Managed services market tipped for growth

The market for managed services is set to double between 2006 and 2010 to reach US$12.1 billion, according to Infonetics Research.

Growth will be driven by increasing security threats and the growing complexity of security solutions, the firm said.

Organisations of all sizes will look more to managed security services as security threats grow in number, security solutions become more complex and demand more management efforts, and as the service providers themselves add value to improve revenues and margins, according to a new report from the firm.

While there will not be a major spike in managed security service spending, strong incremental growth will continue beyond 2010, researchers predicted. Around 49% of security service revenue in 2006 came from managed firewall services, compared to 27% from content security and 24% from other security services.

The managed encrypted virtual private network (VPN) service market on the other hand is expected to decline in coming years after inching up 4% between 2005 and 2006 to $20.5 billion.


"Multi-protocol Label Switching (MPLS) services are really starting to steal business away from encrypted VPNs," said Jeff Wilson, principal analyst for network security at Infonetics Research. "This is having a significant impact on spending for managed IPSec site-to-site VPNs, especially among large organizations who are starting to migrate from complex self-managed IPSec VPNs to simpler carrier-managed MPLS services."

In 2006, 97% of VPN service revenue came from IPSec VPNs and only 3% from SSL VPNs, according to the report.