Technology | Media | Telecommunications

Tuesday, May 13, 2008

Carriers Outsource the Day-to-Day Operations

Facing pressure to quickly innovate with new services and to cut operational expenditures, service providers are increasingly outsourcing their day-to-day network operations to professional service companies, according to the latest study by Infonetics Research.

Driven by traditional IT integrators and the telecom vendor integrators, the professional services shops provide everything from vendor network integration, network assessment, monitoring, and network design to the service providers who hire them.

In 2007, service providers around the world spent $57 billion on such outsourced services, according to a new report by Infonetics Research.

For equipment vendors looking to increase their market share or get into the professional services market, Asia Pacific is the place to be, as carrier spending there represents about a third of the worldwide market. There is strong activity in India with multi-billion dollar outsourcing contracts, and once China's telecom restructuring is complete, we expect new deals to emerge there as well.

"Africa and Latin America are the next big opportunities in this market. Once the competitive landscape in Mexico and Brazil becomes more consolidated with a few large players combining to reach economies of scale, they too will look to further cut opex by outsourcing key professional services," said Stephane Teral, principal analyst for service provider VoIP, IMS, and mobile infrastructure at Infonetics Research.

Highlights from the market study include:

- Worldwide service revenue from professional services to service providers jumped 25 percent from 2006 to 2007.

- In the 5 years from 2007 to 2011, worldwide revenue is expected to increase 49 percent.

- Worldwide carrier opex is estimated to have hit $1 trillion in 2006, with carrier spending on equipment vendor professional services accounting for just 4.5 percent, suggesting strong potential growth ahead.

- Tier 1 vendors (those with annual revenue larger than $7 billion), take in the lion's share of revenue from professional services to carriers, representing 83 percent of the market in 2007.