NSN Sees Managed Services as $277B Market
SINGAPORE -- CommunicAsia 2009 -- Nokia Networks estimates that the potential captive market for telecom outsourcing and managed services is worth €200 billion ($277 billion) a year -- that's around double the value the company puts on the sale of fixed and mobile equipment. Of this, at least 25 percent will come from Asia, NSN suggests.
Speaking at a press briefing held alongside CommunicAsia, Christian Fredrikson, NSN's head of Asia Pacific, explained that NSN values the managed services and outsourcing market based on the amount that communication service providers currently spend internally on the operation of their networks and services. NSN's definition of the market therefore includes network implementation and ongoing care, managed services, and consulting and integration.
The figure does not directly correlate to the revenues available to the vendor community, as Fredrikson concedes that some operators will always want to manage all or at least some of their own networks and service operations. However, he says, the trend toward outsourcing some or all network management is now unstoppable as many operators concentrate their efforts on developing new services, service-orientated business models, and marketing.
Nowhere is that more obvious than in Asia. Managed services are now the norm in India, and with the outsourcing of the operation and management of its value-added services (VAS) infrastructure, Bharti Airtel Ltd. (Mumbai: BHARTIARTL) has taken this to a new level. (See India's Airtel Outsources Again.)
In addition, markets in which operators have been staunchly self-sufficient, such as Japan where NSN partners with Panasonic to offer managed services, are coming around to the idea, says Fredrikson.
Kamlesh Patel, head of strategy and business development, Asia Pacific, NSN, tells Light Reading that it is a trend that is growing at unprecedented rates in many parts of Asia-Pacific and is being driven by operators in low ARPU markets that need lower and more predictable costs, together with the reliability of service. Patel explains that the market share NSN allocates to Asia-Pacific is extrapolated from the proportion of the infrastructure market the region accounts for. But, he says, with the near exponential growth of managed services in Asia, it could take a significantly higher proportion of the business.
Forty percent of NSN's revenue already comes from services. This has risen 10 to 15 percent from five years ago and is helping offset declining revenues from the equipment business which Fredrikson describes as commoditized.
He says infrastructure is still a big business at €100 billion annually, but it is no longer a huge growth business. Indeed, NSN estimates the global infrastructure market will contract by 9 percent in 2009. This is lower than it was predicting at the end of 2008. (See Nokia Siemens Braced for Tough 2009.)
NSN has more than 200 managed service contracts on five continents. It is monitoring more than 125,000 base stations, and it brings a new base station on air every 10 minutes. Together these account for enough connections to put NSN at No. 6 on the operator rankings list by subscriber. However, Fredrikson insists NSN is not about to start competing with its customers.
He says, "We are not going to be an operator and go for licenses and spectrum. We will stick to what we are good at."
NSN manages these networks from its global network solution centers, two of which are in Chennai and Noida in India, with the third in Lisbon, Portugal.
It is experience from these that is driving NSN's strategy toward what it describes as extreme network efficiency. Operational realities are informing product development to create lower-power, lower-cost equipment.
It is also influencing changes in NSN's management processes and OSS products so that they become more automated, deliver real-time information, and enable proactive monitoring that is capable of giving a view on the customer experience for a service, not just the performance of network elements.
NSN says that its target is to be No. 1 in the provision of telecoms services and claims to already be No. 1 in network implementation, No. 2 in network care and managed services, and No. 3 in consulting services.
NSN's heightened emphasis on services can come as no surprise considering the pressure on the infrastructure business in general and the unabated growth of Huawei Technologies Co. Ltd. , which is fast closing in on NSN's fourth place in the telecom equipment vendor rankings. (See Huawei Closes In on Rivals.)
Indeed, Huawei tells Light Reading that it has shipped more 3G-mobile base stations in the first quarter of 2009 than it did in the entirety of 2008, suggesting that in mobile infrastructure at least, the pressure is only increasing on NSN.
— Catherine Haslam, Asia Editor, Light Reading