If you pitch a startup plan to investors around network managed services, you better have a pretty good angle. According to ABI Research, three vendors including Ericsson, Huawei and Nokia, own 80 percent of the market.
Meanwhile these three vendors are sharing a relatively fixed pie, at least this year, where growth is basically flat.
This echoes similar research ABI released in April. Here ABI predicted that the double digit growth the market had experienced will fall to a CAGR of 7 percent between 2012 and 2018.
“The network managed services market saw its glory years starting around 2005, where vendors like Ericsson, Nokia Siemens, Alcatel-Lucent or their erstwhile existences benefited from a trend where a large number of operators, many of them from developing regions, outsourced their day-to-day network management and operations in return for a considerable cost savings,” ABI said. “Most managed services vendors invested heavily in growing network operations centers, taking on board staff, and building large cost structures. In these boom years we had managed service vendors sacrifice profitability for growing market share and revenues.”
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The market might be flat but there is some movement among the top players. Ericsson remains in top place, but Huawei has overtaken Nokia for the second spot.
The market is flat because in many cases, the technology was oversold.
“The managed services market faces a reality check as many of the false promises of high cost savings begin to be shattered, as some vendors struggle to appease investors,” said Aditya Kaul, ABI Research practice director. “On one level we see a certain maturing of the market, as low-end field operations get commoditized and transactional cost-based models give way to customer-centric managed services and strategic business transformation. However, it’s too early to say to what extent operators will bite this new shiny avatar of managed services. While operators face immense pressure to transform their business and not be relegated to dumb pipes by the OTTs, it remains to be seen if they will trust their managed service partners in helping with this transformation.”
Despite sometimes overselling the benefits, smart vendors can serve both customers and their bottom lines if they play their cards right.
“Managed Services as a means to bring competitive advantage and revenue enhancement to operators is a growing trend worth noting, as the days of simply outsourcing to reduce costs are fading,” said Joe Hoffman, research director. “Operators are looking to seize any opportunity to maximize margins, and the long-term competitive advantages will accrue to vendors who maintain scale and execute.” Even so, dark clouds are on the horizon, as the advent of SDN/NFV and moves to the datacenter may provide an opening for IT managed service vendors.
According to IDC, the top benefits of managed network services include around the clock support (53 percent) lowering costs of network operations (50 percent), boosting network performance and availability (39 percent), and letting IT focus on more strategic work (33 percent).
