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Two-thirds of CSPs expect to increase their IT spend this year, and much of this growth will come from IT services rather than software. Ovum expects telecoms-specific IT services to be the fastest-growing segment of the telecoms vendor services market, not just this year but also over the next five years, with a CAGR of approximately 7% over the period.

Why is this the case? First, CSPs are continuing to seek out agile, scalable, and low-cost options for IT systems and processes. This fits well with services-based delivery models, such as managed services and SaaS.

A second factor is automation, with two separate but closely linked forces driving the market in the same direction. On the one hand, CSPs are seeking to reduce cost and complexity through automation. On the other hand, as the professional services market matures, vendors also seek to automate their own services delivery processes and architectures in order to improve margins.

The implementation of automation is becoming an increasing priority for CSPs, with larger players, such as AT&T or Vodafone, leading the way. Ovum's recently published 2017/18 ICT Enterprise Insights survey of senior ICT executives reveals increasing telco interest in network automation, with 33% of CSPs viewing the automation of network operations as a high priority over the coming year, making this one of the highest-scoring IT project areas.

The deployment of SDN and NFV architectures will enable faster service creation, activation, and provisioning processes, but only if supported by capabilities that allow for increased automation, for example, APIs, analytics, and AI. In parallel, CSPs need to transform existing OSS systems so they can support automation in an increasingly hybrid network environment. Some of the changes required to support automated service delivery and orchestration will include: performance and fault management systems that make use of real-time analytics capabilities; service assurance platforms that are more intelligent and better integrated with other systems; and centralized data and network inventory that support a dynamic virtual environment.

For all these reasons, the OSS domain will be a target for CSP investment, and because any changes to OSS systems are complex and time-consuming, it will be increasingly tempting to look to vendor services partners to assist with the management of OSS systems. Managed services will be a big focus of activity, driven in large measure by the need to support network performance optimization.

An increasing number of CSPs will also move to cloud-based delivery models for their IT systems, with investment in SaaS driven by the need for solutions that are agile, scalable, and fast to market. Vendor-provided consulting services will play an important role in helping CSPs identify the roadmaps for system upgrades, and integration services will be required to support systems implementation.

Services will play a crucial role in helping CSPs successfully transition their operations and networks. For this reason, it is essential that vendors' go-to-market strategies include a strong services component and that vendors boost their telco IT services capabilities.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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