In 2015 telecoms operators will pass the $100bn mark for global revenues from ICT managed services to large enterprise customers. New forecasts from Ovum show that these revenues could grow at almost 10% per annum to reach $172bn by 2020.
AT&T chief executive Randall Stephens says that strategic business services such as Ethernet, managed IP, and mobility will replace and outpace legacy losses from T1/leased-line type services over time – though he does not know when exactly. Ovum thinks it will be roughly 2018; we recently published our first Telco-Managed ICT Services Forecast to show this.
Telcos drive ICT revenue share
We believe that telcos are currently collecting 14% of enterprise ICT services spend globally (in competition with systems integrators and other IT outsourcers) but that that proportion is increasing and will pass 18% by 2020. This is as much to do with the increased capability and maturity of portfolios, global account management, and service support as it is to do with geography, but regionally the growth areas for telco strategic services are Latin America (17.8% CAGR), Africa (17.5%), the Middle East (16.4%), and Central Asia (13.0%). Telcos’ carrier networks, data centers, and service centers are already well established and reach far into these markets. This means that they are increasingly enterprises’ first choice as cloud service providers; they act as one-stop shops for hosted and connected applications and have the advantage of ready interconnect to cloud service vendors such as AWS and Microsoft.
Altogether, telecoms service providers will grow revenues from global services to enterprise customers to more than $297bn per annum by 2020. This figure includes legacy fixed and mobile voice and data services. The biggest contribution will come from strategic ICT services, including business IT and IP applications, compute and hosting, enterprise mobility, managed networks, professional services, and unified communications. These represent the new generation of dedicated IT and IP communications services that telecoms service providers are able to offer under contracts with enterprise customers.
Not all telcos are players in this global ICT services field. In fact, it is only a minority: we have identified approximately 40 worldwide with dedicated enterprise services units. The largest by enterprise managed services revenues are Verizon, AT&T, and NTT Communications, followed closely by BT Global Services, T-Systems, and Orange Business Services. A bit further back are Telefonica, Telstra, and Vodafone; on the horizon are regional newcomers and aspirants such as China Telecom Global in Beijing, Exponential-e in London, and Masergy in Dallas. More regional operators want to join the global services competition (Bharti, PCCW) and we are beginning to see consolidation in the sector with NTT Com’s acquisition of Virtela and Telstra’s acquisition of Pacnet. The effects will be the same: an increase in telco services management and market reach and further growth in telcos’ share of enterprise ICT business.
Telco-Managed ICT Services Forecast 2015–20, TE0005-000710 (June 2015)
IT Services Market Forecast: Outsourcing, PT0033-000001 (March 2014)
David Molony, Principal Analyst, Enterprise