Amdocs announced on Tuesday that it has wrapped up its $180 million deal to buy former rival Openet. The acquisition of Openet was first announced late last month.
Prior to the deal, Openet competed against Amdocs, which means there's some overlap between the two. Telecoms consultant Danielle Royston, who was formerly CEO of Optiva, said Amdocs bought Openet for its "world-class cloud-native capabilities," but she was skeptical of the price Amdocs paid.
"The deal placed Openet’s value at 2.6 times its reported annual revenue," Royston said in an email. "However, outside of the telecoms industry, other large cloud-native, SaaS companies are typically valued at 10 times their revenue, with some companies far exceeding that. So, why aren’t telecom cloud software companies valued at 10 times revenue like you see in other industries?
“It is easy to get confused with companies that claim they have cloud-native software, yet are deploying installations into an on-premise, private cloud. In order for telco software companies to pivot and become cloud SaaS companies, they are going to have to deploy their software on the public cloud. They’ll have to dramatically reduce customizations and integrations, so they get the economies of scale you see with product cloud SaaS companies. Convincing the telcos to give up their customizations may be the disruption both parties will need to make, for the better.”
Openet, which was founded 20 years ago by CTO Joe Hogan, provides 5G charging, policy, data management software, BSS, and cloud technologies to customers such as AT&T, Liberty Global, Orange, Vodafone and T-Mobile.
In July, Dublin, Ireland-based Openet announced a partnership with Salesforce to reduce customer care costs while improving customers' experience. Privately-held Openet also has offices in the U.S., Malaysia and Brazil. Prior to the deal, Openet competed against Amdocs.
Openet worked with seven of the top-10 service providers in the world and four of the top-six service providers in Europe. Over the past two years, Openet has generated revenues of roughly $70 million per year.
“We are delighted to welcome Openet and its customers to Amdocs and look forward to working together to bring world-class cloud-native capabilities, network pedigree, and deep 5G charging, policy and data management expertise to service providers around the world,” said Amdocs Anthony Goonetilleke, group president of media, network and technology, in a statement. “With this acquisition, Amdocs stands ready to help services providers future-proof their business as they move into edge compute and 5G and accelerate their cloud journey and operational agility.”