Wednesday, February 22, 2006

Outsourcing: The Next Big IT Wave Slams India

So successful has India been in its stellar performance of off-shored / outsourced business processes, call centre functions and software development, that a number of the world’s top corporations have outsourced their entire IT infrastructure i.e. networks, data centres, storage to desktops for remote management from India.

With huge potential, the trend for off-shoring / outsourcing remote infrastructure management services has picked up over the past two years, and according to Gartner, a tech research firm it is “the next big wave” of Indian off-shoring / outsourcing deals . And, over the next few years, Deutsche Bank believes it will be the engine responsible for growth of Indian IT service companies.

NASSCOM estimates global IT infrastructure management service (IMS) market to be between $86-150 billion, with 60% of overall IMS projects being delivered via the “global delivery” off-shore model , which means the current market potential for remote information management (RIM) will constitute no less than $55-billion. Last year, India exported IT IMS-related services worth $300-million which translated into only 1% penetration of the market leaving a huge potential waiting to be exploited. NASSCOM expects project exports to grow in double or triple high digits in the next few years, while Deustche Bank places it at 50% over the next 3 to 4-years.

The question is: “What makes Indian vendors hot contenders for a bigger slice of the market, and why do top international corporations prefer the RIM off-shore delivery model.” It is not a new trend in whole, as global IT service giants IBM and EDS have been outsourcing infrastructure management since the 1970’s and 1980’s, and EDS, IBM, CSC and HP have dominated the market. Following their example, mid-sized players Unisys and Perot have established a strong presence, as well. Following the traditional business model, these companies either take over or buy into client IT assets i.e. networking equipment, storage and servers, signing them on for long-term maintenance contracts and taking care of entire client IT requirements i.e. total off-shored / outsourced IT infrastructure.

A total solution for IT needs, this approach allows high credit risk clients with weak account balances to transfer their assets to an off-shore / outsource service provider , thereby rebalancing their books and achieving a low credit risk status.

But, Sunil Mehta, Vice President - Nasscom, states: “Recent trends indicate a distinct shift from total outsourcing to ‘selective outsourcing’ (the model generally followed by Indian vendors offering RIM services), which has been more successful than full IT outsourcing contracts.”

Venkataraman, General Manager - Managed Services, Wipro Technologies, “Many customers want to control the destiny of IT in their organisation. They see IT as a differentiator for business and, thus, do not want others to take over their IT architecture or controls. But then, there are others too who do not want focus much on their non-core competency, and they prefer total outsourcing.”

Further, analysts are of the opinion that RIM is a better off-shore / outsource model than total off-shoring which provides little flexibility due to long-term contracts and fixed pricing. HCL Commnet, a part of the HCL Group, and Wipro, two of the early movers and shakers in RIM services; began offering RIM services five years ago. Currently, Wipro boasts 165 accounts from G7 countries, managed by 7,000 employees, while HCL has over 20 Fortune 500 clients and 2,200 employees. Significant domestic business in RIM continues to make both companies benefit for a successful off-shoring / outsourcing service model. Other major players in RIM are Infosys, Tata Consultancy Services (TCS), Satyam and Patni.

Having gained expertise in the managed services / network management much before the boom in applications development market, TCS has been offering IMS to domestic clients since 1980, these companies have matured, and have the skills and necessary talent, and customers continue to gain confidence in not only the off-shore / outsource model but other models, as well.
The many client benefits from RIM off-shoring / outsourcing are as follows:
Transparency and flexibility of measurable services.
Client awareness of all processes and methodologies with tools to monitor functions.
Integrated monitoring and management tools help resolve problems in a quick, structured manner reducing business losses.
24 / 7 x 365 monitoring of infrastructure performance across different time zones with problems fixed before the next working day.
Head count reduction by eliminating under-utilised resources, improving operations leads to cost reduction.
Standard industry process compliance by off-shore / outsourcing service providers for security.

A study by Forester, a tech research firm reveals, opting for selective off-shoring (breaking IT functions and outsourcing to different service providers based on skill and competencies) has a proven track record of 77%, while total off-shoring / outsourcing stands at a 33% success rate. The choice is yours depending on how much your company budget has shrunk, whether you are looking to off-shore / outsource non-core functions to focus on core operations or to reduce costs, off-shoring / outsourcing to skilled, talented countries like India with the expertise to manage your entire range of services, benefits not only the outsourcer but the provider, as well.

For details read here .
The article is sponsored by A-1 Technology Inc, dealing in offshore website development , offshore outsourcing and offshore software development .