Managed services mania

Managed services has become the new telecom industry mantra, as service providers rush into a space seen as the perfect answer to the increased technology needs and lower capital expense budgets of business customers. In announcing their year-end results, both AT&T and Verizon highlighted managed services successes. TW Telecom announced its first managed services portfolio in February, and other smaller players, including Virtela, Presidio Networked Services and Savvis, all reported seeing major growth.

The obvious question seems to be whether the managed services market is growing so fast that all of these existing and new entrants can succeed in this arena. The answer, said Henry Dewing, analyst for Forrester Research, is a qualified “yes.”

“I think the market is poised for growth that it has never been poised for in the past,” Dewing said. “It's that notion of a perfect storm. There is great economic uncertainty right now, at the same time there is a lot of technology change going on so the risk is fairly high, and we're at the tail end of a technology ingestion cycle.”

Forrester believes the next technology cycle will be one of innovation and growth, and at such a time, using managed services enables businesses to be more nimble and to limit their risk and the need for large upfront capital investments, Dewing said.

Even so, Forrester Research so far has documented an increase in interest in managed services — not an increase in sales, just yet, though that may be coming in the next round of numbers, Dewing said. Naysayers believe interest in managed services hasn't historically translated into sales — remember Centrex?

As for competition in this space, the successful players need to get the business model right, Dewing advises. “The provider who can bundle up an attractive group of services [and] do a monthly opex billing statement that is dependable, reliable and affordable has the edge,” he said.