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Networks & Infrastructure
Establishing strategic partnerships through managed services
Service providers in unique position to capitalize on market
by Dr. Ray Mota, Chief Strategist and Founder, Synergy ACG
In an effort to reduce costs and improve efficiency, businesses are increasingly looking at service providers to deploy and manage their networks. And this growth trend shows no sign of slowing down any time soon. On the global level, managed service revenues are estimated to grow at a CAGR of 19 percent and will deliver revenues of US$64.4 billion by 2012. Approximately 35 percent of IT infrastructure is now operated within a managed service offering with managed IP connectivity solutions/services making up the largest segment of the managed services market.
The current economic environment, which is putting pressure on managers to optimize their budgets, coupled with the increasing complexity of networks, which require cutting-edge technologies to keep up with service and product demands are large drivers behind this growth. Service providers, with their diverse service offerings, technology, multiple service delivery models, and cutting-edge applications, are in a unique position to capitalize on this lucrative market and establish strategic, long-term partnerships with their end users.
Business model creation
Before they can support businesses’ MSP in the managed services market, service providers must first focus on some key aspects of their own businesses. Service providers need to analyze and align their business models; envision and differentiate their services; build and market their unique options, and sell their value added services. Differentiation is the key to financial and market success. Why? Competition from a diverse assortment of vendors, carriers, resellers, integrators and specialized service providers (xService providers) are creating turmoil in the market, resulting in price competition and a critical eye aimed at service levels and business service management. Service providers that 1) provide networks with outstanding, highly intelligent, best-in-class, quality-of-service technologies; 2) deploy platforms that not only support current services but can support future service offerings; and 3) allow customization options for their customers will create new revenue and capture significant market share.
Key to successful managed services
The first and foremost underlying requirement of any successful managed services is a flexible and scalable platform that is unified and can handle mass provisioning, operating system upgrades and inventory management. Service providers must ensure that their networks and platforms support multiple point product solutions by critically evaluating and upgrading their service delivery potential and making ongoing investments in their infrastructure to meet their end-users’ technology and service needs.
Although having a flexible and scalable infrastructure provides a significant advantage, it is not the only criteria necessary to compete in the managed services market. Originally, managed services providers concentrated on delivering services that monitored and managed equipment located at an end-user’s business. Those providers that enabled rapid service delivery and operational efficiency achieved competitive advantage. However, with the development, expansion and demand for IP based services and products, just selling products or a management service is no longer enough to remain competitive or dominant in the market.
Service providers need to target a market service niche such as managed VPN, managed security or applications services and brand their offerings from those of their competitors. Given the market competition and the scope of players, service providers have no choice but to develop and aggressively market their targeted value-added service offerings to complement their clients’ or potential customers’ service portfolios. Managed services that offer technology as a service; provide unique partnering platforms; offer options that accelerate time to market; maximize revenue opportunity; allow businesses to differentiate themselves; and provide access to a full range of go-to-market, marketing, technical, branding, and financial resources that support every stage of the service lifecycle will competitively position a service provider to capitalize on the expanding base of enterprises turning to managed services.
Changing the mindset
Equally important is communicating the value of managed services to enterprises of all sizes. Service providers will need to help businesses understand and migrate toward the new paradigm of managed services. This mindset requires that businesses shift from managing their networks to managing third-party service providers that will now manage their IT. These businesses will need to adopt relationship management practices, incorporate their management practices at every level of their business, and restructure their operations to direct service providers rather than manage their internal technologies — new territory for many of them.
With the costs associated with network complexity, metro Ethernet, IP VPNs, managed IP voice and IP security consuming more of their IT budgets, businesses recognize that outsourcing their network management to service providers is one way to improve their success and bottom line, avoid and manage risk, and improve their overall operational efficiency. For service providers, this recognition translates to new sources of revenues and market share, that is, as long as they can differentiate from the pack and address specific operational requirements, such as integration of software applications, data center consolidation, integration of other operational platforms, managed hosting, and managed network solutions, especially in the rapidly expanding areas of managed voice and security.
As businesses look to service providers to help them manage the challenges of their IT and associated business systems, service providers have an opportunity to establish a “trusted advisor” relationship with their customers that will not only ensure delivery of a suite of services and products tailored to their clients’ specific requirements, but will also foster the customer’s loyalty, solidify the strategic partnership and facilitate long-term relationships.
Synergy ACG focuses on providing market analysis and consulting to help service providers, enterprises, and vendors monetize their existing infrastructures and increase operational efficiency and profitability. Through ROI and TCO analysis, product and service message testing, and business model review, reports and forecasts,
Synergy ACG gives you strategic and tactical advice, services and products, and timely answers so that you can better understand market dynamics and grow your telecom operations more efficiently and profitably. We help you make business decisions with confidence!
To contact Dr. Ray Mota
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