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Managed services: The way of the future

Thomas Nolle of CIMI Corp has an opinion / forecast piece in NetworkWorld Fusion on the (almost) inevitable arrival of managed services from the carriers.

Managed services: The way of the future



However, 2005 might be the year when the real justification of managed services emerges - the justification that the user doesn't have any choice, because the carriers phase out legacy offerings. What will happen is that services are going to polarize into a low-cost, low-touch, high-capacity commodity and a higher-touch managed service. A lot of the traditional services will be squeezed out completely, or more accurately, absorbed into managed services.

Let's take VPNs for an example. What do buyers like about a VPN? Its low cost, hardly the attribute a carrier wants to promote if that same carrier is selling the user the service the VPN is intended to replace. But suppose we wrap up VPN services into a managed service framework, including customer premises equipment and support? Now there are service features to promote, which the carriers hope will help keep prices from falling too much.


The goal of this kind of substitution isn't to generate obscene profits or pick buyers' pockets. It's to keep profit margins at survivable levels. What's going to happen is that managed service pricing will stabilize at something like traditional pricing for frame relay or ATM. Carriers will switch to IP infrastructure to lower service costs, thus raising margins.



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