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Market study Cisco about managed IT and communication services

May 2008 by Marc Jacob

Cisco announced the latest results of a multi-year
market study of the global adoption of managed IT and communication services. The study,
performed by Ovum and commissioned by Cisco as part of its on-going commitment to
enabling service providers, confirmed that businesses are increasingly looking to managed
service providers for managed metro Ethernet, managed Internet Protocol (IP) Virtual Private
Networks (VPNs), managed IP voice and managed security. The report notes that the market
for these managed IP-based services continues to see strong growth at a current compound
annual growth rate (CAGR) of 18 percent over the forecast period and is expected to deliver
revenues of US $66 billion by 2012.

This comprehensive study was based on data collected from more than 1,300 individuals in
companies using managed services in 14 countries across the Americas, Europe, Middle East,
Africa and Asia. The companies are in the finance, manufacturing, retail, government,
healthcare and education markets.

"CIOs and IT directors are increasingly looking to service providers and managed service
specialists for deployment and management of their networks to reduce costs and improve
efficiency," said Peter Hall, Ovum’s research director. "This results in significant
opportunities for those able to meet those needs, especially in the areas of managed voice and
security."

Other key findings and conclusions from Ovum’s study include the following:
· Europe currently leads in the adoption of managed services, but will be overtaken by
the North American market, which is expected grow to be the largest market in the
world for managed services by 2012. Asia Pacific is projected to have the most rapid
growth fueled by managed service adoption in India and China, with a CAGR
estimated at 27 percent.
· Customers who have adopted managed services are largely pleased with that decision,
and they are enjoying lower costs and higher levels of support and availability than
anticipated.
· The current global market for managed IP VPN services is the largest among the
managed services studied at US $17 billion.
· By 2012, managed IP VPNs will remain the most widely deployed adopted service,
though IP voice is the fastest-growing managed service with a 39 percent CAGR for
the forecast period.
· The manufacturing industry remains the vertical industry that uses the most managed
services, followed by finance and retail. Government fell from third to fourth place in
managed services adoption since the first report was published in February 2006.
· Thirty-nine percent of the respondents said they would use "Cisco Powered" services
if offered by their providers, in comparison to a total of 8 percent who said they would
use services based on solutions from the next four most highly ranked networking
vendors in the study.
· Interest from end users in managed service bundles continues to grow, with more than
64 percent of respondents indicating that better, more intelligent, integrated managed
service solutions would further incline them to purchase bundles.

"As IT and networks become ever more critical to business success, customers recognize the
importance of uptime, security and performance in supporting critical applications," said Al
Safarikas, senior director of marketing at Cisco. "The worldwide growth in managed services
indicated by this study shows that businesses are recognizing that these can be successfully
delivered by a managed service provider."

Cisco’s strategy is to support managed service providers as they envision, build and accelerate
demand for their network and premise-based managed services that today’s businesses expect.

The Cisco Powered Program designates service providers who deliver their services using
Cisco networking equipment and technology and have met market-based standards of support
defined by Cisco. Through the Cisco Powered Program, managed service providers have
access to industry-leading solutions, third-party validated designations, training and extensive
go-to-market support.

"Greater end-user awareness of the availability of relevant services, combined with a
competitive provider environment, is creating the necessary conditions for rapid market
growth in this area," Safarikas said. "More companies in every geography understand the
business case for adopting managed services; they can significantly reduce total cost of
ownership while increasing the quality of service. The latter is an important driver, especially
in developing markets where due to IT skills shortages, and managed services may be the
only way to achieve satisfactory quality of service and service-level agreements."


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