Call it the wireless industry’s scramble “up the stack,” to borrow an analogy from operating systems. A new research report is calling for double-digit growth in managed services in the mobile communications sector, as more carrier companies outsource the basics of their network operations to third-party providers.
ABI Research says managed services are a major trend to watch. Carriers will increasingly offload network-management tasks to such a degree that growth in this sector could eventually hit the low double-digits the next five years on a compound annual basis.
“Service providers are getting pushed from two directions,” Lance Wilson, ABI Research director, told internetnews.com. Not only is the technology in mobile communications developing at a faster pace, for instance video content to go with voice services, but they have to also focus on squeezing out profits and reducing costs.
Carriers are trying to free themselves to innovate and rollout snazzy new data features, while at the same time trying to take care of nuts and bolts issues with their core business such as combating churn and ensuring that they can attract high-paying subscribers.
At the same time, Wilson added, they must deal with the implications of new technologies: the continuing rollout of 3G cellular systems, the beginnings of HSDPA
“Managed services will continue to be an important component of complicated arrangements in wireless communications,” he added. By managed services, Wilson means an arrangement in which an outside organization undertakes to manage and run part (or all) of a service provider’s network.
He said managed services could encompass one or two functions or the complete range of network management and content hosting responsibilities.
ABI is expecting more carriers to start to offload basic network operations to third parties so the carriers can focus on more high-margin applications and services. Expect this to happen more slowly among U.S. and North American carriers compared to Asia-based wireless companies, he added.
“In practice, managed services vendors primarily are the major wireless infrastructure equipment vendors,” said 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.”
Four merger and partner companies are expected to be dominant in the sector: Alcatel and Lucent, and Nokia-Siemens, whose joint venture includes managed services.
Both “will significantly change the managed services landscape,” Wilson said.