Under-Radar Aricent Scores $60M in Private Funding

Telecom Outsourcing Market to Top $96 Billion in 2012

In 2012, telcos worldwide will have turned outsourcing – think applications, hardware and other R&D – into a $96.8 billion market. That’s according to a June 2008 Gartner Inc. study, and a new round of private equity funding in the communications outsourcing space lends gravitas to the forecast.

One recipient of such funding was little-known Aricent, the outsourcer and software developer spun out of Flextronics. The Palo Alto, Calif.-headquartered company said Tuesday two firms, KKR and The Family Office, have invested $60 million to support expansion and, very likely, acquisitions.

KKR was an existing investor that contributed $25 million. Newcomer The Family Office, a wealth management advisor in Bahrain, signed on with $35 million because Aricent plans to open offices in the Middle East.

“The opportunity in the Middle East – it’s a fantastic infrastructure build-out story,” said Keith Higgins, Aricent's vice president of marketing. Emerging markets such as EMEA, Africa and Asia Pacific have never had extensive legacy networks, he explained. So, telecom carriers working in those regions, along with equipment makers and software partners, are able to jump from providing one-dimensional to 4G technologies such as WiMAX.

“It’s an exciting part of the world just because you’re seeing communications become mainstream very quickly,” said Higgins.

That kind of activity – an outsourcer working with the world’s telecom service providers – will lead to the rapid growth in telecom operations and management systems spending predicted by Gartner. The numbers, by the way, will leap from $74.6 billion this year to the aforementioned $96.8 billion in four years.

“We expect to see vendors begin to take a more vertical approach to address this multibillion dollar market,” said Kamlesh Bhatia, principle research analyst for Gartner. “Customers too are increasingly considering domain expertise and innovation in their buying criteria along with traditional implementation cost considerations.”

In other words, the kind of work Aricent does is right in line with the trajectory of the industry. For example, Aricent helped Alltel develop a mobile client. Alltel’s Celltop makes Internet searches easier. That leads to higher customer satisfaction, increased data usage and, in turn, more carrier revenue, Higgins said. Aricent also tackles the less-sexy field of OSS/BSS, which “can drive a lot of operational costs out of the network,” Higgins said.

Additional, high-profile Aricent clients include NEC, Nortel Networks Corp., T-Mobile and Virgin Mobile. Aricent claims it launched the first commercially available femtocell product, has its middleware in 400 million handsets, and rolled out the first-ever in-flight broadband service with American Airlines and Virgin America.

Overall, Aricent aims to help carriers augment their R&D, and get new products and services to market sooner, Higgins said. Projects involve hundreds of Aricent’s 8,000-plus employees – some of whom serve as dedicated project managers – and millions of dollars.

“We wouldn’t be growing at the pace we’re growing unless we’d come up with a formula ... that’s very much in line with what the market needs today,” Higgins added.

And in a time when scrutinizing budgets becomes more important by the day, carriers often can save millions by using Aricent, Higgins said.

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