Chris Osika, senior director, Service Provider Business, Cisco, says Business IT and network decision makers are keen to virtualize both their fixed and wireless networks. However, some are concerned that network Service Providers (SPs) may not actually be able to deliver on the promise of a new generation of “Virtual Managed Services” (VMS).
That is because VMS — which we define as software functionality delivered either remotely from the cloud or by a combination of premise-based and cloud-delivered capabilities, blending both automation and analytics — invariably raises questions about price, operational efficiency, and the long-term costs of continuous improvement.
To get a deeper understanding of their perspectives, we conducted a survey among our SP customers — in six countries, 17 industry verticals, and a dozen company sizes (ranging from less than 50 employees, to 10,000-plus). About three-quarters of the 2,600 respondents represent decision makers; the remaining quarter are involved in network and managed services purchasing.
The intent was to make reasonable predictions about how the enterprise landscape will reshape organizations with virtualized business, network and security services. A core objective was to synthesize what is needed in today’s marketplace, and determine whether those needs are being met or not.
First, a bit of background. Traditional managed network and security services control the placement of customer premises equipment (CPE) on site, including routers, firewalls, and so on. By contrast, and in its most basic iteration, VMS moves the control of those CPE devices to the cloud, or to a hybrid topology of on-site and cloud-based operations. As a direct result, enterprises become faster and more nimble when reacting to the marketplace, without compromising security or restricting any custom network features.
We placed considerable emphasis on understanding key “pain points” associated with traditional managed services.
# Too costly per month
# Too inflexible in terms of network configurations
# Too rigid when it comes to service and component testing
Specifically, our research indicates that SPs that partner with traditional third-party providers are in dire want of a self-service portal, a feature that could mitigate these pain points. When weighing the tradeoffs of a VMS-based approach, they also seek flexibility, faster access to new features / capabilities, and far greater visibility into the state and security of the network. They want to add and upgrade services on their own, from the portal; and they want the power to remotely monitor, repair and maintain their environments.
How strong is the interest? Pretty strong: 81 percent are interested in a “VMS-like” service; in North America, between 32 and 44 percent said they are “very interested.” In terms of timing, 78 percent said they are ready to move within a year of a plausible VMS solution; in the United States, 31 percent of respondents said they would adopt VMS “right away.”
Also notable: Most customers said they prefer to adapt the pricing model by shrinking monthly fees. The majority — 82 percent — prefers an upfront cost paired with a lower monthly fee, rather than a higher, all-inclusive and monthly fee structure. In the U.S., service providers prefer a monthly fee assessed on a per-site basis, as opposed to a “per simultaneous user” model, or a fee associated with bandwidth consumption.
Respondents were also asked how they would prioritize a VMS service, such as managed router / WAN CPE. The results: 33 percent said they would lead with VMS tests at a low risk site; 21 percent prefer targeted deployment, based on specific use cases for a site. 20 percent prefer a rollout model that switches a site to VMS when it comes due for refresh; 16 percent said they would add VMS in parallel with new site additions. A bold 16 percent said they would deploy a mass refresh to VMS at all sites. Only 5 percent said they have no VMS deployment plans whatsoever.
Businesses are clearly indicating a gradual adoption path, within targeted sites. However, with the VMS marketplace not yet being aggressively pursued by SPs, already 19 percent of respondents indicate a willingness to follow an SP’s recommended approach.
And there is a kicker: They will also consider switching to another SP, if the one they currently use does not deliver superior VMS functionality. A majority of U.S. respondents, for instance (75 percent) said they would switch from their current provider, if it does not offer VMS components.
Because no summary of a survey is complete without a glimpse at an actual survey question, we asked if the “Network Service Provider that your company uses for access/connectivity was unable to provide Virtual Managed Services functionality, how likely would you be to switch to another NSP that could offer VMS functionality and its benefits?” Results: 30 percent were “very likely to switch,” and 45 percent were “somewhat likely to switch.” Another 20 percent are “neither likely nor unlikely,” and 3 percent are “somewhat unlikely.” So that is a substantial majority (75 percent) saying stay innovative so that we can stay innovative — or else.
Overall, the survey indicates a real-time need for and expectation of VMS functionality, across a wide swath of markets and industries. It will take close attention to costs, security, and delivery flexibility. It requires VMS providers to accommodate a shift in their relationship with customers — meaning more sophisticated self-service portals, more “try and buy” options, quicker service activation, and better transparency. Those were the strong preferences in all of the markets we surveyed.
Chris Osika, senior director, Service Provider Business, Cisco
