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Network outsourcing moving into third phase – Report

26 April 2010 , Written by Dhruv Tanwar
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Research and Markets has released its 2010 report on telecom managed services, entitled “Network Outsourcing Enters Its Third Phase." The report analyzes the three phases of development of the network outsourcing market, providing the drivers for the industry's evolution into its third phase.

The report analyzes the experience of three operators from a combination of developed and emerging markets, viz. E-Plus, BASE and Bharti, to assess the impact of network outsourcing on performance of telecom operators, both from a financial as well as a competitive point of view. To uncover trends in network outsourcing, Pyramid Research examined all telecom managed services deals announced since 2002 by the top three suppliers, Alcatel-Lucent, Ericsson and NSN in total 191 contracts. Some of the findings are:

The initial phases saw adoption by operators seeking major cost savings. The third pase is characterized by a greater focus by operators on how to adapt to the changing dynamics of the industry and position themselves better for future opportunities. Drivers for this phase include network sharing and the emergence of over-the-top applications such as social networking, which if allowed, bypass operators almost entirely.

Western Europe leads the world in the sheer number of network outsourcing deals announced, with over a third of signed contracts being in the region, The report says that the mix of outsourcing operators is beginning to widen, and though Western Europe will remain the leader in the short term, emerging markets such as Africa and the Middle East, Central and Eastern Europe and Latin America are starting to fall in step. Even more exciting in terms of the overall credibility of the model is the openness of US players such as Sprint, the report found.

Presently, outsourcing is still mostly about the mobile business. Of the deals analyzed, 70% involved a mobile player, and mobile challengers outnumbered mobile market leaders by a factor of nearly four to one. This, however, is changing, which promises to inject more excitement into the competition among the suppliers of these services, and Ericsson's leadership will come under greater assault by its more diversified, convergence-minded competitors.

On a competitive basis, trends generally favor Ericsson to maintain its market lead as third-phase outsourcing draws on the Swedish company's credibility in network sharing deals. That the market has so far been largely mobile and West European plays quite nicely to Ericsson's strengths.

Taking about players in the network outsourcing market, Pyramid Research, the firm that created the report, said that it believes West European mobile players would continue driving the market. It said that as Ericsson was able to ink the Sprint deal, which calls for it to manage multiple networks including the operators wireline network, the Swedish telecom giant could possibly branch out to wireline outsourcing, a key area going forward, while Nokia Siemens Networks (NSN) and Alcatel-Lucent need to differentiate the value they offer customers. It said it would keep a tab on how Huawei positions itself in this market.
 

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