Despite Anemic Growth, IT Telco Market to Hit $60B

By Doug Barney

The IT Telco market is flatter than the salt in Bonneville, seriously outpaced by hotter areas such as the cloud.

Ovum tracks the telco space and sees spending reaching $60 billion globally by 2017. Hot areas include systems integration, packaged software and mobile and broadband services.

On the downside, voice services are on the wane.

This all means that telcos must adapt to these new market realities, and switch to more profitable areas.

Image via Shutterstock 

“Over the next five years, service and tariff innovation will be key revenue-generating strategies, while LTE rollout, network optimization, and creative approaches to partnerships will become focal points for cost savings. Telcos need to monetize new business models, leverage customer data by investing in analytics, and define their response to over-the-top (OTT) players,” said Shagun Bali, analyst for Telecoms Technology at Ovum.

The growth rate for IT telco is a shabby 0.6 percent CAGR between now and 2017. The U.S. will be slightly better than average with a CAGR of 0.8 percent hitting $17.5 billion in 2017.

Besides branching into new areas, telco also have to gain efficiencies, and part of this is outsourcing much of their operations to other service providers.

MSPs Keep on Growing

The raw telco services space may be flat, but MSPs are very much on the rise, this according to INSIGHT Research and its “Managed Services in an IP World: Global Opportunities for Wireless and Wired Networks, 2013-2017” report.

Two main factors are driving MSPs growth. First, there is the worldwide recession which is just now easing in some quarters.

At the same time, there is a more and more pressing need to implement advanced technologies to drive competitive advantage.

Put two and two together and you get a healthy demand for expert MSP services, services expected to grow on average 11.3 percent a year globally, Insight says. In the U.S., overall revenue will exceed $50 billion in 2017. “INSIGHT’s analysis suggests that the global Managed Services market will grow from $137 billion in 2012 to $235 billion in 2017, at an 11.3 percent CAGR,” the company revealed.

The Internet is also driving the need for services, as there is constantly new technologies and techniques to master. "A large percentage of business activity now depends on the internet for everything from electronic commerce to intranet applications to customer service," said Fran Caulfield, research director for INSIGHT. "These data applications are driving exponential traffic growth onto corporate networks, while increasing their complexity. Managed services allow corporations to handle this growth, while outsourcing the most complicated elements to the skilled service provider. Service providers also win, as they grow beyond basic transport services, increase margins and reduce churn."

The MSP space is a bright spot in an otherwise dull telecom market, one where older core services have reached near saturation and experience the low growth common to mature industries.

“The Managed Services market, on the other hand, will grow faster than basic transport as businesses of all sizes look to service providers to deliver the next generation of business applications, while simultaneously migrating their supporting telecom networks to newer technologies, such as IP, cloud, and wireless,” INSIGHT said. “The complexity faced in managing these applications and networks, coupled with limited resources, declining budgets, disparate networks and support systems, is driving the IT manager to managed services.”

Edited by Alisen Downey

MSPToday Editor at Large

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