Strategize to compensate for the leak in core network services revenues

There is a fundamental shift in demand for core network services from enterprise customers, away from MPLS and private leased circuits to fixed broadband, Ethernet VPN, and DIA. Omdia forecasts that through 2026, the increase in revenue from fixed broadband, Ethernet VPN and DIA will be insufficient to make up for the decline in revenue from MPLS and private leased circuits. As such, the core network services market is forecasted to decline at a five-year compound annual growth rate (CAGR) of -1.2%.  

Source: Omdia 

There are a few underlying factors that are driving this shift in enterprise consumption of core network services. 

• Public internet infrastructure has improved, and enterprises are gaining confidence that quality is acceptable. Enterprises are not fully migrating from private WAN to public internet VPN. Rather, they are shifting by site and application, where less-than-perfect network performance is good enough.
• Network transformation technologies such as SD-WAN and hybrid networking have matured. These technologies give enterprises the option to lower MPLS subscriptions, either by pairing or displacing with dedicated and broadband internet services. These solutions can be architected to deliver a similar connectivity experience, particularly if MPLS remains as one of a pair of redundant services connecting each site.
• Cloud migration and growth of edge computing will drive enterprises to reassess their network architecture and connectivity services requirements. This will be with the aim to optimize network service subscriptions, and lower costs.
• COVID-19 changed the working environment. As the world comes out from the pandemic, many enterprises will re-evaluate their operating models, whether to keep larger office spaces and their corresponding MPLS connections or to right-size as employees continue to work from home. 

CSPs are concerned about how these factors impact on enterprise revenues. Considering that customer experience is highly rated, CSPs may be tempted to sell high-availability services on the fear and uncertainty that cheaper connectivity may fail to deliver the same user experience. This will at best delay the switch, and the customer may develop distrust for its CSP if another provider proposes a demonstrably better solution. 

Enterprise network evolution is inevitable. Instead of going on the defensive, network providers need to strategize with alternative growth plans. Network providers are credible advisors to educate enterprises on different service levels between network types, and to propose solutions such as SD-WAN and hybrid networking. Enterprises will be able to subscribe to optimal access options for their needs; the service provider becomes a trusted advisor, upselling professional and managed services around more complex digital solutions. Core network services may be the foundation, but professional and managed services around new digital solutions will be where potential future growth lies for network providers.  


Discover the full analysis in the updated Global Enterprise Network Services market sizing and forecast analysis. This report highlights COVID-19’s global impact and broader trends for 10 core network and managed network services. This report is an example of one of the many surveys, market forecasts, reports, and market data insights that make up the Network Transformation Services Intelligence Service from Omdia. This service explores the opportunities and models for success with insight into global enterprise IT executive adoption trends, and emerging transformational network services from leading providers. Click here to download the overview now.