The Dangers of a Disorderly Market (cont'd)

The disparities arise for numerous reasons. First, the large OSS vendors will generally state that smaller players are giving their software away, which undermines pricing overall. This is not untrue, but it's not the whole story either. Often, smaller vendors are being forced into unfavorable deals because they have no leverage or credibility in negotiations because of the OSS market's history. They do not get paid until something works in production, and then are often paid less than what their software is probably worth. Either way, this is significant negative price pressure - at least within certain carrier organizations.

Another reason for pricing disparity is that the carriers rarely communicate. Often pleading that OSS is too critical a competitive advantage to speak of openly, carriers clam up when it comes to simple OSS functionality, never mind price. There is plenty of motivation for ILECs to keep quiet about their inefficiencies, not the least of which is the fact that their ability to price services is tied to them. Without effective peer to peer communication from one provider to the next, however, there's no way to enforce consistency in budgeting, pricing or negotiations. Remember, Adam Smith called it "the invisible hand" - he did not say anything about it also being silent.

In the end, all of this disorder is a problem, because it leads down two dark paths. One path brings the price of OSS so low that vendors and their investors cannot make money in it anymore. This is already the case for numerous companies, including some of those that essentially founded the sector. The other path, unfolding in the hallways of some of the largest LECs in North America, leads to more scorched earth. Some service providers are making enormous upfront payments, in many cases to unproven vendors. While the bad decisions may lie with the carriers, it is the vendors who will ultimately suffer if and when the resulting OSS base cannot justify the excessive cost of building it. Once again, they will be marked for over-promising and under-delivering, this time on their ROI models - another notorious OSS sales tool.

Service Provider Politics
Very often, the really bad decisions service providers make in selecting OSS solutions have nothing to do with the people involved in the actual OSS project that is at stake. These decisions are instead made at executive levels, and based solely on politics. Politically motivated decision-making is rampant in all businesses; hence telecom is not unique in this way. From an OSS perspective, however, politically driven decisions can have real and extremely negative consequences.

Political decisions are often made counter to the judgments and recommendations of service providers' own best experts. Experienced OSS architects will go through months of evaluations with OSS vendors to determine which is most likely to deliver specific functionality that is critical to some service the OSS in question will help deliver. Due to politics, they are overrules and stuck with a product that cannot deliver what the project needs. The architects are unhappy, the politically connected vendor's people are set up to fail, and there's no chance the project can meet expectations. IT takes the blame and points to the OSS vendor for failing to deliver. When this happens, it is not overstating the case to say that the entire OSS market's reputation suffers another blow. Unfortunately, OSS vendors can do very little to change carrier politics. There is much the OSS community could do, however, to help the market mature, improve its reputation, and make business better for everyone.

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