Service Providers, poster child cluster of the mid-to-late 90s, are suffering one of the strongest slumps in the current market, but consolidation is under way and a clearer picture is emerging. Fundamentally, service providers are an essential part of the information economy, and they are playing an increasingly significant role as Information Utilities.

Trends that will shape this industry include: 

Deregulation and industry regulatory oversight: Deregulation, very often combined with privatization, has been an essential element of the frenetic investment during the past five years. Since deregulation has not been able to achieve the desired “perfect” competition, regulatory bodies will have to remedy the market imperfection via revised, and in some instances new, sets of regulations. 

Service Providers have to transform themselves from bandwidth providers to providers of higher-value services. This will allow them to exit the commodity business and lock in customers more securely. The challenge is in marketing new services, and in being able to deliver these services quickly enough to retain first mover advantage. 

Outsourcing: Data center hosting and managed services have been -- and will continue to be -- a big part of business for Service Providers focused on the enterprise market. That means that Service Providers have to manage their data centers in a more productive way in order to provide cost savings to clients and to attain acceptable operating margins. 

Next-generation Operation and Business Support Systems (OSS/BSS):
The drive for value added services has created new revenue streams. Service Providers have moved from generating flat-fee bills to applications-on-demand bills. In addition, clients are increasingly expecting their Service Provider partner to allow them to view their billing status, check their SLA, and even provision new services through a secure extranet. This blend of application integration and back-end OSS/BSS platforms is a core focus area for Service Providers in the near to middle term.