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The Cut Stops Here: New Platforms for Growth

The service provider (SP) industry is at an inflection point. During the past couple of years, SPs have dealt with the economic downturn by focusing the majority of their attention on cutting costs -- to the point where there’s very little left to cut. Despite continued economic uncertainty, there is a shift underway to revitalize revenue growth. SPs are eager to identify and execute on new sources of revenue growth -- however, there is also clear recognition that revenue growth cannot come at the expense of profitability. Growth under such conditions means taking advantage of market transitions as they are happening, creating new platforms for growth.

One key opportunity for SPs lies in providing a more expansive set of services to small and medium sized businesses (SMBs)—particularly leveraging cloud-based capabilities. Based on our estimates, the SMB communications and IT infrastructure market collectively represents more than $120 billion in spend for 2010. SPs currently address 60 percent of this spend. By extending into cloud services, much of the remaining 40 percent becomes addressable.

Cisco IBSG Service Provider Director, Tine Christensen, addresses this opportunity in this video:

SMBs will no doubt greet with enthusiasm the opportunity to purchase networking and IT services from a single entity, purchasing them as a subscription with the ability to scale provision on demand. They are concerned about issues such as enhancing security, improving connection speed, improving connectivity among different offices, and implementing wireless technologies. SMBs do not have the expertise in-house to do all this, nor do they have the resources to hire this expertise in-house. They also lack the capital to make large investments in IT solutions. Having no alternative, they are forced to turn to a multitude of small vendors, who may or may not collaborate to assure seamless interoperability.

Cloud service provision is a natural fit for SPs because they:

  • Know how to provide managed services
  • Know how to provide service-level agreements (SLAs)
  • Understand subscription billing
  • Already have the infrastructure in place
  • Are a known and trusted quantity to the customer base

Cisco IBSG’s research indicates that the majority of SMBs are interested in cloud services as an alternative to their current arrangements, and plan to use some or all of the services provided within the near future. In fact, 33 percent of SMBs anticipate they will spend more than 20 percent of the IT budget on cloud services within the next two years.  You can access the full study at http://www.cisco.com/go/ibsg/serviceprovider

So the time of cutting back has passed. Now is the time to seize the opportunities arising from market transitions, launching a new phase of growth that will position and differentiate your company in the rising market to come.

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