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Look for managed network services to grow as economy tanks, industry experts say

December 1, 2008 | Chris Payatagool

With fewer staffers, daunting new technologies, some companies opt for outside help

By Matt Hamblen

Managed network services are expected to continue to grow at a healthy pace, even as the economy tanks, according to an analyst and industry sources.

For many large businesses, the value of managed network services, such as routing and unified communications, actually increases during economic downturns. That's true in part because those companies may have to cut their staffs, and because the technology is getting more and more sophisticated, according to several participants in a webcast sponsored by Cisco Systems Inc. today.

"Managed services do well in tough economic times," said Katherine Trost, an analyst at Nemertes Research, adding there will be a "huge opportunity" for managed service providers in coming months.

In an annual survey of businesses conducted by Nemertes, 63% of this year's respondents said that they expected to adopt some level of managed services this year, that's up from 46% in 2007 and 27% in 2006. Trost said that upward trend should continue next year. The survey was based on in-depth interviews with 117 managers at companies of various sizes; it was supplemented by a Web-based survey with about 310 respondents, she said.

Cisco works with 300 managed services providers, including a variety of global carriers, to provide its technology to business customers. And today it expanded that number by eight. Cisco's new service provider partners include Verizon Business, a unit of Verizon Communications Inc. Verizon Business joined Cisco in the webcast, and the companies touted the way Colgate-Palmolive Co. has benefited from global managed services they have provided.

Al Safarikas, senior director of service provider managed solutions at Cisco, said managed services have been the fastest growing segment of Cisco's business in recent months. The overall managed services market is growing at a rate of 10 times the rate of the IT market in general, Safarikas said, although he didn't provide any specific numbers. "Managed services have traditionally been countercyclical," he said, predicting continued growth despite the global economic downturn.

Michael Marcellin, vice president of global managed solutions at Verizon Business, said that while the economy slows, there will be "pockets" of the world where economic conditions will not deteriorate as much. IT shops in large businesses "will still be doing more with less," thus creating an opportunity for managed services, he said.

Verizon Business has 4,200 managed services customers in 142 countries, and it manages 262,000 network devices, such as routers and firewalls, Marcellin said. More than 200 data centers for large businesses are also under Verizon management, he said. Some companies just want a few branches managed, but others want to turn all network management over to Verizon.

[via The Steve Zone]  

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