Dell’Oro Group published an update to its research on Network Equipment (NE) Services. The following are some of the key takeaways from the report.
Network Equipment Services Market Returning to Growth
Following five consecutive years of market contraction, the NE Services market began to reverse direction, growing slightly in 2019 due to positive developments with Network Rollout Services and Consulting Services offsetting reduced demand for Managed Services. We expect the improved market sentiment in 2019 will extend through the forecast period, resulting in the market registering $46 billion in 2024.
Near Term Challenges with Managed Services
Managed Services is 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.
Network Equipment Services is Evolving
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.
Vendor Landscape is Stabilizing
Following five years of dynamic share shifts, the top three vendors—Huawei, Ericsson, and Nokia—have held their market share for the past three years. Together these three vendors accounted for about 75 percent of the NE Services market in 2019.
Dell’Oro Group’s Network Equipment Services report covers the service offerings by select network equipment manufacturers (vendors) that supply service providers. The network equipment we are referring to includes such equipment as broadband access, optical transport, routers, and mobile radio infrastructure. Network Equipment Services are reported in three segments: Rollout Service, Managed Service, and Consulting Service.