Survey shows managed services boom

The latest results from a multi-year Ovum study, commissioned by Cisco Systems, confirm the telecom market’s move to managed services, a strategy that Cisco has embraced for its service provider customers.

In fact, the 2008 results of the global study primarily confirmed what Cisco has been promoting through its Cisco-Powered Solutions program, said Al Safarikas, Cisco Systems’ senior director of managed services marketing. In its third year, the Ovum data, collected from 1300 individuals in companies using managed services in 14 countries in the Americas, Europe, Middle East, Africa and Asia, managed Ethernet, IP-VPN, VoIP and security services are growing at a compound annual growth rate of 18% and will deliver $66 billion in revenue by 2012.

“It’s not about the best solution anymore – the best solution is table stakes,” Safarikas said. “The real added-value here is turnkey. The conversation we enter into isn’t about the solution -- we know what that is, and we think it is wonderful, but what is the addressable market, what are the price points and at these price points, what penetration do I get?”

Enterprises are looking for managed services to rid themselves of the complexity of operating networks at a time when their networks are more critical to their businesses than ever before.

“CIOs and IT directors are increasingly looking to service providers and managed service specialists for deployment and management of their networks to reduce costs and improve efficiency,” said Peter Hall, Research Director, Ovum, in a prepared statement. “This results in significant opportunities for those able to meet those needs, especially in the areas of managed voice and security.”

The Ovum study also found that while European companies were early to the managed service market and currently lead in adoption of managed services, the North American market is now growing faster and will overtake Europe as the largest by 2012. Asia Pacific is the fastest-growing market because of rapid growth in managed services in India and China.

Other key findings included:

• Managed IP VPN services are the largest among the managed services, at $17 billion and will remain the mostly widely deployed through 2012.
• VoIP is the fastest-growing managed service, with a 39% CAGR through 2012.
• Manufacturers deploy managed services most aggressively, followed by finance and retail. Government fell from third to fourth place in managed services adoption since the first report was published in February 2006.
• Interest from end users in managed service bundles continues to grow, with more than 64% of respondents indicating better, more intelligent, integrated managed service solutions would further influence their purchase decision.

The biggest challenge service providers face in the managed services realm is time to market, Safarikas said. “Getting from ideation phase to taking revenue is absolutely critical,” he said. “It is one of the reasons we say that as an enabler, our job is to support you from A to Z. Typically, ‘do it yourself’ has always historically been the fastest way to do it from scratch, but we are showing managed service providers that they can move faster working with an enabler.”

Service providers have cut their time to market from 2.5 years to a matter of months, Safarikas said. That means managed services are now better positioned to compete with other channels, such as those selling equipment into the enterprise space. In the past, the equipment solution had a much longer lead time on the managed service.

“A lot of our efforts in supporting the process is to ensure that gap keeps getting closer, by earlier engagement and working closely with partners and the partner community,” Safarikas said.