Me­ta­mor­pho­sis of in­fra­struc­ture man­age­ment ser­vices in In­dia

The mar­ket is grow­ing in In­dia amid changes in the de­liv­ery model, na­ture and com­plex­i­ties of work, and du­ra­tion of the deal cy­cles

InformationWeek - - Contents - By Ayush­man Baruah

In­dia may still form only a small piece of the cake in the global in­fra­struc­ture man­age­ment (IM) ser­vices mar­ket but the share and mo­men­tum of growth is fast in­creas­ing. The cur­rent size of the global IM ser­vices mar­ket is around USD 370-380 bil­lion — of which close to 40 per­cent is out­sourced, i.e. around USD 150-180 bil­lion. To­day, In­dian ser­vice providers de­liver over about USD 4 bil­lion worth of ser­vices in the IM ser­vices space. For most In­dian providers, the bulk of their rev­enues come from the U.S., while In­dia con­trib­utes only a tad bit of it. For in­stance, Mi­croland, pi­o­neer in re­mote in­fra­struc­ture man­age­ment (RIM), gen­er­ates 83 per­cent of its rev­enues from the U.S. and 17 per­cent from In­dia. For smaller play­ers like Zen­sar, In­dia con­trib­utes less than 2 per­cent of their global IM rev­enues. Th­ese fig­ures are how­ever chang­ing as In­dia is begin­ning to pump in more rev­enues.

Ac­cord­ing to Zen­sar, a multi-shore end-to-end IM ser­vices com­pany, In­dia is a grow­ing des­ti­na­tion for IM ser­vices but it is a highly com­modi­tized ser­vice mar­ket, strongly com­pet­ing on

price and dom­i­nated by a few larger play­ers. The key driver of the mar­ket and the core dif­fer­en­tia­tor for the providers would be in of­fer­ing niche and spe­cial­ized IM ser­vice projects with high-end skills. “Th­ese are the kind of projects be­ing awarded to ser­vice providers like us. More and more com­pa­nies in In­dia are look­ing at to­tal IM out­sourc­ing with the ob­jec­tive of gen­er­at­ing sig­nif­i­cant cost sav­ings,” says Kr­ishna Ra­maswami, Se­nior Vice Pres­i­dent, Global In­fra­struc­ture Man­age­ment Ser­vices, Zen­sar.

The mode of de­liv­ery of the IM ser­vices has also changed and evolved over the years. While in In­dia, on­site de­liv­ery of IM ser­vices has been pre­dom­i­nant, the trend is chang­ing to a more hy­brid model to­day. Ac­cord­ing to Zin­nov, there were two rea­sons that made In­dian cus­tomers de­ploy their per­son­nel on-site. First, it gave them a com­fort fac­tor. The sec­ond rea­son was the lack of ap­pro­pri­ate IT in­fra­struc­ture and tools in In­dian cor­po­ra­tions to per­form sup­port re­motely. How­ever, as or­ga­ni­za­tions are global to­day, with mul­ti­ple of­fices across ge­ogra­phies, the hy­brid ap­proach seems to be work­ing out bet­ter in many ways.

Most of the providers are ex­pe­ri­enc­ing an equal mix of re­quire­ments. “While there are mul­ti­ple re­quire­ments for the on-site “fix on fail” and “hands and eye” sup­port, there is an equally large de­mand to pro­vide re­mote ser­vices es­pe­cially on the server and net­work sup­port. The do­mes­tic op­por­tu­nity will largely be on high vol­umes and lower billings and will form a sig­nif­i­cant base for growth for IMS com­pa­nies,” says Ra­maswami of Zen­sar.

Play­ers such as Dell Ser­vices are wit­ness­ing more and more cus­tomers ask­ing them to de­cide the best model

In the next three-five years, all en­ter­prises will run a hy­brid in­fra­struc­ture en­vi­ron­ment and the role of IM ser­vice providers will evolve

VAIB­HAV TE­WARI

VP & Busi­ness Head- Cloud Ser­vices, Mi­croland

for de­liv­ery of ser­vices to them. “We have ca­pa­bil­i­ties to de­liver ser­vices both from cus­tomers’ premises, as well as from our re­mote de­liv­ery cen­ters. Both th­ese mod­els have their own ad­van­tages and a fi­nal de­ci­sion is taken based on what works for the cus­tomer based on their re­quire­ments and strate­gic pri­or­i­ties,” says Sumed Mar­waha, Coun­try Man­ager - IMS, Dell Ser­vices In­dia. “In In­dia, we are fo­cus­ing on some key cus­tomers where we al­ready have ex­ist­ing re­la­tion­ships. We fo­cus on value-added SLA-based ser­vices rather than just the pro­vi­sion of man­power-based ser­vices. We also have a cus­tom­ized go-to-mar­ket model for In­dia. This model brings in the global best prac­tices to In­dia at a mar­ket price point.”

Given that glob­ally, RIM is the pre­ferred model, In­dian providers are uti­liz­ing this op­por­tu­nity in a big way. RIM is the re­mote man­age­ment of the IT in­fra­struc­ture of a com­pany, such as its work­sta­tions (desk­top PCs, lap­tops, note­books), com­mu­ni­ca­tions and net­work­ing hard­ware and soft­ware, as well as ap­pli­ca­tions by a ser­vice provider. Re­mote mon­i­tor­ing and man­age­ment is un­der­taken through global de­liv­ery cen­ters, where skilled staff mon­i­tors and man­ages the in­fra­struc­ture, en­sur­ing up­ti­mes and avail­abil­ity. With a growth of over 30 per­cent CAGR dur­ing the ini­tial years and sus­tain­ing above 15 per­cent CAGR for the past cou­ple of years, RIM has con­trib­uted sig­nif­i­cantly to the over­all IT ser­vices ex­ports in the coun­try. One of the sig­nif­i­cant in­no­va­tions that have oc­curred much ear­lier in RIM com­pared to ap­pli­ca­tion de­vel­op­ment man­age­ment (ADM) ser­vices is the dis­rup­tion in lin­ear­ity be­tween rev­enues and ef­fort. The com­pa­nies were quick to move to an out­come-based pric­ing model and of­fer ef­fi­cien­cies through au­toma­tion.

All in­dus­try ver­ti­cals are now con­sid­er­ing In­dia as a pre­ferred lo­ca­tion for out­sourc­ing their in­fra­struc­ture and ap­pli­ca­tion ser­vices. While some of it is in the form of set­ting up cap­tives (pre­dom­i­nantly the BFSI or­ga­ni­za­tions), oth­ers are adopt­ing more con­ven­tional out­sourc­ing mod­els. “While ini­tial in­ter­est in In­dia as a RIM ser­vice provider was mainly due to the sig­nif­i­cant cost ar­bi­trage, this was soon over­taken by other ben­e­fits such as labour ar­bi­trage, pro­duc­tiv­ity im­prove­ments through im­proved op­er­a­tions, pro­duc­tiv­ity from bet­ter tools and in­cre­men­tal value from value-added ser­vices,” says Rama Murthy Prab­hala, AVP, Prac­tice Head, Man­u­fac­tur­ing at In­fosys.

Kaseya, a pi­o­neer in au­to­mated man­aged ser­vices (AMS), says the re­cent trend points to an in­crease in adop­tion of AMS among the small- and medium-

sized busi­nesses in In­dia. En­ter­prises with highly dis­trib­uted, com­plex IT en­vi­ron­ments, such as those in the re­tail, BFSI, health­care, and ed­u­ca­tion ver­ti­cals, have adopted AMS. “Kaseya’s low-cost, highly flex­i­ble AMS so­lu­tion can en­sure very low down­time, su­pe­rior vis­i­bil­ity and control of IT through sin­gle pane of glass in­ter­face, en­hanced se­cu­rity of data and as­sets, ease of IT man­age­ment and more,” says HS Shenoy, Direc­tor of Mar­ket­ing, Kaseya In­dia.

DEAL­ING WITH SLOW­DOWN

As the ma­jor rev­enue gen­er­a­tor, the eco­nomic slow­down in the U.S. and the euro­zone cri­sis has had a par­tial impact on the IM ser­vices in­dus­try. In­fra­struc­ture, es­pe­cially the “run” part of it, is part of non-dis­cre­tionary spend and hence com­pa­nies are bound to in­vest in keep­ing their ba­sic in­fra­struc­tures run­ning. How­ever, trans­for­ma­tional in­fra­struc­ture projects, which form part of dis­cre­tionary spend, are be­ing de­layed and can­celled, which is hit­ting the in­dus­try hard.

“We are see­ing a fairly ro­bust de­mand en­vi­ron­ment. En­ter­prises need to keep their IT in­fra­struc­ture run­ning and there­fore it is not a dis­cre­tionary spend. Off­shoring/RIM can help them cut costs and hence there is con­tin­ued strong in­ter­est. Clearly, pric­ing be­comes an im­por­tant vari­able where cus­tomers ex­pect yearly dis­counts dur­ing the term of a con­tract. Mi­croland’s fo­cus is to im­prove our pro­duc­tiv­ity us­ing au­toma­tion and bet­ter pro­cesses to be able to sup­port that ex­pec­ta­tion,” says VM Ku­mar, Chief Mar­ket­ing Of­fi­cer at Mi­croland.

The du­ra­tions of an­nual IM ser­vices con­tracts have also short­ened. The clients, which ear­lier signed con­tracts for seven years have now short­ened it to about three years up to a max­i­mum of five years. The de­ci­sion-mak­ing cy­cles have be­come longer and most of the clients are not com­fort­able with sign­ing deals longer than five years.

Apoorva Singh, Se­nior VP, iGate, says the pri­mary rea­sons for shorter deals are busi­ness un­cer­tainty and the need to have IT aligned to busi­ness. “Also the buyer is much smarter now and wants to eval­u­ate the sourc­ing de­ci­sion in shorter time pe­ri­ods. The buyer also wants a greater trans­parency and ‘skin in the game’ from the ser­vice provider which is more eas­ily ob­tained by shorter deal pe­ri­ods.”

THE CLOUD IMPACT

Cloud will change the way in­fra­struc­ture man­age­ment is looked at. “While the un­der­ly­ing pieces of in­fra­struc­ture will re­main same even with the ad­vent of cloud, the in­creased busi­ness fo­cus in the new en­vi­ron­ment will make sig­nif­i­cant changes in the way we ap­proach in­fra­struc­ture man­age­ment across all the com­po­nents. IT as a ser­vice is the new de­liv­ery paradigm and in­fra­struc­ture man­age­ment will con­tinue to evolve to han­dle this new paradigm ef­fec­tively,” says Vaib­hav Te­wari, VP & Busi­ness Head- Cloud Ser­vices, Mi­croland.

Cloud will eat into the IMS mar­ket only to the ex­tent of soft­ware-as-aser­vice (SaaS) wherein the providers man­age all the lay­ers. But this, Te­wari says, is only a small seg­ment of the busi­ness. “Bulk of the en­ter­prises will re­tain por­tion of their phys­i­cal in­fra­struc­ture or move to the pri­vate cloud where they would still re­quire some­body to man­age it for them and help them re-ar­chi­tect it with the chang­ing busi­ness en­vi­ron­ments. Go­ing for­ward, in the next three-five years, all en­ter­prises will run a hy­brid in­fra­struc­ture en­vi­ron­ment and the role of IM ser­vice providers will grow and evolve.”

Most com­pa­nies are pre­par­ing them­selves for the cloud wave that is com­ing their way. For in­stance, Mi­croland, a pure-play IM ser­vices provider to­day of­fers con­sult­ing ser­vices to com­pa­nies in their jour­ney from the tra­di­tional IT to a cloud en­vi­ron­ment. “We en­able en­ter­prises to trans­form their de­liv­ery and con­sump­tion of IT ser­vices to an on-de­mand model lever­ag­ing hy­brid cloud en­vi­ron­ments through our con­sult­ing, so­lu­tion in­te­gra­tion and IM ser­vice of­fer­ings. We work with global en­ter­prises help­ing them with their cloud roadmap across dif­fer­ent stages. It’s eas­ier for us be­cause we un­der­stand our cus­tomer’s in­fra­struc­ture re­quire­ments best as we have been manag­ing their phys­i­cal in­fra­struc­tures for a long time,” says Te­wari.

As com­pa­nies are not likely to move their en­tire phys­i­cal in­fra­struc­ture to the cloud, IM ser­vice providers will still have their share of busi­ness. The na­ture and com­plex­ity of their work will how­ever change. Cus­tomers will look for a sin­gle point of con­tact for all their in­fra­struc­ture man­age­ment — be it phys­i­cal, vir­tual or cloud. The in­fra­struc­ture man­age­ment and mon­i­tor­ing tools will have au­toma­tion, self-ser­vice, charge­back etc., as the key com­po­nents and the providers will have to evolve ac­cord­ingly. The fo­cus will change from manag­ing IT to de­liv­er­ing busi­ness value.

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