Despite unabated need for service providers to outsource non-core tasks, 2017 was marked by slower growth in the service provider outsourcing market. Worldwide revenue reached $67 billion last year, an increase of just 1 percent over 2016.
Despite unabated need for service providers to outsource non-core tasks, 2017 was marked by slower growth in the service provider outsourcing market. Worldwide revenue reached $67 billion last year, an increase of just 1 percent over 2016. After another year of strong growth, and propelled by a gain of 3.5 percentage points, Huawei maintained its professional services market lead, with 27 percent of worldwide revenue, ahead of Ericsson with 16 percent, HPE with 14 percent, IBM with 12 percent, and Nokia with 10 percent.
Vendor results were a mixed bag, characterized by double-digit growth for Huawei and declines for other big players. Without Huawei running on every front of the professional services business and picking up some of the contracts Ericsson exited, the global market would have tanked.
This slow growth is the result of a combination of musical chairs between Ericsson, Huawei, Nokia and other large traditional telecommunications vendors, and big technology companies like IBM and HPE. Many existing large contracts were also executed last year, in the absence of new ones.
As service providers operate in saturated markets everywhere in the world, they increasingly focus on customer satisfaction and retention and on business and network transformation, which require increasing dedicated resources. However, significant revenue growth may no longer be achievable, so it is necessary to de-emphasize network operations through outsourcing and managed services to preserve margins and sustain cash flow.
Ericsson and Nokia spent the year exiting unprofitable contracts, which Huawei picked up. In addition, North America was marked by Sprint taking back its network operations from Ericsson, setting the stage for a deal with T-Mobile US, which reduced the market in the region.
As market fundamentals remain intact, and despite the drought of multi-billion dollar contracts, the market is expected to reach $68 billion by the end of 2018, achieving 2 percent revenue growth over the previous year. In the long run, if substantial merger and acquisition activity and economic recession do not materialize, the market could hit $72 billion by 2022, growing at a compound annual growth rate (CAGR) of 1.4 percent.
Service Provider Outsourcing to Vendors Annual Market Report provides forecasts, analysis and trends for network outsourcing and managed services to help clients make better business decisions in the service provider outsourcing to vendors market.