Industry experts have placed special emphasis on IT Infrastructure Management Services (IMS) as an important growth area for pure-play India-based providers. However, we believe the use of global IMS is a case in which reality from a user’s perspective precedes the traditional precursory hype.
Due to a number of industry progressions, a strong base of global infrastructure-management operations clearly exists today. Additionally, according to research from our 2005 State of Global Service Delivery study, global pure-play providers are not providing the majority of these global IMS offerings — rather, they are common extensions of established relationships with MNCs (multinational corporations such as CSC, EDS, HP and IBM) or the users’ own captive centers.
The Case for Global Services Delivery of IMS
The size of the global market for IMS is estimated to lie between $86–$150 billion, depending on the market source. For instance, a 2004 report by Deutsche Bank estimates the size of the global IMS market at $86 billion, while Forrester Research estimates it to be at $111 billion. Gartner estimates it still larger — at $150 billion.
According to a Nasscom report, about 40%–60% of the overall IMS pie may be efficiently delivered through a global delivery model. This translates into a market potential (for offshore infrastructure management) of approximately $55 billion. Focusing on the potential for India, Forrester estimates that it can bring almost $1 billion in earnings for the region, provided Indian providers can strengthen their cost, quality and security strings. According to Gartner, IMS delivery in a global delivery model from Indian to U.S. companies will surpass $1 billion by 2006.
IMS can potentially include a broad array of end-to-end services. However, global IMS most commonly focuses on relatively risk-adverse operations like network monitoring, remote helpdesk and server monitoring. For the more mature global service-delivery user, services may include firewall management, intrusion detection, Virtual Private Network (VPN), network-performance management and event response. Specific IMS offerings vary among service providers based on their capabilities and skill sets, as well as client needs.
What makes globally delivered IMS attractive to corporations? A short answer — their own growth. As corporations grow globally, either organically or through mergers and acquisitions, they often come to possess unwieldy and often heterogeneous infrastructure, along with related applications and tools. Third parties may be able to add an umbrella management system above these disparate tools with minimal impact, and follow up with a transformation of the underlying monitoring toolset. Factors such as automation, optimization and intelligence, 24x7 support, risk mitigation and disaster recovery with no up-front investment costs are extremely alluring as well. However, these services come at a cost, and may require significant lead-time to operationalize effectively. The scale of operations and leverage of assets over a wide base continue to be important considerations. Of course, as with software Application Development and Maintenance (ADM), cost savings is initially a major driver of outsourcing IMS to low-cost destinations. However, TPI believes that in most cases, cost is not the only driver. For most corporations, contracting for the global delivery of IMS today encompasses a variety of business drivers contributing to the design of a global solution.
Options for Global Delivery of IMS
Much has been written about the growth opportunities for pure-play service providers, as well as the heated competition between the MNCs and pure-play offshore service providers for the offshore market space. But our survey results indicate that these discussions do not provide a comprehensive portrayal of current market activity related to IMS. Research from 2005 State of Global Service Delivery reveals that when the global operations of corporations grow and expand to the point that global infrastructure management is considered, the decision becomes more of MNC versus captive operation, as opposed to MNC versus offshore pure play. In fact, nearly 30% of the survey respondents executing global IMS today have captive centers, and nearly half are using MNCs.
