Network infrastructure services (NIS) adoption has increased as customers invest in IT transformation initiatives, leading to a 5.4% yr/yr rise in NIS revenue for benchmarked vendors, according to TBR's 1Q16 Network Infrastructure Services Benchmark.
NIS segments grew in 1Q16 as customers shift focus to modern hardware and holistic business outcomes, it says.
Product-centric vendors maintained their lead over their services-centric counterparts, increasing their revenue contribution from 69.4% in 1Q15 to 70.4% in 1Q16.
The rise in open hardware and customer initiatives to gain holistic business outcomes from a single install are key reasons for this advantage.
However, as the market shifts to cloud-based models and vendor lock-in concerns increase, TBR believes services-led NIS vendors will, in the long term, challenge product-led vendors' footholds, causing a shift in market share in favour of services-led vendors.
TBR believes the competition between product- and services-led vendors will transform into co-opetition as market consolidation intensifies.
For example, in 1Q16 Dell and Hewlett Packard Enterprise (HPE) each announced deals to divest their respective professional services arms.
TBR believes Dell's and HPE's divestitures and the overall trend of market consolidation will bring about increased partner activity, as product-centric vendors such as Dell and HPE will require services-led vendor partnerships to provide customers with holistic business outcomes.
Consolidation is effectively leading to some vendors having a services specialty, creating co-opetition opportunities.
"NIS market consolidation is increasing, altering the competitive balance within the market," said TBR Senior Analyst Krista Macomber.
"As product-led vendors such as Dell and HPE vacate the professional NIS market in favour of maintenance and deployment services, and customers increasingly desire more complex infrastructure, co-opetition will be necessary to address customer demands and stimulate revenue growth."
According to TBR's 1Q16 Network Infrastructure Services Benchmark, all NIS segments experienced growth in the quarter.
Maintenance services remained the top performing segment, growing 7% year-to-year, and contributed 50% of overall NIS revenue for benchmarked vendors, making it the largest NIS revenue contributor.
TBR believes as customers transition more of their businesses to modernised solutions, NIS vendors will have an opportunity to increase share of wallet with add-on consulting and outsourcing services, as complex and customised deployments will require more vendor-customer collaboration, and increase professional services' share of NIS revenue.
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