Managed Services: Scope for growth

DQC News Bureau
Updated On
New Update

This heralds good news for

solution providers, who can scale up their business to maintain the IT

infrastructure of these companies.


The last few years have seen Indian enterprises take greater cognizance of

the vast benefits of IP technology. In the new globalized economy, this is

delivering greater benefits, such as higher productivity and reduction in manual

time spent on the job.

As India integrates itself with the rest of the business world, there is an

urgent need for Indian enterprises to realign themselves with international

standards and norms vis-à-vis business practices. IT too has an integral role

to play in this regard.

In fact, Indian enterprises are fast recognizing the true impact of an

IT-enabled business environment. According to New York-based Access Markets

International report, 20,500 Indian enterprises invested over $596 million in

various kinds of telecommunications over the course of last year. This rapid

pace of IT adoption is expected to grow by 17.39% to $26.39 billion this year,

according to a study by World Information Technology and Services Alliance.


What managed services is about

This increasing adoption is giving birth to a new trend of managed services,

whereby enterprises and SMBs are looking to outsource some/all of their

networks/services to the service provider. By doing so, enterprises are

increasingly focusing on their core competencies, leaving the task of everyday

network management to the experts.


certain networking solutions allows them to reassign IT staff to higher-value

work such as developing important new applications, rather than managing the

network. As suggested earlier, many organizations are adopting IP-based ICT

solutions to drive down operating costs, increase functionality and improve


Since most service providers have already built out the network, it's

cheaper if organizations to share it rather than build their own. Every business

depending on its need can outsource either the whole or a part of its networking



Managed services go beyond providing just the pipe and basic connectivity

services. It is about managing the end point of the pipe. The Customer Premise

Equipment (CPE), creates more stickiness for organizations by offering more

professional services, thereby preventing them to move on to other vendors.

This also presents a tremendous business opportunity for service providers.

With falling average revenue per user (ARPU), service providers need to offer an

enterprise and value added services as this adds to their revenue stream.

Ideal for SMEs

The reasons for increasing midsize enterprise demand for managed IP-based

services are simple, yet compelling. The nature of the applications used most by

MEs to enhance productivity and trim costs is changing dramatically, from

simple, low-bandwidth applications to higher-bandwidth, business-critical

multimedia applications that are policy-based, network-intensive, and



These value-added services include videoconferencing, hosting services, IP

telephony, and distance learning. These applications, and others, have become

more critical to business success because of their remarkable ability to improve

productivity while reducing costs. The foundation for enabling these converged

services is IP VPN. A converged data and voice WAN requires the implementation

of an IP VPN to prioritize and secure traffic. Without IP VPN, convergence is

more difficult.



The most significant of these changes to the customer's operations is the

transition to IP telephony from traditional private-branch-exchange (PBX)

switching. The primary benefits of migrating from a traditional PBX environment

to IP telephony are savings in networking costs and complexity-and a rapid

return on investment (ROI)-all of which are made possible by converging voice

and data over a single network infrastructure. A core enabler of IP telephony is

IP VPN, so at a minimum, these two managed services tend to be deployed in

tandem, simplifying network operations and reducing its cost structure.


Although, there is a large gamut of services that service providers can look

to provide, the need is dictated by enterprises. Some of the more common

requirements for an enterprise include:

Managed IP VPNs

For an enterprise, managing VPNs requires large capital outlay for equipment

and ongoing commitment of human resources. From a total cost of ownership (TCO)

perspective, out-tasking is advantageous because many companies can share the

costs of using a common infrastructure — a concept that has taken off among

some Indian service providers.

In fact, Indian enterprises are increasingly leveraging IP VPN services.

Bajaj Auto in the private sector and UCO Bank in the public sector are two such

examples that have adopted this approach and are benefiting immensely. In fact,

IDC predicts that revenues from IP VPN services are likely to cross Rs 1,100

crore by 2008 up from Rs 230 crore in 2003.


Managed IP Telephony

In India, IDC expects the IP telephony market to grow at a CAGR of 119% to

touch Rs 13,000 crore during the course of 2005. However, IP telephony requires

much more external assistance throughout the life cycle, including planning,

deployment, and support services, than other technologies such as VPNs and WLANs,

a fact corroborated by Gartner.

The complexity of call servers, unified messaging services, and collaboration

tools is a far cry from the simple plug-and-play devices. This is a prime

opportunity for services companies to deliver comprehensive IP telephony

services to enterprises that are looking to save communication costs by adopting

IP telephony.

IP-managed security

Today IT is at the heart of all business operations, irrespective of the

size of the business. It is imperative to have a secure network that can repel

any form of cyber attack. A recent Gartner study found that 97% of the cyber

attacks exploited known security flaws for which a patch already exists.


Clearly, investing in security applications is not adequate enough.

Enterprises need to continuously monitor their networks and constantly upgrade

their knowledge vis-à-vis new threats, viruses, patches etc, something that is

not their core competency.


Managed IP VPN:

IP VPN services are likely to cross Rs 1,100 crore by 2008 up from Rs 230 crore in 2003 

Managed IP Telephony: IP telephony market to grow at a CAGR of 119% to touch Rs 13,000 crore during 2005

IP-managed security: 97% of cyber attacks in companies exploited known security flaws for which a patch already exists

To sum it up, as basic IP connectivity becomes a commodity, enterprises need

to avail the benefits offered by IP-based technology. As networks become more

complex and face an ever-increasing threat from external elements, Indian

enterprises should look to out-task their network management to 'capable'

service providers.

This will go a long way for them to gain an edge over competition and

enhanced productivity. Service providers on their part need to take the

initiative of driving these services to the enterprises.  

Shrikant Shitole is the New Business Development Manager at Cisco Systems.