Managed Services on the Rise - 08 Nov 2006

Managed services are a red hot market, and company consolidation is occurring at a blistering pace.

ITPro Today

November 8, 2006

3 Min Read
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Managed services are growing in popularity, with the support of many network administrators. The value of managed services is clear: They offload a lot of burden from a company, saving it time and money and reducing learning curves to a nearly flat line in some cases. Plus, managed services provide the advantage of knowing someone is there watching a service 24 hours a day, even on holidays.

Because managed services are such a red hot market, consolidation is occurring at a blistering pace. The most recent movement comes from BT Group, global provider of communications solutions and managed services, which announced that it acquired Counterpane Internet Security, a provider of managed network security services. Counterpane, servicing some 550 companies, is now part of BT Global Services, a division of BT Group.

This latest acquisition comes on the heels of other recent major acquisitions and mergers. In late September 2006, SecureWorks and LURHQ merged under the SecureWorks name. Together the companies provide managed security services to an estimated 1500 clients. In late August, IBM announced that it had reached a deal to acquire Internet Security Systems (ISS) for $1.3 billion in cash. ISS, a definitive leader in software-based and hardware-based solutions, also provides managed security services.

Another managed services provider, Perimeter Internetworking, has acquired seven companies during the past several years: ANE Technologies, Red Cliff Solutions, Internet Threat Management, IRW Services, US Networks, Guarded Networks, and Breakwater Security Associates. If Perimeter wants to be acquired, its own recent acquisitions make it ripe for that possibility. Earlier this year, SurfControl acquired BlackSpider Technologies, and late last month, SurfControl announced two new managed security services offerings for Web and email protection.

The merger and acquisition trends fit with industry analyst projections for increasing interest in the overall managed services sector. In February, a spokesperson for Insight Research said, "The US managed services market will grow at a compounded rate of 22 percent over the next five years due to growth in all segments of the managed services value chain." The company also said that revenues in the market sector will grow from $34 billion in 2006 to nearly $94 billion in 2011.

"Because they can offer around-the-clock monitoring of network performance, improved application performance, and predictable service levels, managed service providers are in a unique position to expand their business in an effort to address the growth of this market," said Insight President Robert Rosenberg.

In a study commissioned by Cisco Systems, research firm Ovum said that it expects the global managed services market to reach $41.5 billion per year by 2009. The study results include predictions that by 2009, managed VPNs will account for 53 percent of the managed services market and that managed VoIP will account for the fastest growth with a 65 percent compound annual growth rate. The study also indicates that Europe, the Middle East, and Africa are adopting managed services faster than any other region, with North America being the second fastest adopter.

"More and more business customers want service providers to deploy and manage their network solutions to reduce costs and improve reliability," said Peter Hall, research director at Ovum. "Significant opportunities exist for service providers developing and delivering managed services, especially in the areas of multi-service IP VPN, IP communications, security and Metro Ethernet."

If you aren't using managed services, you might consider looking into how they could benefit your company. And if you're looking to head out on your own into the world of business start-ups, the managed services market space is a good one to look into.

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