Managed network services provide a large and growing opportunity for mobile communications service providers in order to offload network operation tasks to third parties. Additionally, these services allow infrastructure vendors to secure new revenue streams, according to a new study from ABI Research that forecasts double-digit compound annual growth rates over the next five years.
“Service providers will be under pressure from several directions in 2007,” says research director Lance Wilson. “They must focus as never before on maximizing profits and reducing costs, rather than just recruiting as many new subscribers as possible.”
This distracts operators from their core business of rolling out services, combating churn, and ensuring that they can attract high-paying subscribers. At the same time, they must deal with the implications of new technologies: the continuing rollout of 3G cellular systems, the beginnings of HSDPA implementation, and the implications of “NGN/IMS” – “next-generation network/IP Multimedia Subsystem” technologies.
The solution? Managed services: an arrangement in which an outside organization undertakes to manage and run part (or all) of a service provider’s network. Managed services can encompass just one or two functions, or the complete range of network management and content hosting responsibilities. Today, more Tier One operators are accepting managed services as a viable cost reduction (OPEX) opportunity, and to enhance their networks’ management and operation.
“In practice, managed services vendors primarily are the major wireless infrastructure equipment vendors,” says Wilson. “This is logical: they already have close relationships with the service operators; they have the very deep pockets needed to succeed in this field; and they have always offered some services relating to their own equipment installation and maintenance. Finally, they enjoy economies of scale, because they may offer the same service to many different operators.”
The recent merger of Alcatel and Lucent, as well as the Nokia-Siemens managed services joint venture, will significantly change the managed services landscape – enhancing their participants’ relative competitiveness and leverage in the market.
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