Cisco-Ovum study projects $66-billion market for four IP-based managed services by 2012

Cisco today announced the latest results of a multi-year market study of the global adoption of managed IT and communication services. The study, conducted by Ovum and commissioned by Cisco, confirmed that businesses are increasingly looking to managed service providers for managed metro Ethernet, managed internet protocol (IP) virtual private networks (VPNs), managed IP voice and managed security.

The report notes that the market for these managed IP-based services continues to see strong growth at a current compound annual growth rate (CAGR) of 18 per cent over the forecast period and is expected to deliver revenues of $66 billion by 2012.

This comprehensive study was based on data collected from more than 1,300 individuals in companies using managed services in 14 countries across the Americas, Europe, Middle East, Africa and Asia. The companies are in the finance, manufacturing, retail, government, healthcare and education markets.

"CIOs and IT directors are increasingly looking to service providers and managed service specialists for deployment and management of their networks to reduce costs and improve efficiency," said Peter Hall, Ovum's research director. "This results in significant opportunities for those able to meet those needs, especially in the areas of managed voice and security."

Other key findings and conclusions from Ovum's study include the following:

• Europe currently leads in the adoption of managed services, but will be overtaken by the North American market, which is expected grow to be the largest market in the world for managed services by 2012. Asia Pacific is projected to have the most rapid growth fueled by managed service adoption in India and China, with a CAGR estimated at 27 per cent.
• Customers who have adopted managed services are largely pleased with that decision, and they are enjoying lower costs and higher levels of support and availability than anticipated.
• The current global market for managed IP VPN services is the largest among the managed services studied at US $17 billion.
• By 2012, managed IP VPNs will remain the most widely deployed adopted service, though IP voice is the fastest-growing managed service with a 39 per cent CAGR for the forecast period.
• The manufacturing industry remains the vertical industry that uses the most managed services, followed by finance and retail. Government fell from third to fourth place in managed services adoption since the first report was published in February 2006.
• Thirty-nine per cent of the respondents said they would use "Cisco Powered" services if offered by their providers, in comparison to a total of 8 per cent who said they would use services based on solutions from the next four most highly ranked networking vendors in the study.
• Interest from end users in managed service bundles continues to grow, with more than 64 per cent of respondents indicating that better, more intelligent, integrated managed service solutions would further incline them to purchase bundles.

"As IT and networks become ever more critical to business success, customers recognise the importance of uptime, security and performance in supporting critical applications," said Al Safarikas, senior director of marketing at Cisco. "The worldwide growth in managed services indicated by this study shows that businesses are recognizing that these can be successfully delivered by a managed service provider."

Cisco's strategy is to support managed service providers as they envision, build and accelerate demand for their network and premise-based managed services that today's businesses expect. The Cisco powered programme designates service providers who deliver their services using Cisco networking equipment and technology and have met market-based standards of support defined by Cisco. Through the Cisco powered programme, managed service providers have access to industry-leading solutions, third-party validated designations, training and extensive go-to-market support.

"Greater end-user awareness of the availability of relevant services, combined with a competitive provider environment, is creating the necessary conditions for rapid market growth in this area," Safarikas said. "More companies in every geography understand the business case for adopting managed services; they can significantly reduce total cost of ownership while increasing the quality of service. The latter is an important driver, especially in developing markets where due to IT skills shortages, and managed services may be the only way to achieve satisfactory quality of service and service-level agreements."

Hall and Cisco will host a series of live webcasts, Capture the Managed Service Opportunity in Your Region on 20 and 21 May focusing on Global and regional opportunities for managed services; and Managed IP VPNs, managed metro Ethernet, managed security and managed IP communications services trends.