Managed services provide infrastructure vendors new revenue streams

January 5, 2006

Managed services provide a large and growing opportunity for mobile communications service providers to offload network operation tasks to third parties, and for infrastructure vendors to secure new revenue streams, according to a new study from ABI Research.

Service providers are under pressure from several directions in 2006. They must focus as never before on maximizing profits and reducing costs, rather than just recruiting as many new subscribers as possible. 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.

According to Lance Wilson, ABI Research's director of wireless research, all these factors are "defocusing" for operators and distract them from their core business of rolling out services, combating churn and ensuring that they can attract high-paying subscribers.

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.

"In practice, managed services vendors are primarily 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've 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."

A good example of a large managed services contract, he says, is the deal struck by Ericsson to manage and operate 3's networks in Italy and in the UK.

The new ABI Research study, "Managed Services for Mobile Wireless Networks" examines the managed services market in depth, identifying opportunities and challenges, dissecting the mechanisms in use, and forecasting expenditures, revenues and market shares.