Dell’Oro describes evolution of network equipment services

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After five years’ contraction, the market grew slightly in 2019, offsetting reduced demand for managed services.

Network equipment services have historically been to some extent correlated with the underlying equipment business.

Now the supply and demand transitions due to 5G, IoT and virtualisation are expected to change the role of NE services and disrupt the relationship between equipment and services.  

Growth in services

The growth in network equipment (NE) services was due to developments in network roll-out and consulting services, which made up for the fall in managed services as contracts came to an end.

The analyst house says it expects this “improved market sentiment” to continue, resulting in the market rising to $46 billion (€39.13 billion) in 2024.

Jimmy Yu, Vice President at Dell’Oro Group, wrote in a blog, “While “plan, build, operate, and maintain/transfer” remains a critical aspect of the services market, it is not expected to be the dominating driver for services in the future.

“The reason for this change in drivers is that the next network generation is not just about installing the newest hardware, expanding network coverage, or reducing the number of network layers. While these will still be part of the next network solution, we believe that network complexity will dramatically increase in the future as service providers strive to incorporate SDN/NFV, IoT, 5G real-time services, along with exploring new architectures such as Open RAN.

“As a result, we believe Service offerings in the future will increase in sophistication often incorporating a higher amount of software and consulting.”

Same old?

Yu also writes, “Managed services [are] expected to weigh on the market in the near term as vendors continue to exit contracts that are unprofitable and non-strategic. However, we are optimistic about the role of managed services in the future as networks continue to increase in complexity and vendors deliver a greater amount of automation to proactively maintain networks, reducing the number of costly alarms.
 
He also notes that, “After five years of dynamic share shifts, the top three vendors – Huawei, Ericsson, and Nokia– have held their market share for the past three years and together accounted for about 75% of the NE Services market in 2019.