The $80 Billion Opportunity



Remote Infrastructure Management (RIM) is still a small part of India’s IT
business with only HCL Comnet and Wipro having the first mover advantage.
According to Nasscom, India’s exports from software, other IT services and
business-process outsourcing industries, grew by more than 25%- to $12 bn last
year-of which infrastructure services accounted for just over $300 mn. Says N
Venkaswamy, president, Datacraft India, a relatively new entrant in the RIM
industry, "That’s just 1% of the global pie." But the potential is
huge. Gartner puts the entire size of the global infrastructure management
market at $80 bn by 2007.

RIM might sound jargon to the layperson, but the concept of outsourcing
infrastructure management has been championed by the likes of EDS and IBM way
back in the 70s and 80s. However, RIM, devised by Indian companies to tap a
significant slice of the $80 bn pie, has turned the traditional concept of
infrastructure management on its head.

The India Edge
So what tilted the balance in favor of the likes of Comnet and Wipro?
Explains Anant Gupta, COO, global operations, HCL Comnet, "The Indian model
is flexible and collaborative in nature, whereby the customer retains asset
ownership, physical infrastructure and the technology refresh of the
infrastructure and the vendor is entrusted with only the monitoring and
management aspect." The traditional infrastructure management model or the
total outsourcing model evolved by international giants like EDS and IBM
involves buying out the IT infrastructure of the organization. The assets, along
with human resources, get transferred to the company. Says GK Prasanna, VP,
technology infrastructure services, Wipro Technologies, "The tables are
definitely reversed. I have no illusions about size."

As per IDC estimates, more than 85% of infrastructure components can be
managed from remote locations. Given the circumstances, cost becomes a key
operational driver. Says Gupta, "RIM can reduce the cost of operations and
infrastructure management by 40-60%." Agrees Paul Hooper, VP, information
technology, Extreme Networks, which opted for a multi-year contract with HCL
Comnet for remote infrastructure management after a long association with EDS.
Complementing the cost advantage are factors like automation, optimization and
intelligence, 24×7 support, risk mitigation and disaster recovery, all at no
upfront investment. Interestingly, the cost proposition is also making global
majors set up offshore Infrastructure Management Services (IMS) delivery
facilities in India. Computer Sciences Corporation has moved part of its
infrastructure management support to India and has over 400 people dedicated to
IMS.

The Indian advantage also gets reflected in the growth the two first movers
are witnessing. Wipro is the largest offshore infrastructure services provider
in terms of revenue, people and customers. The company has grown 15 times in the
last five years, and over 60% in Q2 over the same period in the previous year.
Wipro has a team of 1400 dedicated to infrastructure management, over 140
customers in the US, Europe and Japan, and over 550 customers in India. Wipro’s
kitty is already filled with some of the biggest names like Thames Water, Lehman
Brothers, Farmers Insurance, to name a few.

Following close is HCL Comnet, which has grown from Rs 8 lakh to Rs 2.54
crore in just eight years. Currently, it has 1,500 employees as part of its
infrastructure management team. Comnet has three facilities with a total
capacity of 1,400 seats and is in the process of building another with a
capacity of 1,200 seats. These centers currently deliver infrastructure
operations and management services to over 90 customers. Customers of Comnet
span sectors like insurance, banking, software and manufacturing with some big
names like Nike and AMD to boast.

Scene I: At Wipro’s global command center in
Bangalore, slices of IT
infrastructure of customers, located several thousand miles away, are being
monitored and managed round the clock. Capable of housing over 200 plus
engineers, this center, with a dazzling array of gadgets, is connected to Wipro’s
point of presence, UK and Japan, through redundant links. For Wipro, which is
aggressively pitching for global IT infrastructure deals, the command center
showcases its remote management capabilities.

Scene II: In a shiny new building in the drab construction site that
is Noida, a Delhi suburb, teams of young Indian engineers are, in a manner of
speaking, managing the world. A number of America’s best-known companies have
entrusted the remote running, of part of their global computing networks, to HCL
Comnet.

Both these information-technology services firms are at the crest of what
Gartner calls "the next big wave" of Indian outsourcing deals,
covering remote infrastructure-management services (IMS). India’s outsourcing
boom started with software development and has expanded into a whole range of
business services that can be handled a continent away-of which the country’s
hundreds of call-centers are just the most prominent examples.

"Currently, most companies that offer remote infrastructure management
services offer a combination of on-site and off-site management", says
Prasanna of Wipro. Adds Datacraft’s Venkaswamy, "End-to-end outsourcing
may not happen immediately. More and more companies would prefer offshoring
infrastructure management in relatively risk-averse operations like network
monitoring, remote help desk and server monitoring." But what is evident is
that the general perception towards offshoring IMS is changing. For example,
when Wipro started in 1999, less than 5% of the work was done offshore.
"Now nearly 60% of the infrastructure management is done offshore,"
says a proud Prasanna.

Indian RIM service providers are now offering more sophisticated services
like firewall management, intrusion detection, VPN, network performance
management and event response, among others, on a 24×7 basis.

Challenges Ahead
However, despite the growing excitement about the great Indian opportunity,
convincing customers to offshore can sometimes become an uphill task. Technology
is not a concern any longer. Customer issues range from infrastructure and
security concerns to geo-political risks. With business continuity and security
becoming key concerns today, it is also difficult to convince customers, who
have already spent millions of dollars on security, to trust the offshore
service providers. Says Prasanna, "Companies need to invest more and set up
better infrastructure and implementing tools that will make the service more
proactive". Wipro has set up two Network Operation Centers (NOCs) outside
India, one in the US and the other in UK, to ensure that no situation becomes a
roadblock to the 24×7 support process. Wipro treats every Offshore Development
Center (ODC) as a virtual extension of the customer’s infrastructure with
separate networks, access and dedicated customer security policies. Says Bithin
Talukdar who heads the Market Development & Alliances Software Global
Business Unit at Hewlett-Packard India, which partners Wipro to provide
infrastructure management tools, "With Indian IT services getting
credibility for its quality the world over, an enterprise propensity to offshore
infrastructure management has increased manifold."

N
Venkaswamy, president, Datacraft India, Companies would prefer offshoring infrastructure management in relatively 
risk-averse operations 
GK
Prasanna, VP, technology infrastructure services, Wipro Tech Every ODC in India is a potential vehicle for offering remote IMS
Anant Gupta, COO, global operations, HCL
Comnet, Remote Infrastructure Management can reduce the cost of operations and infrastructure management by 40-60%

Credibility, agrees HCL Comnet’s Gupta, is the key. Comnet is also the
world’s only organization whose customer center is BS 15000 certified. The
company’s global delivery model is perfected for stringent security
requirements and is often audited by global organizations before their offshore
locations are connected to the customer’s network.

The
Cost Factor
Choice:
In-house
Cost:
x
Saving
areas
Choice:
Outsourcing IM to local vendor
Cost:
0.8x
Saving
areas:
Avoiding duplication of technical roles standardization
Choice:
Offshoring IM (RIM)
Cost:
0.5x
Saving
areas:
Lower employee wage bill
Lower
costs for upgrading technical skills
Lower
attrition costs
Avoiding
duplication of technical roles

According to an online survey of 145 executives from various industries,
conducted by Wipro, more than 30% of the respondents were planning to offshore
their IT requirements in the next 12 months and another 30% were evaluating the
same with active interest. Realizing the opportunity, albeit a little late,
Indian IT biggies like Infosys, TCS and Satyam-and smaller ones like Datacraft,
with 25 global clients currently, and Mphasis BFL, which has opened its Global
Network Operations Center in Bangalore this September-have already jumped on
the bandwagon. Says Aditya Menon, COO, Mphasis BFL, "We are getting ready
to roll out our business plans to sell this facility as an add-on to our
existing customers first and then move to new ones." Analysts expect IMS to
overtake BPO in terms of revenue in a couple of years contributing 10-20% to the
revenues of tech majors. With IMS-related exports likely to cross the $1 bn in
the next three years, Wipro’s Prasanna aptly describes the potential,
"Every ODC in India has received security clearance and is a testimony to
our ability to deliver quality services and is a potential vehicle for offering
remote IMS."

How They Stack Up

Customer Infrastructure
Vendor
Thames
Water
Wipro
AMD HCL Comnet
Lehman
Brothers
Wipro
Nike HCL Comnet
Sun
America
HCL Comnet
Toshiba Infosys
Farmers
Insurance
Wipro
British
Petroleum
Satyam
South
Carolina County Council
TCS/CMC
Source:
Deutsche AG estimates

Team DQ

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