The North American managed telecom services market revenues are likely to increase over the next few years as a greater portion of enterprise customers outsource network functions to telecom operators. While mid sized enterprises constitute the consistent target market for managed services due to their limited IT resources, large enterprises are equally likely to outsource certain tasks or functions associated with their corporate voice and data networks.
New analysis from Frost & Sullivan reveals that the North American managed telecom services markets revenues totaled $16.6 billion in 2005, and estimates this to reach $26 billion in 2010.
Expansion of business activities across national and international markets and the resulting increase in mobile workforce has further complicated the implementation and management of enterprise-network infrastructure, thereby encouraging enterprise customers’ interest in outsourced/out-tasked telecom services and functions. Adoption of various managed services is particularly popular with large enterprises seeking to reduce their capital and operating expenditures.
Despite the greater availability of managed-telecom services, majority of enterprise customers are implementing outsourced/out-tasked solutions in conjunction with in-house managed networks. The piece-meal adoption of managed services impacts service providers’ revenues and profitability, given that a number of operators have invested significant resources in development and deployment of managed services.
From the enterprise customers’ perspective, limited in-house telecom and IT resources as well as continuing enterprise focus on core competencies are facilitating demand for outsourced/out-tasked services. In addition, convergence of wire line and wireless services/applications is urging enterprise customers to take advantage of telecom carriers’ expertise in developing and implementing integrated networking solutions. Moreover, greater focus on business continuity and disaster recovery is also helping drive adoption of managed-network services among large enterprises. Finally, regulatory-compliance requirements are also prompting utilization of professional/network management services, especially in finance and health-care verticals.
The revenue and profitability potential of managed services can attract new market entrants, as well as encourage existing participants to boost their managed services customer base.
“While managed-services market presents tremendous revenue and customer growth potential for telecom operators, service providers must address a number of financial and operational issues, particularly focusing on several back-end processes, functions and systems that should be in place, prior to entering the managed services market,” cites Imran Khan, Industry Analyst, Frost & Sullivan.
However, potential market growth can be hindered by the continuing enterprise interest in in-house managed telecom and IT functions that is suppressing adoption of managed-network services. Moreover, growing competition and the rising pressure on managed services prices, especially managed transport/access services, further impact long-term revenues and income of the managed services providers.
