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Optical/IP

Bad Economy Good for Managed Services Sales

The managed-services market will grow at 12 percent per year through 2015, or about two times the pace of telecommunications services in general, according to a new report from The Insight Research Corp. But, some of that growth has been fueled by a depressed economy and may not continue when the economy grows enough to fuel hiring.

The report, Managed Services in an IP World: New Opportunities for Wireless and Wired Networks, finds enterprises are using managed services to address two concurrent trends -- the rise in complexity of telecom services with the move to all-IP networks and wireless access, and a recession that has caused massive job cuts.

"Enterprises can no longer hire staff to keep up with technology changes that require them to adopt a new strategy, and managed services fits the bill," says Robert Rosenberg, Insight Research president.

He is projecting the total U.S. managed services market will grow from $29 billion in 2010 to $47 billion in 2015. Individual segments of the managed services market will grow 10 percent to 20 percent, while overall telecom transport services will grow 7 percent.

Integrating wireless and wireline technologies, providing 24-by-seven-by-365 support for applications, managing quality of service and moving to IP for voice, data and video are all among the challenges sometimes overwhelming business IT departments, Rosenberg says.

"Then there is the whole question of mobility, which is the universal access mechanism today, and integrating that within the work flows," Rosenberg says. "That is difficult even if you are fully staffed, because we are making another transition."

Rosenberg believes enterprises are undergoing as dramatic a change today, with the move to all-IP and wireless, as they did with the move to the Internet in the mid '90s.

That said, however, he believes that some enterprises, particularly those for which telecom services are essential to their core business or those with high security needs, will be quick to bring services back in house, once the economy has recovered sufficiently to allow them to hire more IT staff.

"We think financial services companies and others would much prefer to keep their IT functions in house when America gets off its knees and is standing on its feet again," Rosenberg says.

With every major telecom service provider rushing into the managed services and cloud services space, and many of them using the same vendors, the differentiation in managed services will come down to how service providers interact with their customers.

"Everybody buys arms from the same arms-makers, so any differentiation takes place at the level of interface to the customer and how the process and work flows are throughout and, of course, price," Rosenberg says. "There is something to be said about economies of scale, and that will favor the larger carriers, who will have the advantage of offering greater functionality."

Ultimately, maintaining the customer's trust will be more important in the managed services arena than the types of technologies deployed, Rosenberg says.

— Carol Wilson, Chief Editor, Events, Light Reading

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