Excerpts from the latest Infonetics (News - Alert) Research report, Service Provider Outsourcing to Vendors, were released today, showing that telecom service providers will spend $77.4 billion on outsourced services to equipment vendors by 2015. The report covers market size and vendor market share and features a forecast report on service provider spending.
The report tracks the revenue vendors derive from services offered to their service provider clients. These include mobile and fixed network planning and design as well as building, maintenance, operations and application service delivery. Additional outsourced services can include service provisioning and activation and billing.
Worldwide and regional market sizes are covered in addition to market share and forecasts through the year 2015. Companies included in the report include Alcatel-Lucent, Ciena, Cisco, Ericsson (News - Alert), Fujitsu, Hitachi, HP, Huawei, IBM, Juniper Networks, Microsoft, Motorola, NEC, Nokia Siemens Networks, Nortel, Tellabs, UTStarcom and ZTE.
The report shows that service providers spent 10.6 percent more on outsourced networking services to equipment vendors in 2010 than in 2009. This represents a jump from $49.6 billion to $54.8 billion. The major growth areas for the carrier outsourcing market are identified as network maintenance, planning, design and operations. A good chunk of the growth is coming out of the EMEA region, led by major outsourcing deals in Africa as well as medium-sized deals across Western Europe and in the Asia Pacific region, and particularly India.
HP was leading the way in the competitive service provider outsourcing market in 2010, followed closely by IBM (News - Alert) and Ericsson. According to the report, traditional equipment vendors manage close to a quarter of the world's managed subscriber base. Also, Infonetics' 2009 outsourcing revenue forecast of $54.3 billion for 2010 was within 0.9 percent of actual 2010 revenues, calculated at $54.8 billion.
"There's no question that managed services are the future for network equipment vendors," said Stephane Teral (News - Alert), principal analyst for mobile and FMC infrastructure for Infonetics. "The May 18 Clearwire/Ericsson deal fully supports our thesis that manufacturers are shifting from box producers to service providers at the same time that telcos and cellcos are transforming into client-centric software-based companies, or 'softcos.' Similarly, network sharing is the future for cellcos, as cutting operating expenses continues to be the chief driver for outsourcing, although it is becoming taboo."
Teral added, "No matter how you look at it, OPEX (News - Alert) stinks big time, totaling $1.4 trillion in last year's fourth quarter (up seven percent year-over-year) and chasing new subscribers in rural areas in Africa, Brazil, China, and India or subsidizing smartphones in the West drives 'selling and marketing expenses,' fueling opex. That illustrates how carriers have shifted gears from operating networks to caring for customers."
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