Experts: Weak economy to grow managed network services

Managed network services are expected to continue to grow at a healthy pace, even as the economy tanks, according to an analyst and industry sources.

The value of managed network services, such as routing and unified communications provided to large business customers, actually increases in economic downturns, partly because of staff cuts at those companies and the increasing sophistication of the technology, according to several participants in a Webcast sponsored by Cisco Tuesday.

" Managed services do well in tough economic times," said Katherine Trost, an analyst at Nemertes Research , adding there is a "huge opportunity" for managed service providers in coming months.

In an annual survey of businesses, Nemertes found that 63% expected to adopt some level of managed services this year, compared to 46% in 2007 and 27% in 2006. Trost said that upward trend should continue next year. The survey was based on in-depth interviews with 117 managers at companies of various sizes and supplemented by about 310 respondents to a Web-based survey, she said.

The trend towards third-party MSPs

Cisco works with 300 managed services providers including a variety of global carriers to provide its technology to business customers, and today expanded that number by eight providers. Among them was Verizon Business, a unit of Verizon Communications Inc., which joined Cisco in the webcast that also cited global managed services benefits that Verizon and Cisco have provided to Colgate-Palmolive Co. in New York.

Al Safarikas, senior director of service provider managed solutions for Cisco, said managed services have been the fastest growing segment of Cisco's business in recent months. The overall managed services market is growing at a rate of 10 times the rate of IT technology growth in general, Safarika said, although he didn't provide any specific numbers. "Managed services have traditionally been counter cyclical," he said, in predicting continued growth despite the global economic downturn.

Michael Marcellin, vice president of global managed solutions for Verizon Business, said that while the economy slows, there will be "pockets" of the world where the economy will not deteriorate as much. IT shops in large businesses "will still be doing more with less," which creates an opportunity for managed services, he said.

Verizon Business has 4,200 managed services customers globally in 142 countries and manages 262,000 network devices, such as routers and firewalls, Marcellin said. More than 200 data centers for large businesses are also under Verizon management, he said. Some companies just want a few branches managed, but others want to turn over all network management to Verizon.

Tom Greene, CIO at Colgate-Palmolive, said his company made a major network infrastructure investment of Cisco gear with Verizon's oversight about two years ago, and has begun recently to have paid off the investment with returns in network efficiency. He didn't disclose specific costs, but said communications costs didn't go up in the current year over a year ago, despite an increase in network traffic of about 77%.

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