asia Telecom State Enterprise), and the strategic acquisition of On-Line Billing Solutions (OBS) from Fujitsu Services. And now, our technologies serve more than 38 million subscribers in 18 countries on 4 continents. However, we position ourselves aggressively in the market and plan radical geographic expansion by means of direct sales and collaboration with HP, resulting from the OBS purchase. After becoming a transnational corporation we have got a great chance to overcome some prejudices that unfortunately sometimes are to be found in the market, and hope that from now on our technologies will be regarded fairly according to business-criteria.
V+: Do you plan to enter new markets such as Western Europe, the U.S.A and further your activity in the Asia Pacific market? If so, will you do this by increased investment and establishing sales offices in more regions or by entering into partnering arrangements?
AM: Of course, we do. Due to the recent OBS acquisition CBOSS obtained a perfect base for economic expansion into foreign markets. New assets include highly-qualified employees, the infrastructure required for further operations and all intellectual property rights. Besides, we are a fast-growing company, with over 1,800 analysts, consultants, programmers, testers, and supporting staff at our Moscow headquarters. We have sufficient resources to provide any market with our solutions. Our price/quality ratio is also high enough to be of an interest for European, American, Asian - in a word, any - customers. As far as the expansion strategy is concerned, we are going to conquer new markets, as you've said, both by increased investment and establishing sales offices in more regions and by entering into partnering arrangements.
V+: What is your view of multi-vendor partnerships? Do you belong to any? Does CBOSS regard partnering as a means to work closely with other vendors to gain access to customers?
AM: In our business, where integration and universality of technologies play the most significant role, partnership with the other IT-market players is not to be underestimated. In this sense, multi-vendor collaboration is not the only means to gain access to customers, but the only way to success. Offering complex, flexible and universal solutions, CBOSS is working closely with other vendors such as Hewlett-Packard, Oracle, Sun Microsystems, Excel Switching Corporation, Hitachi Data Systems, Intel, Brooktrout, Avaya Communications, Microsoft, Xerox and others. Partnership with them has brought us success, and the "honour partner" status issued to us by these companies demonstrates that they profit from it too.
V+: Consolidation is continuing in the market with many companies ceasing to trade or exiting the market through trade sale. Does CBOSS regard this as an opportunity to acquire customers and technology or do you see yourself as an acquisition target?
AM: Our policy of geographic and economic expansion is tightly connected with this trend. We are actively moving towards market consolidation. For example, recently we have acquired the full package of exclusive rights on the Absolute billing solution with a customer base of almost 50 Russian ISP and IP-telephony operators, and On-Line Billing Solutions from Fujitsu Services. These two examples demonstrate that we are involved in the market consolidation trend, acquiring businesses that appear interesting for us and creating partner-alliances. Naturally, we are ready to consider different ways of our business expansion - not only by means of its own development, but by means of purchases as well. CBOSS doesn't see itself as an acquisition target at the moment.
V+: How has CBOSS profited from the OBS acquisition?
AM: Our association profits from access to a new market segment, namely, that of high-end prepaid systems. Other benefits include mutual integration of solutions and a Europe-based launch pad for CBOSS products to enter the international market. Deepening of collaboration with Hewlett-Packard is also a really important consequence of this agreement for CBOSS. Hewlett-Packard plays an essential role in promoting rtBilling, as a system integrator, equipment supplier, and professional service provider. We plan to widen our collaboration and extend the interaction model, which will grant CBOSS system integrator status in solution supply. In addition, I must mention a significant international prestige enhancement of CBOSS caused by winning the (Fujitsu-OBS) tender, in which some serious players have participated and which made strict demands on the competitors.
V+: What demands did Fujitsu Services Oy make on the OBS acquisition competitors?
AM: First of all, acknowledged telecom market popularity; secondly, readiness and intention to make long-term investments in the acquired business; thirdly, lack of conflict of interests with HP and potential for collaboration with this company and finally, a comprehensive line of products that will add value to the business due to mutual integration. CBOSS was chosen among the many as the best company capable to deliver product continuity and further development of the solution.
V+: The last five years have seen the giants of software industry leave the OSS/BSS sector largely alone. However, as the market stabilises and OSS/BSS vendors begin to show healthier balance sheets do you regard the possibility of players such as Oracle, Siebel and Microsoft entering the market as a threat? How might the market be changed by their arrival?
AM: I won't comment on the intentions of such large and respected companies because it is up to their managers and PR services. However, I must mention that today the OSS/BSS problem domain suffers from a barrage of demands and therefore requires great flexibility and reaction speed. To my mind, the current situation looks too dynamic for the giants, which, in spite of all their power, are not so versatile and fast and cannot react on customer's demands as rapidly and offer end-customer-oriented services as the market demand dictates. Therefore, I think the cooperation opportunities for the system software developers and application software vendors not only preserves the possibility of mutually beneficial collaboration, but amplifies it.
V+: Do you think carriers in the current market want technologies they can manage themselves or are providers that can manage solutions for them more attractive?
AM: This depends on the carrier's size and its history. During their growth some operators pass through several stages, first creating their own technologies, then moving to off-the-shelf solutions, and then again trying to customise them. Of course, the market demands flexible technologies, which can be tuned and configured by the business-user on his own and preferably with open standards for optimisation. However, I must mention that the rapidly growing high-tech business doesn't allow having open standards everywhere, where we would like to see them and where they could appear naturally, therefore a complex solution from one vendor looks better on price and performance for the mid- and large-size carriers. The larger carriers often begin to think about diversification of the IT suppliers and consequently start to carry out systems integration on their own or involving professional third-party system integrators. This often leads to multiple problems, because the complexity of the system integration sometimes exceeds their capabilities and causes great capital and time losses.
V+: How difficult is it for CBOSS to gain access to world markets and how challenging do prevailing market conditions make it for you to increase revenue and profits?
AM: Undoubtedly, it is really a serious challenge for a company with headquarters in Russia to enter the world market, and we feel a certain lack of trust in our products caused - and we fully realise it - by the specific development history of our country and its position in the modern international market. However, there is also a tendency for fair evaluation in the market, which gives us confidence in the future demand for our products and income and revenue growth - a hundred percent of which we redirect to R&D. I think this product approach will bring us success in the future, as it has in the past.
V+: Carriers are averse to spending of any sort (cap. ex or op. ex). How appealing to carriers are pay-as-you-go solutions rather than traditional licence-fee based offerings? Does CBOSS offer any pay-as-you-go solutions?
AM: We are extremely flexible in pricing models and have got multiple examples of successful collaboration with carriers within totally different schemes of investments in IT. Being a billing systems developer allows for different tariff models, and we realise that tariffing flexibility may be a great marketing tool. We use this knowledge in managing our relationships with the customers offering multiple choices for them. Although we are not a telecom carrier we use our own billing system for the settlements with our customers. This allows us to automate using different models. As far as the carriers' preferences are concerned, they are varied - in fact they're as varied, as those of their subscribers.
V+: What's next for CBOSS?
AM: A lot of work, difficult work, hard work, work almost on the edge of possibilities for everyone - directors, managers, common employees. And exactly because of that this work appears terribly interesting. I'm not an oracle to forecast the future, but seven years ago CBOSS was just a dozen enthusiasts in not the most civilised country - without a brand product, funding sources, customers, lobbying ties or infrastructure for R&D. We had only experience, knowledge, a will to work and a defined vision. So let's see...