derations by CSPs, based on inter- views conducted with CSPs in Europe and Far East. The rapid change in telecom business environment taking place in China is also discussed. Fourth chapter considers the current state of the telecom software market. In this chapter, the data by Dittberner Associates is employed in order to match the telecom software market evolution against the model for evolution of a vertical software industry, Rogers' innovation diffusion model, and Moore's technology adoption lifecycle. The chapter studies also correlations between OSS/BSS soft- ware market indicators, analyzes market concentration, studies strategies adopted by the software vendors, and considers the OSS/BSS software market evolution through alternative merger and acquisition strategies. Part III. Issues Affecting Telecom Software Market Evolution The part analyzes factors which are specific to software industry and telecom operator software market. These factors may potentially halt the development of the vertical (OSS/BSS) software market or change the direction of the development. P. Tyrväinen and M. Pulkkinen Chapter "Vertical Integration due to Software Systems' Modularity" analyzes the role of system modularity in predicting the integration of software subsystems within vendors' offerings. It seems that the data flows in the main business processes (order fulfilment, billing and assurance) enforce individual software systems to interface with other systems within the same process. The hypothesis analyzed is that this inherent connection enforces the software to be preintegrated in order to match the processes, to enable innovation, and to avoid integration costs repeated for each customer installation. Chapter "Vertical Integration due to Small Market Size and High Product Development and Integration Costs" compares the costs of in-house software development against the costs of acquiring and integrating software provided by an independent software vendor. The hypothesis analyzed here is that a small number of customer