Infrastructure management is now percolating beyond the large enterprises
INDIA: Large enterprises in the US and Europe have taken a lead in outsourcing their infrastructure management to companies like IBM, HP and EDS (now part of HP), or even Indian IT services vendors like HCL, TCS, and Wipro. The model succeeded in providing huge cost savings and increased efficiency besides allowing them to focus on their core business.
Talking about India, about five years back larger organizations were managing their IT infrastructure through a dedicated IT department, that was initially created to provide services to internal customers. The only part which was outsourced was the annual maintainable contracts primarily for hardware related issues. No wonder, both MNC and Indian vendors saw an opportunity to replicate their global success into the Indian market. Thus infrastructure management services started to take root, driven primarily by the telecom and BFSI verticals.
Some banks however chose to set up their own data centers, and are still reluctant to outsource infrastructure services to third parties. Security is the key reason why they have chosen to own rather than outsource the hosting capabilities. Girish Krishnamurthy, managing director, Kaseya India, a provider of remote management software, traces the evolution of infrastructure management services: Companies were earlier following break-fix model and called service providers when they needed them. But now the outsourcing model is fast replacing it.
Customers changing priorities are also becoming more refined. Says Deepak Jain, vice president, professional services division, Wipro Infotech, Earlier, customers used to define the scope of work in infrastructure management. Now customers are saying they dont want to define, but insist that their business should be up and running and the service provider should do whatever it takes to achieve that.
Dataquests survey of CIOs (at the DQ-CIOL C-Change event held in Kathmandu in February, 2009), clearly revealed the pressure that enterprises are under on account of the current economic scenario, and the likely impact on overall IT budgets. The reality is that almost all verticals are feeling the pinch and CIOs are busy strategizing to manage their costs better. This is contrary to the situation in the last few years when IT budgets were on a high. This period also saw several transformational outsourcing deals which included the big bang ones in the telcom space. Some of the leading ones included IBM (Airtel, Vodafone, and Idea cellular), HP (Britannia and Godrej), Wipro (Aircel). These were primarily IT transformation deals which also included infrastructure management services.
The players
Both the MNC (HP and IBM) and Indian vendors (HCL, TCS, Wipro) are actively engaged in offering infrastructure management services in India. Incidentally, they are also leading players in the space for their global business. IBMs customers include pure Indian enterprises as well as MNCs who have their presence in India.
Infosys, a relatively late entrant into the domestic IT services market, is aggressively looking at this market. Binod HR, head, India business unit, Infosys Technologies says Yes, we were late in our focus on the domestic market but our plans and strategies are in place and we hope to gain good market share in the next 2 to 3 years. As of now, Infosys does not report its India revenue but plans to do that once it gains some market share.
Wipro Infotech, the domestic arm of Wipro, has major focus on infrastructure management services in India. If Wipros revenue split between onsite and remote is anything to go by, one can safely assume that the trend is toward going for remote. Wipro, in fact, is about to commission its two data centers, one in Mysore and the other in Noida, which will act as remote management centers for the services which it will offer.
HCL Technologies (which traces its foray into infrastructure management services in the form of the first HCL Comnet deal struck with the National Stock Exchange in the early 1990s) is one of the earliest Indian players in the space starting with networking but later diversifying into an integrated portfolio. Says Kiran Bhagwanani, country manager, India & Middle East (IME) for HCL Technologies, Infrastructure management is in HCLs gene and we have been doing remote management from day one of our operations.
There are also third party data center players who have created state-of-the-art hosting capabilities and are now trying to leverage that and offer infrastructure management services. The ones beginning to provide competition to IT services companies include Reliance Data Center, Bharti Airtel and Tata Communications.
Netmagic, which traditionally started as a hosting services provider during the dot com boom and survived, has now diversified its offerings by leveraging its hosting capabilities to offer remote infrastructure and management services. Its clients for remote services include its existing hosting customers, but the company is now exploring this as an independent offering. Informs Nitin Mishra, head, product marketing, Netmagic Solutions, Netmagic, We are seeing interest for remote services from finance and brokerage firms, and some of the Internet start-ups in India. Datacraft also offers what it calls infrastructure operations and outsourcing services.
Changing priorities
Businesses are trying hard to find a way to manage their IT better during the current downturn. This in turn is keeping infrastructure management providers busy in chalking their strategies to offer more value for money to enterprises and manage their IT in a better way. CXO level decision makers in all organizations are relooking at optimization of their existing IT infrastructure, and are also looking for ways to get more out of less. A lot of companies are looking at cutting the cost of supporting their operations and are looking at outsourcing and out-tasking their operations.
Aditya Singhal, country manager, infrastructure services, IBM India/S Asia feels that customers are redefining their priorities. He says, Couple of months back, customers were looking at addressing the growth issues. Right now, the biggest challenge is how we can do more with less. Different people are looking at IT in different ways. Some of the organizations are looking at how to cut down the cost of IT operations because the budgets have shrunk.
Similar sentiments are shared by KS Ganesan, CTO, Microland, While all of us are accepting the slowness in growth, reality checks on how IT is delivered will only lead to IT optimization models and ensure that costs are kept down. This will lead to service innovation. Hence, efficiency improvement models will take center stage, and engagement models will be tuned to reflect this thinking.
Would there be a freeze on spending by CIOs that in turn would impact the businesses of infrastructure management providers? Answers Girish Krishnamurthy of Kaseya, A CIOs nightmare is to keep the infrastructure working appropriately, and given the current scenario, they dont want to make additional investments or increase capital expenses.
From Onsite to remote
A lot of transformation has taken place in terms of how we deliver services to our clients, says Singhal. He talks about the mix between onsite and remote: Considering the complex nature of the infrastructure services, it is difficult to quantify the mix. But there is a clear trend toward remote infrastructure management, though the existing arrangement can be termed as a hybrid model. Singhal also attributes increased traction toward remote management to the reduction in cost of telecom infrastructure and increased reliability of the network resulting in better service levels.
Wipro Infotechs revenue mix from its domestic infrastructure management gives a good indication of the shape of things to come. Eighteen percent of the companys IM revenues comes from remote management while the rest is from onsite services. Prakash MS, director, ITO, Hewlett Packard, adds to the onsite-offshore debate: The onsite-offshore split depends to a large extent on the type of service being delivered as well as the maturity of the service provider, the robustness of the tooling fabric and discipline around process adherence. Typically, a 80:20 offshore:onsite split in infrastructure technology outsourcing can be easily achieved.
In fact, HCLs 80 percent of revenues are from remote infrastructure while the rest of the 20 percent are onsite, but on specific customer preferences.
From large to small
One encouraging development is that infrastructure management is now percolating beyond the large enterprises, with some of the enterprises with regional focus also outsourcing their IT infrastructure. A case in point is the five year IT outsourcing deal that IBM has signed with Madhav Nagrik Sahakari Bank, a leading co-operative bank in Rajasthan, based in the small town of Sirohi. IBM will host and manage the banks IT infrastructure and help it reduce the capital expenditure. It will also enable services like Internet, Mobile banking and ATM, which till now were restricted only to larger pan India banks.
Challenges ahead
Both vendors and enterprises are looking at the future with cautious optimism. Predicts KS Vishwanathan of Microland, We are entering into a cycle starting 2009 where we are not going to see a growth curve which we saw in last five years. This will lead to transformation of already built IT environmentsmoving into technology areas like unified communications, virtualization, remote operations, better management of assets and improving utilization of the existing infrastructure. The broad business theme will be optimization of IT.
The talent available for providing real time services would be a challenge. The IT personnel have not been trained to handle the real time situation and the skill matrix is also changing. Retaining this resource is becoming a big challenge. The infrastructure business model has to change and enterprises have to move toward a model where the IT has to be done automatically. Most of the vendors Dataquest spoke to believe that remote models can move toward cloud once the offering of infrastructure as a service becomes mainstream. Cloud though has its inherent weaknesses in terms of outage and the kind of impact it can have, as has been seen in the recent Gmail blink.
