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By Matthias Machowinski, Senior Research Director, Enterprise Networks and Video, IHS Markit [NASDAQ:INFO]
Matthias Machowinski, Senior Research Director, Enterprise Networks and Video, IHS Markit [NASDAQ:INFO]
Managed networking services are services in which a third party (e.g., a service provider or a value-added reseller) handles various aspects of the day-to-day operation of an organization’s network and/or networking devices, rather than the organization itself. Managed services are not new and in fact have already been adopted widely. Our discussions with enterprises show two out of three use managed services, but they use them selectively— only about one-third of their networking devices are managed by a third party. For example, a retailer may decide to use a managed service for its retail stores due to a lack of local expertise, but handle the headquarter operations itself. Many expect their reliance on managed services to grow over the coming years, and interestingly, WLAN APs are the biggest beneficiary of this trend. Why is that?
Exhibit 1: Devices Managed by a Third Party
2015 IHS, Network Equipment Spending and Vendor Leadership North American Enterprise Survey, July 2015
Wireless Networks are Caught in a Perfect Storm
The WLAN is one of the most dynamic segments of enterprise networks. It is constantly changing as users rapidly upgrade their devices to the latest technologies, embrace new types of devices, and discover new applications. WLANs present a great challenge to network administrators, who are tasked with running a network that performs under stress and can evolve alongside rapid technology cycles. Businesses tell us that out of all their network segments, wireless access has the greatest need for upgrades, including the access point (AP) itself, as well as the network connection to the AP. The shift to wireless network access is putting tremendous pressure on WLANs, and pushes network administrators into a constant upgrade cycle to ensure adequate performance. Upgrades aren’t limited to just wireless segments— new 802.11 generations like 802.11ac wave 2 can push existing 1GBaseT backhaul links to the limit, necessitating upgrades to 2.5/5/10GBaseT Ethernet.
WLANs are caught in a perfect storm that’s driving exponential growth in the demands placed on wireless networks. This includes:
More Network Users
Respondents to our surveys expect their user population to grow at a double-digit rate annually over the next 2 years, driven to a large extent by guest access, which accounts for almost one-third of the user population today and is the faster growing segment. Many organizations view guest access as a differentiator to attract new customers and as a tool for customer analytics and promotions. Internally, organizations are still in the process of extending network access to more of their employees—only one quarter of all employees are currently network users, but this ratio is rising as new use cases surface and companies see the benefits of extending network access to all employees.
More Connected Devices
Along with more users come even more devices—device growth is outpacing user growth, as users access the network from a growing variety of devices and as companies leverage the power of the Internet of Things (IoT). Survey respondents organizations expect network-connected devices to grow by 20 percent by 2018. There is growth in almost all types of devices, but the real growth story is in mobility and IoT applications:
• Mobile devices (e.g., laptops, tablets, smartphones, wearables) account for 39 percent of devices today, growing to 44 percent by 2018. But this modest change masks a significant underlying trend: almost 2 out of 3 new devices will be mobile, which illustrates just how critical wireless access has become in network planning.
• IoT is still a niche application but is seeing strong growth as well: IoT devices (e.g., cameras, TVs, sensors, and locks) will grow 37 percent by 2018 to account for 15 percent of all network-connected devices.
The Rise of Cloud-based Applications
Enterprise IT departments are migrating applications to the cloud to improve business agility and reap cost savings, allowing them to quickly introduce new applications and grow or shrink capacity to fit business needs, while shifting upfront capex to as-needed opex. Our research shows strong interest in e-mail software-as-a-service (SaaS), with collaboration and customer relationship management (CRM) services close behind. In addition, individual end-users are adopting cloud applications (not always with the blessing of IT) because they address their specific business needs.
Cloud applications present a new challenge to network managers, because they require connectivity that’s ubiquitous, high performing, and always available. Without consistent and reliable network access, cloud applications become unusable.
New Architectures Make it Easier to Offer and Consume Managed Services
Changes in WLAN and IT architectures over the last decade have enabled service providers to deliver managed services more efficiently, including plug-and-play hardware installation, remote monitoring, and troubleshooting. In addition, service providers have complemented their services with flexible payment options and enhanced features like help desk support, which can be especially helpful in public-facing environments where a large number of users are involved. What was once an expensive proposition that made financial sense for few organizations has evolved into offerings that can now be delivered in a streamlined and cost-effective manner, opening up the managed services market to a wider audience. Managed services won’t be the right choice for every organization, but the number of use cases where managed services are a good fit is on the rise.
Companies have many Service Options
An overwhelming majority of organizations owns and operates both the access points and the management tools today, but a major shift toward outsourcing at least some aspect of network operations is on the horizon. The use of cloud and subscription-based management tools has the greatest traction and is becoming the dominant approach by 2018. A cloud-based approach is well suited for companies who lack the capital to make big equipment purchases, whose needs are evolving rapidly, and who are highly distributed. Another third of respondents plan to hand off all management to a third party, an effective approach for those who have a good grasp of their needs and the capital to invest but lack internal expertise or resource to run their networks. Almost a quarter plan to entirely outsource their WLAN, which is suitable for companies who don’t want to invest in either equipment or operational capabilities, and consume the network as a service.
Exhibit 2: WLAN operation
2016 IHS, Wireless LAN Strategies and Vendor Leadership North American Enterprise Survey, October 2016
Wireless networks are giving network managers the biggest headache, with high user, device and traffic growth. WLAN isn’t as straightforward to set up and maintain as the LAN— even after site surveys have been done and the network has been established, changes in user behavior and interference from other wireless devices can affect performance. Managed Wi-Fi service providers have the expertise to deal with the intricacies of running wireless networks and offload mundane operational tasks from network managers, in turn freeing them up to focus on new value-creating activities like enhancing analytics to support business decision-making.
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