SAMPLE PAGES Data Center and Managed Security Services in Latin America: Leveraging Telcos Services Portfolio

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1 SAMPLE PAGES Data Center and Managed Security Services in Latin America: Leveraging Telcos Services Portfolio Leslie Arathoon Research Director Marcelo Kawanami Senior Analyst This report is part of Pyramid Research s series of Latin America Insider Reports January 2015 Edition 2015 Pyramid Research Latin America Telecom Insider

2 Executive summary Within the enterprise segment, telcos are keenly aware of the slowing growth of conventional voice and data services. They know that they need to diversify their sources of revenue. Many operators end up honing in on data center and cloud services as potential growth areas, including hot spots such as data center outsourcing and managed security services. But there are still some obstacles for telcos in this area. Mainly, enterprises hesitate to partner with telcos in IT-based solutions. They see large providers of IT services as the experts in this field. Telcos are trying to address this obstacle through various strategies including acquisitions, partnerships with global IT service providers and network security vendors, and positioning as an alternative to IT service providers for a diversified enterprise outsourcing strategy. In this report we describe the concept of data center outsourcing and managed security services, putting them into the telcos context. We discuss the drivers and challenges for these markets, analyzing the impact on telcos under a technology, demand and competitive perspective. We introduce some case studies and outline what telcos must do to improve their positioning in the market. We conclude by presenting the results of an end-user survey conducted with selected multinationals in Latin America, polling their perceptions of service providers, technologies currently in use and investment plans. Marcelo Kawanami is a Senior Analyst and a member of Pyramid Research s Latin America team. He tracks, analyzes and provides guidance on technological and business trends in the TMT industry and is responsible for Pyramid Research`s market sizing and forecasting for Brazil and other Latin American countries. Marcelo has authored numerous reports analyzing traditional and emerging technology services and their implications to the overall communication markets. Marcelo Kawanami Senior Analyst 2015 Pyramid Research Latin America Telecom Insider 2

3 Key Findings Telcos across the region are in different stages of development of their data center outsourcing and managed security service offers. While some telcos have robust SOCs and are prepared to provide a complete portfolio of data center and managed security services, many others are still limited to the colocation and hosting approach. Telcos in developed markets have acquired data center service providers and MSS companies as a strategy to enhance their IT capabilities, and also expand operations overseas. Telcos in Latin America have engaged in strategic partnerships with traditional technology service and hardware providers in order to improve the confidence of enterprises in hiring a telco for their IT needs. Global telcos are expanding their operations in Latin America, focusing on data center outsourcing and managed security services. Given the maturity level of these services in developed markets, global telcos are targeting emerging regions such as Latin America as part of their growth strategy. According to the survey, XX% of the enterprises stated that they plan to increase their expenditure in the managed security services area. Driven by the increasing complexity of attacks and the negative publicity that a security breach can cause, enterprises are likely to keep increasing their investments in managed security services Pyramid Research Latin America Telecom Insider 3

4 Telcos portfolio for data center outsourcing and MSS in Latin America Some telcos are already well positioned within the IT space, offering a complete range of data center outsourcing and managed security services; others are still focused on basic infrastructure services such as colocation and hosting. Regional telcos such as Telefonica and America Movil (including its Brazilian subsidiary, Embratel) have a complete portfolio of data center outsourcing services. This includes colocation, hosting and disaster recovery services. Telefonica and America Movil both also operate security operation centers (SOCs), and provide managed security services. Alestra and Axtel in Mexico also have well-developed IT offers within the data center and security spaces. With the exception of Entel Chile, local telcos are still consolidating their data center outsourcing services offers and have not yet entered the managed security services market. EXHIBIT 5: TELCO DATA CENTER OUTSOURCING AND MANAGED SECURITY SERVICE OFFERINGS, LATIN AMERICA, 2014 COLOCATION DATA CENTER OUTSOURCING SERVICES SHARED AND DEDICATED HOSTING STORAGE DISASTER RECOVERY MANAGED SECURITY SERVICES* * Pyramid Research only considered telcos with a SOC structure as a provider of Managed Security Services Source: Pyramid Research 2015 Pyramid Research Latin America Telecom Insider 4

5 Expenditure plans for 2015 data center outsourcing services XX% of the MNCs interviewed stated that they plan to initiate or increase their data center outsourcing services expenditure in Pyramid Research asked executives about their budget plans Only X% expect budgets to decrease. When asked if these on IT data center outsourcing services for Most of the MNCs would consider a traditional telco for their data center MNCs interviewed already have some sort of data center outsourcing needs, 66% of respondents answered yes. outsourcing service from a third-party provider. XX% of the Although the XX% of MNCs stated that they trust on a telco MNCs interviewed stated that they plan to initiate or for their data center needs, a significant XX% of respondents increase their data center outsourcing expenditure in answered no. The majority (XX%) plans to maintain their expenditures. EXHIBIT 23: 2015 DATA CENTER OUTSOURCING EXPENDITURE PLANS OF MNCs IN LATIN AMERICA Question Regarding data center outsourcing services expenditures for 2015, does your company plan to initiate, increase, stay the same, or decrease? Do not know/ No answer Decrease Initiate Increase EXHIBIT 24: MNC s OPENNESS TOWARD OUTSOURCING DATA CENTER SERVICES TO A TELCO, 2014 Question - Do you feel comfortable in hiring a telco as a provider for your needs regarding data center outsourcing services? No Yes Stay the same N=35 N=35 Source: Pyramid Research Source: Pyramid Research 2015 Pyramid Research Latin America Telecom Insider 5

6 Table of contents SECTION Introduction: Data center and managed security services market context 4 Definitions Data center outsourcing services Definitions Managed security services (MSS) Telcos portfolio for data center outsourcing and MSS in Latin America Telcos infrastructure for data center outsourcing services in Latin America Telcos infrastructure for MSS in Latin America Drivers and challenges: Analyzing the impact on telcos data center and managed security services offers 12 Technology market driver Demand market driver Demand market challenge Competitive market challenge Market details: Case studies 20 Regional: Telefonica Mexico: Alestra Chile: Entel Conclusions: Key findings and recommendations 27 Appendix End-user survey expenditure plans and telco positioning 30 Acronyms and definitions Pyramid Research Latin America Telecom Insider 6 PAGE

7 Table of exhibits EXHIBIT 1: IT department framework EXHIBIT 2: Enterprise security framework EXHIBIT 3: Enterprise services framework and the role of the telco EXHIBIT 4: Data center and MSS acquisitions by telcos in developed markets, 2013 and 2014 EXHIBIT 5: Telco data center outsourcing and managed security service offerings, Latin America, 2014 EXHIBIT 6: Selected telco data center specifications and upcoming projects in Latin America, 2014 EXHIBIT 7: Selected telco security operation centers in Latin America, 2014 EXHIBIT 8: Key market drivers and challenges impacting the positioning of telcos within the data center outsourcing and managed security services markets in Latin America, 2014 EXHIBIT 9: Examples of IT-telco partnerships for data center outsourcing services in Latin America, 2014 EXHIBIT 10: Telco strategy for entering into data center outsourcing deals in Latin America, 2014 EXHIBIT 11: Examples of telcos positioned as #2 providers of data center outsourcing services, Latin America EXHIBIT 12: Strategy to enter MSS space in Latin America, America Movil and Telefonica EXHIBIT 13: Competitive advantages of global telcos in data center outsourcing and MSS markets EXHIBIT 14: BT s Latin America data centers, 2014 EXHIBIT 15: Verizon s Latin America data centers, 2014 EXHIBIT 16: Telefonica s managed security services framework EXHIBIT 17: Examples of Telefonica s awards in the IT market, 2012 to 2014 EXHIBIT 18: Alestra s investments in the data center outsourcing and managed security services areas, Mexico EXHIBIT 19: Alestra s revenue mix, 2011 vs. 2013, Mexico EXHIBIT 20: Entel s revenue by line of business, 2011 and 2013, Chile EXHIBIT 21: Entel s go-to-market strategy for datacenter outsourcing services and MSS, 2014 EXHIBIT 22: Breakdown of survey respondents by vertical segment, Latin America, 2014 EXHIBIT 23: 2015 data center outsourcing expenditure plans of MNCs in Latin America EXHIBIT 24: MNC s openness toward outsourcing data center services to a telco, 2014 EXHIBIT 25: 2015 MSS expenditure plans of MNCs in Latin America EXHIBIT 26: MNC s openness toward outsourcing MSS to a telco, Pyramid Research Latin America Telecom Insider 7

8 Reasons to buy This Telecom insider helps executives build proactive, profitable growth strategies by offering comprehensive, relevant analysis of the data center outsourcing and managed security services markets in Latin America. The report offers a wealth of data on data center outsourcing and managed security services in Latin America, with a focus on the region s major markets: Argentina, Brazil, Chile, Colombia, and Mexico. The report is designed for an executive-level audience, boasting presentation quality that allows it to be turned into presentable material immediately. The broad but detailed perspective will help operators, equipment vendors and other telecom industry players to succeed in the challenging IT services market in Latin America Pyramid Research Latin America Telecom Insider 8

9 Methodology This Telecom Insider Report comprises assessments of telcos data center outsourcing and managed security services initiatives, as well as assessments of the key major barriers and triggers for telcos to engage in the data center outsourcing and managed security services markets. Insights and data were captured through primary and secondary research: Primary research consisted of interviews with key contacts at regional telcos, IT service providers, and ICT decision makers at MNC s across selected countries to gather insights. Secondary, desk-based research ranged from data collection on data center outsourcing and managed security services initiatives across the selected countries. Our sources include publicly available documents from market players, including financial statements, quarterly and annual reports, presentations and press releases, as well as information from local and international authorities, online and print media, and publications by infrastructure vendors Pyramid Research Latin America Telecom Insider 9

10 About Pyramid Research ADVISING LEADERS IN THE GLOBAL COMMUNICATIONS INDUSTRIES ON EMERGING MARKETS AND SERVICES OPPORTUNITIES Pyramid Research ( offers practical solutions to the complex demands our clients face in the global communications industry. Its analysis is uniquely positioned at the intersection of emerging markets, emerging technologies and emerging business models, powered by the bottom-up methodology of our market Forecasts for more than 100 countries a distinction that has remained unmatched for more than 25 years. HOW WE COVER COMMUNICATIONS MARKETS Our highly structured analysis closely examines the performance, technology trends, macroeconomic and regulatory environment, of service providers and equipment vendors in each of the more than 100 countries we cover. Using a bottom-up approach, we size market demand across services and countries, and conduct end-user surveys to validate adoption trends and anticipate shifts in demand. Our commitment to intensive, direct interviewing of regulatory authorities, service providers and manufacturers complemented with end-user data ensures the most reliable portrait of every market we examine Pyramid Research Latin America Telecom Insider 10

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