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%.
Verizon took over management after Colgate-Palmolive decided to centralize global network operations at a data center in New Jersey. That data center is the hub for networks reaching to 300 locations globally, providing voice, data and video connections, he said. About 20,000 e-mail users in the company all rely on four e-mail servers at the data center, a vast reduction from before. The network runs on a private Multi Protocol Label Switching network managed by Verizon.
Greene said his company picked Verizon because of its global reach for managed services, its willingness to use innovative technologies and its ability to control costs globally. Other managed services providers offered reasonable costs for network operations in one region, but much higher costs in other areas, he said.
“I couldn’t imagine the growth we’ve seen at Colgate-Palmolive” without the managed services being provided to the consumer products maker, Greene said.
Cisco today also said that Verizon sold Cisco’s 5 millionth integrated services router to Colgate-Palmolive, and announced that 3G wireless wide area network capabilities have been added to Cisco fixed-configuration ISRs. Cisco also said it has bolstered reliability for its 880 series routers to achieve the same reliability levels attained in routers used in larger business settings.
