The capabilities that underpin telcos’ managed services offer to enterprise customers have shifted to the cloud. If telcos are to stay relevant as providers of managed services, they must understand the changing needs of enterprise customers, including how to partner, go to market and design SLAs.

Capturing growth in managed services

In the broadest sense, managed services are the outsourcing of any business operation to a third party in a contract that includes the technical capability and the ongoing management of that capability: management that includes integration with other systems, issue resolution and service maintenance, updating or optimisation. Telcos have been offering managed services to their enterprise customers for many decades, combining and repackaging capabilities from major vendors to offer managed solutions to enterprises across a number of domains.

This report focuses on three enterprise domains in which telcos offer managed services – cloudified IT, cybersecurity and networking. There are other services that telcos resell in managed contracts that are beyond the scope of this report (unified communications, mobility and contact centre services, for example).

Managed services are a significant source of revenue. The global managed services market is estimated to be worth around US$200 billion in 2022 (14% of US$1.4 trillion of global telecoms revenue) and is set to grow substantially during the 2022-2032 period.

A significant driver of the growth of managed services is the cloudification of the capabilities that underpin them, a disruptive trend that has dramatically influenced the IT and telecoms sector by making these capabilities affordable to smaller entities. Understanding this shift, and how it affects customer perceptions of the managed services that telcos build on top of cloudified capabilities, is key to capturing this growth.

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Cloudification drives a new opportunity in managed services

Cloudification has been one of the main trends driving the telecoms, media and technology sector for the past decade. In telecoms, this cloudification can be seen both internally and externally.

Internal impact: New telco architectures and capabilities

• Telcos have moved their own internal IT systems to the cloud, turning to hyperscalers such as AWS, Google and Microsoft for the technical expertise and raw capabilities. These vendor relationships form the basis for partnerships on which to resell IT managed services to the telcos’ own enterprise customers.
• Telcos’ core networking competencies are moving towards cloud architectures, with network equipment providers (NEPs) and new vendors offering cloud-based solutions for mobile networks from the core to the RAN. In enterprise networking, SD-WAN abstracted the management of the network from the underlying IP-MPLS or IP-VPN infrastructure, providing the cloud-like benefits of a purely software-based solution which can be run as an overlay on commercial off-the-shelf (and possibly shared) hardware.
• The need for cybersecurity has increased with the move to cloud-based IT and networking. This is because highly distributed enterprise users (in part due to widespread working from home following the COVID-19 pandemic) increase the attack surface of an enterprise’s systems. It has been a natural evolution to deliver cybersecurity services through the cloud as well. The simple service of SD-WAN is now often found packaged with four cloud and network access security components, collectively coined secure access service edge (SASE), which include firewall-as-a-service, cloud access security broker, zero trust network access and secure web gateway (see the below graphic). Telcos most successfully resell and manage these platforms to enterprise customers where they have built additional cybersecurity capabilities (such as 24/7 local security operation centres) that complement the offering.

In all three domains, telcos are reselling to enterprise clients the capabilities that they have themselves migrated to (or are in the process of doing so). This is one strength that telcos should emphasise in addressing the enterprise managed services market, especially in terms of the reliability of a migration (i.e. what they offer to do for their enterprise customers, the telcos have already done successfully for themselves). As the operator of critical infrastructure, a telco is held to a higher degree of accountability for the reliability of its core operations. This reputation holds significant currency with enterprises in verticals with mission-critical IT, security or networking considerations, such as healthcare, utilities or financial services. For instance, telcos have developed cloud migration and transformation skills which they resell as “cloud managed services”, whereby they emphasise their ability to integrate and manage solutions across multiple cloud deployments.

SASE capabilities

Source: STL Partners from Zayo

Table of contents

• Executive Summary
  • Recommendations
  • Next steps
• Introduction
  • Cloudification drives a new opportunity in managed services
  • The imperative to adapt: Threat of partners going direct
• How should telcos partner to provide managed services?
  • Telco’s positioning depends on the nature of the partner
  • Telco as small fish: Orange Business and Telefónica
  • Telco as big fish: AT&T’s SASE platform, Telefónica Tech and Orange Cyberdefense
  • What does a telco bring to the table?
• Engaging customers with a data-driven sales and marketing force
  • Personas not segments
  • Drivers and triggers of change
  • Provide your customer success team with the relevant tools
• Adapting SLAs to the move to the cloud
  • Customers want SLAs tied to actual business needs
  • SLAs as flexible as the cloud
• Conclusion
• Index

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Yannick Mayaud

Yannick Mayaud

Senior Consultant

Yannick has worked across STL’s consulting practice on projects looking at growth opportunities for the telecoms sector in 5G, edge computing and new technologies. Recently, he has worked on projects exploring 5G’s impact on industry verticals through specific use cases and intersections with trends in digital twins and satellite technology. A graduate of the University of Cambridge, he is a French national and bilingual English/French.