Source: www.zdnetasia.com
Swati Prasad,INDIA–As companies become more cost-conscious, CIOs worldwide are increasingly feeling the need to outsource infrastructure management remotely to locations such as India. For local companies such as TCS, Infosys, HCL and Patni, remote infrastructure management (RIM) is becoming yet another fast-growing revenue stream.
“We created a separate business unit for RIM in 2004 to give it increased focus,” P. R. Krishnan, vice president and global head IT infrastructure services at Tata Consultancy Services (TCS), said in a phone interview. “Since then, our revenues from RIM have grown ten-folds, from around US$40 million to US$400 million today.”
TCS is now targeting its RIM business to account for US$1 billion of its US$5.7 billion revenues. “Revenues of US$1 billion for RIM appear achievable today,” Krishnan said.
RIM essentially refers to the monitoring and management of a company’s IT infrastructure components, such as data centers, servers, laptops and desktops, from a remote location on a 24 by 7 basis.
“Around 80 percent of problems related to infrastructure can be offshored,” Anant Gupta, president or HCL Comnet Systems & Serviced told ZDNetAsia in an interview. For the remaining problems, such as those pertaining to hardware, these Indian IT companies have onsite staff or partnerships with local companies that can address such problems. For instance, HCL Comnet–a subsidiary of HCL Technologies–has around 25 partners worldwide.
Downturn drives RIM
With the economic slowdown, more companies are making RIM part of their strategy.
“RIM means keeping the lights on,” Ajay Soni, vice president of infrastructure management services at Patni Computer Systems, said in an e-mail interview. He explained that the slowdown is compelling companies to lower budgets, thereby increasing the need for efficiency in traditional datacenter and infrastructure management.
According to Soni, Patni’s RIM business has been growing at around 30 percent over the last five years.
Concurred Krishnan: “Data centers, desktops, servers, and so on, are cost centers for CIOs and, therefore, a new lever for companies to reduce costs.”
Gupta said: “In the last six months, we have seen a huge increase in the levels of enquires. RIM has become more acceptable.” In the last one year, HCL Comnet added 45 new customers, taking its RIM customer base to over 80, he said.
Similarly, TCS added 75 new global clients in the last 18 months, bringing its total RIM clients to 225.
Gupta added: “Today, there is a 0.7 probability that every global company will go through RIM.” He noted that overall cost savings Indian RIM players are able to offer their clients are in the range of 20 percent to 25 percent for a full outsourcing deal, which includes RIM and onsite support. For a RIM standalone deal, the savings are around 30 percent to 35 percent, he said.
According to a recent study by McKinsey and Nasscom, India’s trade body and chamber of commerce for the IT-BPO industry, RIM could prove to be India’s next big offshore opportunity for India, after application development and maintenance (ADM) and business process outsourcing (BPO).
The report indicated that India is strongly positioned to capture US$13 billion to US$15 billion of the global RIM market by 2013, creating 325,000 to 375,000 jobs in the sector. At present, RIM services revenue for India stands at between US$3.2 billion and US$3.6 billion, while the global RIM market is around US$7 billion.
Krishnan said: “Earlier, complete infrastructure management deals were more popular, wherein companies would outsource their entire requirement for assets [such as workstations and datacenters] to companies like IBM and EDS.
However, he noted that such deals–also described as being “asset-heavy”–had several limitations, he noted. For instance, each time the customer wants to make a change to its network topology or server configuration, the contract would have to be renegotiated. With technology cycles shortening, this was becoming more of an administrative hassle for companies.
“Even today, asset-heavy deals are more popular than RIM, though RIM is growing very fast,” Krishnan added.
RIM deals give clients the flexibility of choosing services based on their individual needs, Gupta said. It also brings in transparency, providing companies insights into how many CPUs and servers are being used and to what extent.
This opens opportunities for RIM players to offer value-added services, such as new virtualization technologies to help their clients better utilize their servers and IT advisory services.
Soni said: “Some of the services, like datacenter operations and virtualization, are the need of the hour.”
Besides cost savings and flexibility, scarcity of skills in countries such as the United States and Europe–especially in the IT industry–the need for 24 by 7 IT support, and the call for consolidation and standardization across global markets, are the other growth drivers for RIM.
Even Indian companies are going in for RIM deals.
Gupta said: “Indian companies that are going global are required to meet global service benchmarks and regulations. RIM deals help them achieve that.”
For Patni Computers, North America is the major contributor to RIM services, followed by Europe. Soni said: “For us, banking and financial services is the largest segment active in RIM global sourcing, followed by products companies.
According to Krishnan , today, RIM is the fastest growing business for TCS. He believes that this business will continue to grow at around 70 percent to 80 percent per annum.
By 2011, he added, some 8 percent to 10 percent of TCS’ total revenues should come from RIM.
