Managed Services will be increasingly essential for established telecoms
The rapid pace of development in the telecommunications industry means that established telecoms need to constantly keep on their toes to provide demanding end customers with the most up-to-date communications services and solutions available on the market. They need to globally utilise resources and partnerships effectively and cost-efficiently to maximise return on investment and ensure that they maintain their market position. Young and hungry up-and-coming OTTs and SD-WAN players are entering the market every day, and are causing a shift from the traditional product-based model to more platform-based ones. According to IDC, the SD-WAN market is projected to reach $5.25 billion USD by 2023. More established telecoms often struggle to compete with their fresh, flexible approaches, and will have to expand their portfolios and embrace new technologies if they want to remain relevant.
However for many legacy organisations, the overhead costs associated with constantly upgrading to the latest technologies and expanding their service offerings beyond their more traditional core services just isn’t financially feasible. Expanding their organisation to enter new markets is often too expensive to justify, even though capitalising on these new market opportunities is precisely what telecoms need to do if they want to keep up with the times. More and more people are utilising streaming services, video, and VOIP calls, and many streaming providers have seen 30-60% increases in data traffic since the start of the pandemic. With this massive increase in internet and data traffic, and with new SD-WAN providers entering the market every day, telecoms simply cannot put off the large-scale digital transformation of their organisations.
So are established telecoms inevitably going to lose a share of their revenues to smaller, more agile startups with more cutting-edge services and technologies?
Not necessarily. With the rise of OTTs and SD-WAN providers, there has also been an increase in the prevalence of managed service providers who are able to customise their service packages around the core services of legacy telecoms. Managed services allow organisations to expand their service offer as well as their geographical coverage without having to invest as much money up front. By utilising managed services to meet the otherwise difficult borderline demands from end customers, established telecoms can cost-efficiently win both new business and retain old customers. They can offer more complex solutions than they would have the capacity for otherwise, and more easily expand into new markets with no need to establish branch offices and physically purchase network hardware.
So will they do it?
They’re already doing it. Even though telecoms and other established IT organisations are traditionally slow to adapt to change, a recent survey of more than 1,000 IT decision makers in North America and Europe predicts that managed services will account for 16 percent of the total IT budget in 2021. The same survey notes that total spending on managed services by IT organisations is expected to continue to increase, while spending on hardware is expected to further decrease. Grand View Research reported that revenue from the managed services market is expected to grow from 214.7 billion USD in 2020 to 376.1 billion USD by 2025. These predictions show a clear trend in favour of managed services as a preferred method of service delivery, and bode well for both legacy telecoms and managed service providers around the world.
These promising trends send a clear message that managed services are and will increasingly be an effective tool for telecoms to continue to expand their offerings around their core services. The market shift towards managed services will be an important development for the ICT services industry, and managed service providers are in a prime position to capitalise on the growth.
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