2023 Amdocs Up Close Executive Industry Analyst Summit, Ra’anana, Israel, June 13-14, 2023 — A select group of industry analysts gathered at Amdocs’ new corporate campus in Ra’anana, Israel, to hear from executive leadership about the company’s strategy, portfolio and go-to-market approach, as well as other aspects of its business. Amdocs’ CEO and CMO, along with the heads of the company’s business units, presented updates on their individual areas of focus. Significant time was allocated to discuss AI and its impact on Amdocs and the broader telecom ecosystem as well as how Amdocs is addressing nontelecom customer segments to diversify and continue its growth trajectory.
Amdocs is working hard to reinvent itself, and the company has made significant progress in its journey over the past few years. This message was directly and indirectly conveyed and supported with evidence across the event sessions, with the company providing updates about how it is evolving its strategy, products, go-to-market efforts and resources to align with changes in the markets in which it operates.
Though Amdocs remains fixated on telecom operators, there is an increased focus toward addressing nontelecom verticals, especially financial services. Amdocs will ultimately need to formalize and broaden its exposure to the nontelecom market to maintain its growth trajectory, especially as the telecom industry’s challenges continue to worsen.
Amdocs’ management believes the strategy changes it implemented over the past few years have increased its serviceable addressable market from $36 billion (2020) to $57 billion (2025). Most of this increase is due to the expansion of the company’s portfolio and geographic reach and the inclusion of opportunities from previously unaddressed telcos (primarily Tier 3 telcos and MVNOs as well as telcos operating in countries that Amdocs has historically had minimal presence in) and nontelecom verticals.
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Impact and Opportunities
Portfolio Disaggregation and Willingness to Support Best of Breed
In a marked shift from the company’s historical approach of solely pushing its full stack under a best-of-suite value proposition, in 2020 Amdocs began demonstrating a willingness to decouple its stack and sell individual products from its portfolio in a disaggregated way. Note that this approach begins with the CES20 portfolio; prior products largely remain in the suite format. This change in approach is intended to help Amdocs address a broader range of customers, especially those that are non-DOX customers.
Additionally, though Amdocs remains a product-led services company at its core, it is also willing to provide services, such as quality engineering, data services, cloud migration and operations, in customer environments that do not have Amdocs products in them. TBR notes that these go-to-market changes will help Amdocs be more flexible and opportunistic with customers versus its historical approach of pushing the company’s entire stack.
As part of this shift in approach, Amdocs also made foundational changes in how it writes code and incorporates CI/CD, scrum, guilds, and other modern elements of software design and innovation. Taking a more iterative, API-centric approach toward product creation and road mapping will help Amdocs better align with key trends in the ICT sector and bring cloud principles and best practices into the telecom industry. Ultimately, Amdocs wants to move from version updates, which are currently on a quarterly cadence for the CES23 portfolio, to versionless updates, where updates can be implemented in a flexible, real-time manner.
AI Is Being Taken Seriously
Amdocs’ management believes AI will be an important pillar of the company’s strategy and portfolio going forward, and the company has been directed by executive leadership to assess AI and incorporate it across the business (e.g., around corporate functions, products, service delivery, human resources and customer outcomes). This process will be a journey, but Amdocs expects tangible benefits will start to materialize later this year, with cost optimization and product enhancements likely to be among the earliest benefits. Amdocs debuted its amAIz platform and is also assessing how its strategic partnership with Microsoft could leverage AI to bring improved business outcomes to the customers of both companies and the broader ecosystem.
Amdocs’ persistent, nearly myopic focus on telecom operators remains the company’s biggest challenge, but also its greatest opportunity. The products and skills the company has refined by supporting its telecom customers over the past 40 years are translatable and valuable to other industries, especially those that operate in heavily regulated industries and need to modernize or transform legacy IT systems.
Though Amdocs has been involved in nontelco verticals for years, representing a TBR- estimated approximately 10% of total company revenue, TBR notes that Amdocs seems to be making a strong push into the financial services vertical, as evidenced by acquisitions (especially Projekt202 and Sourced Group) and an increase in dedicated resources to support that vertical. Amdocs is also supporting retailers and customers from other verticals primarily via its Stellar Elements business unit, which is also underpinned by Amdocs’ acquisition of Projekt202. In total, Amdocs has over 50 financial services customers as well as customers in a range of other verticals as of June 2023.
Over time, TBR believes nontelecom verticals will comprise a more significant portion of Amdocs’ total revenue. This will be driven by strong organic growth and a weakening contribution from the telecom segment as the health of the telecom industry continues to deteriorate.
As part of Amdocs’ business evolution, the company made structural changes in its workforce. This included a significant rotation of workers to align with its new strategy and a strong push to market Amdocs as a desirable place to work. The result is a much younger workforce that is more geared toward modern software innovation. Amdocs also noted that retention has been higher, employee job satisfaction has improved markedly, and the market perception of Amdocs as a good place to work has improved. These KPI improvements were assessed and validated via a third-party study conducted by a leading management consulting company.
Amdocs has made significant progress toward its reinvention over the past few years. The company is clearly becoming more receptive and willing to adapt to better align itself with the market. This reinvention comes at a good time, given that the telecom industry has entered a challenging multiyear period. After seeing a range of evidence that Amdocs is making changes, TBR’s opinion of the company and its prospects has markedly improved and there is a high probability that the company will continue to achieve consistent performance despite challenges within its core telco customer segment.
Amdocs is encouraged to start providing more information about its nontelco initiatives, which are known to be significant but are unquantified and minimally discussed, as it will become more important to the company’s business results and growth profile over time.