Network services shift pay offs for vendors

John C. Tanner
Telecom Asia
In the last ten years, more and more network equipment vendors have opted to supplement their equipment sales income by working more closely with their operator customers and getting into the ICT outsourcing/managed services business. And business is good.
  
You wouldn't necessarily know that from the first-quarter results of this year. According to research firm Ovum, telco spending on ICT services was $17.1 billion for Q1 2012, which was essentially zero growth compared to the same quarter a year ago, thanks to the tough economy.
  
But the bigger picture reveals a more optimistic outlook for ICT outsourcing and network managed services. The same economic conditions putting pressure on services spending for telcos is also applying pressure on overall spending. Telcos must find ways to cut costs, and therein lies a serious opportunity for vendors to grow their network managed services portfolios.
  
The bottom line: telcos are already spending a lot on network managed services in the name of cutting their opex costs, and are likely to spend more in the next few years.
  
"Service providers continue to spend more on outsourcing, making it clear that equipment vendors must push ahead with their transformation from box producers to managed service providers," says Stéphane Téral, principal analyst for mobile infrastructure and carrier economics at Infonetics Research.
  
Opex drivers
  
Recent figures from Infonetics show that operators spending on outsourced networking services to equipment vendors grew 9% last year to $60 billion, compared to $55 billion in 2010. Infonetics expects that to grow to $75 billion a year by 2016.

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