$126bn up for grabs for vendors looking to help telcos

Service providers must continue to focus on cost control to offset relatively flat revenue growth – that’s the message from research firm Ovum, who predict that revenue will flatline for the next five years. Actually, it predicts a 2 per cent annual growth in revenues up until 2018, which is pretty much non-existent. However, if they were to utilise the capabilities of their major vendor partners, they could achieve savings in network rollout, operations and optimisation, as well as customer experience and service quality management.

Matt Walker, principal network infrastructure analyst at Ovum, says that whilst service providers are keeping a tight lid on their capex budgets, this is only part of the story:

“Service providers need to spend heavily on technology – both their customers and the competition demand this. What’s changing is that operators are more smartly attacking their opex budgets, which opens new opportunities for vendors.”

Ovum has calculated that network/IT operations account on average for 18 per cent of telco operating costs, of which 60 per cent – $126bn – is for spending internally, mostly using salaried staff. Therefore, it suggests that telcos should look to transfer these employees to their vendors, especially those with proven network management capabilities, and let them deal more efficiently with operations and services.

But to take full advantage of this growth opportunity, Walker says it is crucial that vendors have a true understanding of telco opex, which is often complicated by the lack of consistency in telco financial reporting. Vendors will also have to develop far more complex solutions for carriers than they have in the past. And for their part, telcos need help with the monetisation of their networks and better customer retention, and not just deploy equipment:

“While services projects don’t come with guarantees of profitability, there is clearly some upside for vendors as carriers look to outsource more of their operations. As telcos explore this, vendors need to be creative and aggressive about winning the business – but should not forget to protect themselves.”

Ovum is not the only firm to put out a new report on vendors accessing telco opex budgets – read our related story from IDC here.