June 9, 2025
By Curtis Price
Program Vice President, IDC
Curtis Price, Program Vice President of IDC’s Infrastructure Services group, details how managed services can play a key role in supporting business models that generate new sources of revenue for CSPs as cloud and hyperscale providers extend their presence into new markets. This is the second of two blogs from IDC on managed services. Read the first blog here.
The evolution of managed services
Managed network operations services have been used by communications service providers (CSPs) to address a variety of operational challenges. In today’s environment, the challenges CSPs face include rising network operations costs, ensuring optimal network performance, and meeting stringent customer requirements for network uptime and resilience. CSPs are also deploying new technologies that must be managed alongside legacy infrastructure, which adds to cost concerns and highlights the lack of skills and experience many providers have with the new technologies being deployed in the network.
Today, the value proposition for managed services is expanding even further. As cloud and hyperscale cloud providers extend their presence into new markets, managed services can play a key role in supporting business models that generate new sources of revenue. Managed optical fiber networks are an area where IDC expects to see lots of activity.
Defining managed optical fiber networks
IDC defines a managed optical fiber network (MOFN) as a service offering where a third-party provider builds an optical network and takes full responsibility for its installation, maintenance, monitoring, and ongoing management. The service provider then provides the infrastructure to another service provider or cloud provider as a managed service.
The value of full turnkey managed services for network operations
The MOFN use case shows how the importance of managed services has expanded for CSPs. The value proposition here is built on a range of capabilities provided through turnkey offerings that help CSPs address strategic priorities and drive key business outcomes. A fully turnkey managed services offering typically includes a broad set of capabilities such as the following:
- Managed Network Operation Center (NOC)
- Event and incident management
- Spare parts management
- Technical support
- Multivendor support
- Software upgrades
- Monthly reporting
Turnkey managed services can also help CSPs in the following areas:
- Managing new technologies: Implementation of new optical technologies in the transport layer of the network is needed to support higher bandwidth and faster speeds. CSPs lack expertise in these technologies today. Partnering with skilled and experienced technology providers in areas like optical network services helps to fill a skills gap for them.
- Focusing on customer experience: Providing “white glove” support for managed services clients through a dedicated support manager is an important value-added feature, particularly for CSPs concerned about losing operational control to a managed service provider. IDC believes that providing full visibility of operating metrics through dedicated customer experience support can help alleviate the perceived loss of operational control.
- Reducing network costs: Reducing operating and capital expenditures is a priority for CSPs, and managed services have traditionally been used as a lever to achieve this objective. CSPs spend over $300 million annually on capex expenses (see Figure 1), while network operating costs can represent up to 40% of total operating expense for some providers. CSPs can reduce network operating costs by outsourcing specific network operations tasks to a third-party managed services provider. However, the rationale for managed services has expanded beyond pure cost takeout and now includes a broader range of benefits.
Figure 1. 2024 Telecommunications Capex
Enabling new business models
With the growth in data, video streaming, IoT-based applications, cloud connectivity, and emerging AI applications and workloads, optical networks provide the bandwidth and faster speeds needed to support higher traffic volumes on provider networks. While there are several use cases driving demand for MOFNs, an area that IDC believes is poised for growth is enabling cloud and hyperscale cloud expansion into new markets.
Increased AI adoption is reshaping datacenter interconnectivity by requiring more agile, secure, and efficient networking solutions to support the growing demands of AI-driven applications. This is leading to significant investments in infrastructure modernization and the adoption of new technologies to ensure that datacenters can meet the evolving needs of AI workloads in hybrid, multicloud, and datacenter-to-datacenter environments.
According to IDC’s AI Datacenter Capacity, Energy Consumption, and Carbon Emission Projections report, AI IT datacenter capacity is projected to grow 40.5% over the next five years (see Figure 2). Hyperscale cloud providers are already building fully dedicated AI datacenters, which will likely drive requirements for higher bandwidth and faster connectivity speeds. As these datacenters are built out in new markets, the timing involved in getting revenue-generating services up and running is critical. MOFN services can provide CSPs with a solution for cloud and hyperscale cloud providers that can address their connectivity needs as they expand into new markets.
Benefits of MOFN for CSPs and cloud providers
MOFN services provide a win-win for CSPs and cloud providers. For cloud providers, utilizing MOFN services allows them to forgo costly capital and operating expenditures while gaining access to dark fiber or obtaining licenses to build, own, and operate a network. Instead, cloud providers can have services rapidly available in new markets by leveraging MOFN services from local providers. By offering MOFN services, CSPs can tap into a new market opportunity by addressing current and future connectivity requirements for hyperscale and cloud providers.
Planning for managed services
Managed services continue to play a key role in the transformation of CSP networks and the creation of new business models that generate revenue. While managed services continue to address the traditional operating challenges for CSPs, their value has expanded to include a full suite of capabilities and the ability to support a greater variety of use cases. One way to successfully utilize managed services is to partner with a provider that has a broad array of technical skills, a proven model for delivering managed services, and a customer engagement model that provides “shared control” and visibility.
Join us for a webinar on June 26, 2025, as Curtis Price, Program Vice President at IDC hosts Ciena’s VP and GM of Global Services, Greg Friesen, and Colin Naples Director of Services PLM at Ciena to discuss current challenges facing CSPs and how managed services are being used to address these challenges and create new opportunities.