In new research, Ovum forecasts just a 2 percent annual growth in telecom SP revenues between 2012 and 2018, as carriers struggle with increased over-the-top (OTT) competition, end users more interested in buying devices and apps than services, and limited customer appetite for usage-sensitive billing. With revenues moderating, SPs are keeping a tight lid on capital expenditures (capex), but this is only part of the story.
“Service providers will keep a tight rein on their capex budgets, but they do need to spend heavily on technology – both their customers and the competition demand this. What’s changing is that operators are more smartly attacking their operating expense (opex) budgets, which opens new opportunities for vendors,” says Matt Walker, principal network infrastructure analyst at Ovum.
“However, to take full advantage of this growth opportunity, it’s crucial that vendors have a true understanding of telco opex – something, which until now has been complicated by the lack of granularity and consistency in carrier financial reporting, amongst other barriers”.
Ovum’s newly created taxonomy of opex segments across all operators reveals network/IT operations account on average for 18 percent of telco operating costs, of which 60 percent (US$126bn) is for spending internally, mostly using salaried staff.
“If you’re an operator, this is a huge cost that needs to be managed,” comments Walker. “As operators look to lower operating risks and their cost bases, one option is additional services projects that involve the transfer of employees.”
However, to meet operators’ needs vendors will have to develop far more complex solutions for carriers than in the past. Carriers need help monetizing their networks and retaining customers, not just deploying the equipment.
“While services projects don’t come with guarantees of profitability, there is clearly some upside for vendors as carriers look to outsource more of their operations. As telcos explore this, vendors need to be creative and aggressive about winning the business – but should not forget