Okay. Thank you. Thanks, Shuki. I'm the only one.
Hi
In the room that knows how to pronounce your name properly.
Shuki is a nickname for Joshua.
I know. I thought about it, how we're going to start our discussion, and as always, this is not about the quarter. This is not-
Mm-hmm.
This is about the long-term positioning and why an investor would want to hold Amdocs for the next three years. That is the purpose of our discussion. I want to go over an overview of your product for those who do not know the company, and then we will get much deeper into the details.
Okay.
I want to get to an overview of the products, and basically, the question that I'm asking you is, what drive your sales? What drive your growth? What drive your positioning with customers?
Okay. a little bit what is Amdocs and what Amdocs is doing, because Amdocs is a bit pretty unique.
Yeah.
Our target customer is obviously the service provider, you know, the AT&Ts, the T-Mobile of the world. These are target customers. What we do for them is all, pretty much all the IT infrastructure.
-of BSS/OSS. In simple terms, you can think about from the channels, it could be the website, the mobile application to the call center, through the catalog, ordering system, all the financial system, like billing, invoicing, general ledger, account receivable, et cetera. Down layer, that actually started to touch the network, like charging, rating, policy, and then it provisioning the services it has on the network. It's an end-to-end portfolio. What is unique about Amdocs, usually you have two type of companies. You have software companies, Salesforce, and you have system integrators like-
Accenture.
Accenture, Infosys, and the rest. What is unique about Amdocs, that we are both a software company, we obviously develop our products, and we do the implementation and operation of our products, which create a very unique accountability model. Usually, if you see in a bidding competition, it would be Amdocs, it would be a consortium of three, four companies with some system integrators trying to stitch everything together. I mean, there was a big war between, I think, started in 2010, between the best of breed and the best of switch of Amdocs. I think the best of system Amdocs won, and you can see that all the largest companies in the world running Amdocs platform. This is and what we do, both the product and the services.
If another thing, what's propelled the growth of Amdocs, and what has changed in Amdocs? Because Amdocs was traditionally, for many years, you know, the company for many years, what we call steady heady.
Yeah.
Traditionally, Amdocs delivered consistent 2% growth. However, over the last three years, our growth has accelerated. We grew 7% in 2021, followed by 10% the next year, and we have guided for 8% growth for the current year.
We also increased our total addressable market, which was pre-COVID, around $35 billion to close to $60 billion.
Mm-hmm.
All this. This is the thing that are propelling the company growth.
Got it. What is unique in your business? Meaning, I see the same customers running with you for years.
Mm-hmm.
Right? Basically, you never lost a customer.
Mm-hmm.
If you think about it at a high level. What is so unique in this business model that is sticky to customers, that are just once they have a relationship with you, the relationship either is the same or better?
First of all, it's not system that you would like to replace.
Yeah.
We are talking about a mission critical system, but I think Amdocs has done a relatively good job in reinventing the company. I mean, we identify all the trends that are existing right now in the market as part of our strategic process 4, 5 years ago. We invested heavily in cloud, in automation. We are sitting in a position that we see what's happening around the world. We talk about, for example, 5G monetization. By the way, in the U.S., 5G monetization didn't even start, I mean...
We, from our position, we see a lot of innovation in APAC, for example, two of our customers are operating probably in the last, I mean, the two new countries that I know that have a 5G standalone deployment, which is Singapore and Korea. We are getting a lot of experience. We continue consistently to invest in the product. It's not that we are stuck and we are running a legacy system, and it's a type of a mess for less relationship. It's environment, that we are coming with new product, new services. We call it in the company, constant innovation. We are not a startup that, you know, do innovation. We all the time trying to be ahead of the market.
I think at the end of the day, the customers see value, a very unique accountability model. It's not like if you have a system integrator or something doesn't work, you say it's the product, the product guys will say the integration doesn't work well. It's unique accountability model, taking ownership and a very strong always deliver DNA.
Mm-hmm.
Customer know they can trust Amdocs, and this is the most important system for them.
We're seeing, across the board, we're seeing some slowdown, we're seeing, you know, budget cuts, even the big cloud companies, the big service provider companies.
Mm-hmm.
Your business is quite stable.
Mm-hmm.
What makes your business inherently more stable than other businesses within the software landscape?
We don't, first of all, I don't say we are immune.
Right.
I believe that we are more resistant. If you look at the how the Amdocs business look. First of all, 60% of our business is managed services. This is when we run the largest operation of the world, from AT&T, to T-Mobile, to Bell Canada, to Vodafone, to Vivo Brazil. I mean, we are running, 60% of our business is managed services.
Yeah.
Approximately 75% of our business is recurring, comprised of managed services and recurring projects. We maintain roughly 80% visibility over a 12-month period through our 12-month backlog. When we stress-test our model against events like the 2008 financial crisis, we find that none of our projects were stopped.
Yeah.
They must be able to monetize it. I'm not sure that the first place to slow down investment is in your 5G monetization system.
Right.
Everyone eventually will move to the cloud. It's just a question of time and how. Amdocs will be a lot of capabilities around this. Our, what we would like to do is actually to move all our customers to the cloud in different type of way, that cloud migration journey will be beautiful then. Network automation is a must, giving 5G scalable network, and I think digital transformation was there before COVID and actually accelerating today. To answer the question, I guess that everything that we do for our customer is highly critical.
Yeah.
I am not saying that we do not see occasional slowdowns, but overall, these are highly critical projects for our customers. For example, we have delivered projects for AT&T as part of their fixed wireless offering.
Got it. I mean, the number one question I'm always getting about you from those that don't know you, is about the competitive landscape.
Mm-hmm.
Can you discuss competition at 2 levels? Number 1, competition with internal IT departments-
Mm-hmm
And competition with external vendors.
Okay
Other similar companies.
There is no other Amdocs.
Yeah.
Obviously, when there is like a competitive bid, it will be Amdocs on one hand, all the portfolio of the product end-to-end, and as I said, it will be several companies and with some system integrator that try to glue everything together. We have competitors in different domains. In charging, it could be a company called MATRIXX. In a contact center, it could be Salesforce. In billing, it could be Netcracker. There is no. Ericsson, sometimes Oracle. There's no one that have the whole portfolio of Amdocs, and no one is doing the service like Amdocs. From this perspective, I think we have a lot of advantage. As you rightly said, the major competition of Amdocs is internal IT.
If you see, usually, we are. I'm not saying it in a bad way, we are replacing platforms, legacy platform, that were managed and developed by legacy, by IT. This is our main competitor. This is why I that even if you see Let's say that the spend of the IT telco part, even if it's not growing, or flat, or growing 1%, it does not mean anything on Amdocs growth. At the end of the day, we are replacing a part, that money was spent on legacy system, and now it's, the system are being modernized. It's not like there's no growth, then there's no growth for Amdocs.
Another thing that I want to, and we talked about this before, we are not connected to the CapEx cycle.
Everyone is talking about a lot of.
CapEx slowing down.
Yes, CapEx slowing down. It's mainly impacting the, you know, the Ericsson of the world. This is the guys, because this is less CapEx-oriented.
Got it. Got it. You spoke about four drivers of growth, and in the next few questions-
Yeah
I'll take you through the four drivers, and the first one is digitalization or digitization. Explain why Amdocs is benefiting from it, and how you're helping your customers to handle this?
Okay. When you talk about digitization in general, in North America, you ask yourself, how much of the engagement that you are used to do with Amazon or with any other one, which is pretty much almost, when was the last time you called a representative from Amazon? I mean, it's and the idea is that eventually, that the industry will be able to serve its, its customers or consumer in a relatively likely great consumer experience like Apple have, or Amazon have, or any other company. Most of our customers are not there. Elevating the way that you engage with the consumer or the B2B, this is what we call digital transformation.
In order to do this, you need to make sure, being digital, it's not just a having a nice mobile application. Being digital, and this is where the heavy lifting, is the ability to take a complex order of a consumer, that bundles a fiber, five wireless devices at the home, maybe some other services, content, et cetera, and be able to completely fulfill this order completely automatically, from the order capture up to the network. This is the holy grail of a digital transformation. This is where, when we can do a much better consumer experience. This is where we can reduce a lot of the cost, a lot of manual work, and this is the holy grail. Most of the companies are not there.
All the companies go soup to nuts, meaning I have nothing, take me all the way down to the whole thing, or do you see companies going step by step, saying, "Okay, do for me"?
We, for this reason, we build a different modernization journeys for our customers.
Mm-hmm.
There are customers that, it makes sense to what we call rip and replace.
Yeah.
You're taking, you have a legacy system, and they say, "It doesn't make sense..." By the way, if you are trying, it doesn't make sense to start to patch the legacy system, I'm going to stand up a completely new platform, latest and greatest, cloud native, all the buzzwords.
Yeah.
This is one option that obviously we can do. The other option, what we've done, and when we build the new portfolio, we decouple it in a way that we allow you to do a gradual modernization. For example, if time to market is the main business problem, you can start with a new catalog. Our latest and greatest catalog, which can do drive thing, it use weeks, now takes days. If you have an issue, we came with a platform, it's called right now, this is the next generation billing. It's called Freestyle Billing. If historically, remember, it was like post-paid, prepaid subscription, now you can do everything. You can start, you can pay your bill, half subscription, half credit card. It's almost completely. completely free.
You can, let's say, consumer choose, you start the month as a prepaid, you end up as a post-paid, I mean. If someone think that is their, they want to create differentiation by introducing a new billing option, they can start with the billing. We were able to move from a, like, what you call rip and replace, or soup to nuts, as you call it, to a completely modernization journey, which build on the business needs.
Got it.
Now, and in this way, we are able to address all the different permutation of Amdocs customer, and it's very tailored. You will not see almost like the same modernization from one customer to the other, because what is relevant to Singapore Telecom is different in Vodafone Netherlands.
Got it.
This is, this is what. By the way, we spent a lot to build a platform to allow these ways of modernization.
You have partnership with Microsoft, and I'm trying to understand how you bring the cloud experience to this world, number one. Number two is AI and what we're seeing now, the trend with AI, does it help Amdocs? Does it hurt Amdocs? How do you see it?
Now, just AI, I can talk about 20 minutes at least.
I understand.
Okay, let.
We have 13 minutes and 44 seconds.
Yeah. Let's start with generative AI in general.
Yeah
We also have our partnership with Microsoft. We wanted to extend our portfolio because, previously, we did not have the components for what you call a CRM suite. Beyond the contact center or call center, a CRM suite includes campaign management, lead management, sales automation, and many other parts.
This has become really the by far, the most comprehensive value proposition in this domain. By the way, there are other pillars for the partnership, but this is one. By the way, Amdocs is still cloud agnostic.
Yeah.
I mean, our platform are running on Azure, on AWS, on Google, on Oracle. This is how we build the platform. This is regarding the partnership with Microsoft, a very new, very strategic partnership. It's going very well. We see very nice funnel of opportunities. Regarding OpenAI, in general, we are looking it in three different domains, and this is, by the way, connected to the announcement we've done yesterday. The first one is internal. Like any other company, we look at, we do finance better, legal better, HR. You can put all our skills management system in a way, and you can type a query.
I want all the people that know this type of system for this, and that they know how to speak German, and this and this, and suddenly you get a list of employees. It's getting. This is more like internal stuff. The second thing is how we are leveraging this in a different domain of the company. I will give a couple of examples. If you talk about operation, today, we introduce a lot of automation to our operation. Think about this, that every ticket that Amdocs have in any minute sales worldwide is going to be loaded to our large language models.
Tomorrow, after this is starting to get some to be more mature, an Amdocs support employee writing to this machine and say, "I have this issue," immediately get an answer: "We have the same issue in Vodafone last year. This is what was the issue, this is how it was resolved, and this is what you should do." This is a completely next, it's a jump, major jump on the current automation that we have today. This is in a development. Also, we are looking to see, can we develop code? I mean, by the way, we found out that we develop, like, small snippet part of code, is working well. When you have more complex code, is not working well.
We took a decision that we don't want junior programmers to use it, because they will never be developers. Eventually, you want the developer to be judgmental on the code of that was generated. All in all, we are looking to see how we can leverage this in programming, in scope definition, generating test cases, the whole development life cycle. This is more to Amdocs. By the way, the third element is how we are integrating, this is where it connects to Microsoft also, in our products, to create different type of capabilities for our customer, to give the consumer.
In our catalog, for example, we are building capabilities that let's say you are a marketer in the San Francisco area, you can getting from demographic information, uptake, 5G adoption, et cetera, it can create you different options for new offering for the catalog, that it took a lot of time before, and everything is automated. Why we build our platform? First of all, everything we do is carrier grade. You know the situation that when open source is not working, and you pick up the phone and call one item open source to find out that no one is answering. It has to be carrier grade.
Okay.
It has to be highly secure. We need to make sure that we keep data privacy, not we are losing sight of data privacy. We want to make sure that we keep ours and our customer intellectual property. Not the situation like happened to Samsung, where either they dumped a lot of code to the general OpenAI, and now everyone understand what is the code. We build a framework that allows us to do it in a way that, as I said, carrier grade, highly secured, we keep data privacy, and we keep all the intellectual property of Amdocs. We are going to bring our own, we're talking use different open source to bring our own large language model, and actually build it with the telco taxonomy.
We are going to build layers, and obviously, the more they mature, they will be more, even, more effective. They build in a way that every Amdocs programmer on operation will not just use it will not be able to use it. You will have to use it only through this framework.
Right.
This is, I think, what is the different. It's not just, "Oh, everyone is doing, we'll do this and that." We are making sure it's going to be... Obviously, you know, when we build it, our legal counsel was involved, because there are a lot of issues there.
Right
... that you need to answer. We announced it yesterday, and we're starting to discuss with customer.
Great. Thank you. Okay.
The short answer, I believe that Amdocs and our customer can benefit-
Yeah
... a lot from,
Right
... from the OpenAI.
Got it. This was one.
Mm-hmm.
Digitalization, the journey to digitalization. The second thing that you mentioned was journey to the cloud.
Yeah.
The question is: How is Amdocs benefiting, and how is it enabling journey to the cloud?
All our customers are going to move to the cloud. We have built the infrastructure to facilitate this transition for all our clients. Moving to the cloud is not strictly about TCO reduction; it is about achieving greater service agility and a faster time to market. It is highly secure and provides elasticity. Most of our customers traditionally tripled the hardware they needed just for events like Black Friday or Cyber Sunday. In the cloud, you can purchase that capacity for just a couple of days.
Right
hat elasticity leads to TCO reduction. Eventually, all our customers will be in a hybrid situation, and we are ready to support that. As they move, they scale down on-premises operations and scale up in the cloud. We have built two types of journeys for our customers to move to the cloud.
Suddenly, rather than do like a big, big jump from the current legacy system to the new cloud, we build them optionality. We acquired a couple of companies in the cloud domain, two years ago, and the reason is we are giving the whole lifecycle to the customer: consulting, deciding what to do, then implementation of the platform, which is cloud-enabled or cloud native, then migration, and then operation. We are the only one that actually build the whole... Every Amdocs customer will go through the journey with Amdocs. Doesn't make sense, I mean, to... The industry is really in early days. I would argue maybe 5% of the workloads of the industry are on the cloud, it will take time. We don't see slowdown in the whole.
Actually, we reported last quarter that the opposite. We see more deals which are cloud related than before, and we believe that the industry will go there. It will take several years, and we are there to do it.
What kind of relationship do you have to have with the cloud companies, Azure, AWS?
We have strategic partnership with Microsoft, with AWS, and also with Google. Actually in some of them, Amdocs is buying the consumption directly from AWS and giving it to customer. There's some opportunity for us to do FinOps in a good way.
Got it.
We have strategic partnership with all of them.
Got it. Okay. In the interest of time, I'm going to move to the third driver-
Yeah.
because I want to make sure that we cover it.
Yeah.
5G and next gen network automation.
Yeah.
Same question: what is the opportunity for you, and how do you help your customers?
5G, everyone is moving to 5G.
Yeah.
Everyone is spending $ billions on 5G. The question, how, is the big question, is how to monetize 5G. In order to monetize 5G, there are some basic elements that you must do when you move to 5G. You need to change your rating system, your policy system. There are many things that you have to do because the architecture is completely different, the protocols are different, the interface, so you have to do it. At the same time, we are building capabilities to support the next generation 5G use cases to be able to monetize 5G.
Yeah.
Today, if you had a phone from AT&T or T-Mobile, there's no service level. Everything is best effort. You can get one speed here, you move to the other part of the town, different one. Latency, which vary. I mean, there is no. When you move to 5G standalone, when this will be deployed, probably next year or in the next year, then you can sell quality of service. You can buy a package, premium package, that you will probably might be willing to pay more, with guaranteed speed and latency. This is because of network slicing and other capabilities of 5G. We are now building the platform for our customers to allow them to do this new monetization of 5G.
For example, a customer from Amdocs in Singapore, over there, with the standalone, he's selling a 5G package, which guarantee speed, latency, game, it's a gamer package.
Mm-hmm.
Game and the VR glasses. Everything is packaged in one. The use cases for 5G will emerge, and actually, what we build right now is the capabilities to monetize all the capabilities of the network, when it be ready. 5G also connects to network automation.
Okay.
Even historically, network in general was completely proprietary. You buy Ericsson, it comes with hardware and the software, you cannot do anything. When the network is software-defined, we have a role, a big role, in ability to do network automation. An example is, you know, we've done an acquisition, we announced last quarter. We always have the capability to do what we call service design and creation. We have to do service, the fulfillment on the services, service orchestration. The part we're missing is the service assurance. What is service assurance? You are doing great, and you're selling a lot of fiber in the neighborhood, you might don't have the capacity to deal with it. Fault prevention, fault detection, everything around service assurance. This historically was proprietary.
Yeah.
Now, the ability to give this type of services, this is something which is completely new revenue for us.
How did you acquire this kind of capabilities? Because before that, it was in the hands of the telecom guys, the telecom company.
Some of it we developed ourselves.
Mm-hmm.
Like, we were always strong in service.
Sure
Service design and creation.
Yeah
and service fulfillment.
Yeah.
The part we were missing.
Got it.
Is the service assurance. Openet was a partner of Amdocs, but we saw more and more demand from customer that they want the supplier to own all three, not just to partner.
Got it.
Now, actually, we are integrating them to Amdocs, and we'll come with a very strong.
Got it.
We offer what they call a "closed-loop" in the network. You can close the loop because what is unique about Amdocs is that the same catalog used for all ordering and offerings is the same catalog used in the network.
Right.
This is why it's completely integrated.
Got it. I want to ask one more question, although we're running a little bit out of time.
Okay.
The question is, you talk a lot about helping carriers to monetize 5G. What does this mean, to help them to monetize 5G?
It means that to build capabilities in the system that will give them all the flexibility that every dream of every marketeer ever in the world can be performed. Remember, it's not in all the way. If you are a 5G customer, it's not just buying the service. You need, at the end, a policy system that will run the network, tell Yani, "This is the service that he's getting.
Right.
This, it's all the way.
Got it.
How you purchase the offering, and in the catalog, create a very unique offering, to how to provision this automatically to the network.
I understand. The red line is blinking, meaning we ran out of time.
Okay.
Thank you very much, Shuki. It was great.
Thank you. Good to see you.
Thank you.
Thank you.
Thanks so much.