Business Accent

IMS: about a business model

Launching a full-fledged infrastructure offering not only makes business sense for IT service providers but is also a good reason to go that extra mile towards providing enhanced customer service

Kamakshya Prusti

The growth of global IT Infrastructure Management Services (IMS) led by offshore IT services vendors is a precursor to an emerging business model where the offshore infrastructure practice is entering the business mainstream. A well defined IMS offering will play a key role in winning or losing deals for both incumbent offshore IT vendors and MNC service providers.

According to the NASSCOM report, the addressable market for infrastructure management services is about $100 billion, nearly half of which is offshore-able. On the demand side you will find large MNCs who have to streamline several heterogeneous infrastructure devices. Their pressing need for a transformational plan with the least possible disruption to business functions has suddenly given new meaning to management of IT infrastructure. Secondly, cost considerations and business continuity planning have necessitated the management of infrastructure from offshore locations.

As a rule of thumb, nearly two-thirds of infrastructure related activities can be managed from an offshore location. In fact NASSCOM’s market size estimate of $50 billion is based on the assumption that 50 to 60 percent of infrastructure activities can be performed seamlessly from a remote location.

Offshore vendors focus on integrated offerings

On one side you have a set of service providers focusing on management of relatively risk free functions such as network management or help desk administration and on the other, you find sophisticated vendors offer expert advice on intrusion detection and virtual private networks. The latter also host applications such as VoIP, CRM and ERP.

Currently, most multinational corporations outsource their infrastructure to an offshore captive centre on the pretext of retaining complete control of their internal processes, IT security and Intellectual Property (IP). Pure-play offshore vendors focus on specific opportunities, starting with entry point services such as help desk outsourcing.

By and large, offshore vendors lack the taste for a model of asset and people transfer and owning data centres. Despite that, this model is slowly catching up as some offshore vendors now have the critical mass.

Interestingly, a pure play IMS vendor offers offshore infrastructure services differently from a mainstream IT services company. Looking ahead, IT services companies have been able to weave in a subtle infrastructure component into their response to client service requests. Integrated offerings of IT applications and remote infrastructure management have become commonplace when it comes to making IT deals. The most talked about deals in FY 2005-06, namely a contract from ABN AMRO (TCS, Infosys) and DSG (HCL) had a clear infrastructure element in them.

The most notable aspect in all integrated offerings is that apart from application development and maintenance and package implementation, BPO and remote infrastructure management provide long term asymmetric strategic gains to the principal outsourcer.

A smart pricing strategy

The robust nature of the offshore infrastructure outsourcing model is such that innovative pricing techniques are as deep rooted as in case of IT services. There have been instances where IMS pricing patterns are not merely transaction or people based but results based and sometimes on the basis of the number of devices touched by the vendor.

In a nutshell, dominance in the offshore game comes from a successful mix of application portfolio optimisation, capability in remote infrastructure management and a smart pricing strategy. Most offshore vendors have more or less graduated to this model and that’s a key reason why offshore players are winning more deals today than they are losing.

At a time when the industry has witnessed a lot of infrastructure led but application dominated deals, those involving BPO and IMS are taking time to evolve. The reason for this remains lack of capability or even the complete absence of it. Most leading BPO vendors operating out of India do not have a strong infrastructure offering and the same holds true for IT services or infrastructure companies who have failed to leave their mark in the BPO space.

The propellant for application outsourcing

Global CIOs are beginning to draw a parallel between offshore outsourcing with incremental business value; a dominant theme in application outsourcing has now caught up with infrastructure outsourcing. Many IMS vendors have adopted ITSM and ITIL frameworks and are proactively educating customers on the merits of these standards ensuring that said customers are taking small steps in the right direction.

Offshore-able infrastructure services can be measured and controlled at their base location. Unlike in the case of application outsourcing the end user’s involvement with an infrastructure vendor is minimal. On top of that, a robust process foundation and lower risk of service delivery make infrastructure services ideal candidates to be sent offshore. At the same time, greater adoption of IP networking on account of voice or data security and QOS concerns have had a positive impact on the growth of this line of business.

Remote infrastructure management

Today’s complex business environment has made monitoring and managing IT a fairly challenging task. The industry’s long quest for automation has found respite in the form of tools (such as HP OpenView or IBM Tivoli or CA Unicenter) that convert incongruent IT into a continuous service. However such tools are not cost-effective unless they are configured and monitored centrally. This is one of the many reasons why remote infrastructure management is the fast becoming strategic from the point of view of global MNCs.

Launching a full fledged infrastructure offering not only makes business sense for IT service providers but is also a good reason to go that ‘extra mile’ towards providing enhanced customer service.

The author is a business analyst with HCL Technologies Ltd. The views expressed here are his own and not that of his employer. He may be reached at kamakshya_prusti@yahoo.com