The Next Big Thing

The managed IT services (MITS) market in India has been present for over 20
years. Now, it is evolving from facility management services and contracts to a
process-oriented delivery model. Until the early 1990s, the concept of
outsourcing as well as delivery process was still in its nascent stages. Then,
India was lagging behind in terms of technology. However, it all began with
liberalization when India opened up to the world in 1993. Since then, there has
been no looking back in the progress of IT and ITeS in the country. After the
initial wave of onsite services, the market partially transformed to a hybrid or
offsite managed services delivery model. This was done either through remote
infrastructure management (RIM) or a combination of RIM services and onsite
delivery, which is a hybrid model.

Market trends

Speaking about market trends that led to the evolution of MITS, Sudip Saha,
Senior Analyst-IT Services, Springboard Research said, "Cost savings is not the
key reason for growth of managed services in India, but also its development as
a business driver. Besides, MITS provides flexibility to enterprises, which
gives them an option of converting capex to opex. It allows enterprises to
convert unpredictable, reactive and costly IT services to a single tangible
cost. It also enables enterprises to access high-quality, expert support and
best-of-breed management tools with a minimum investment."

MITS India is one of the fastest growing markets in the APAC region. However,
when compared to other regions in the APAC zone, India is still a fragmented
market with most local services providers, apart from the big players like IBM,
TCS and Wipro, operating from a city or state with a low capabilities.

"The general trend and expectation, irrespective of any country, is that
technology investments will grow at two times rate of GDP. However, from an
Indian IT market perspective, this theory held true until economic recession
crippled the IT investments. During that time, the IT market growth went down to
1.6 times the rate of GDP. However, for managed services the trend was quite the
opposite. Despite uncertainty, Indian CIOs realized that managed services
provide them with the opportunity to reduce day-to-day monitoring costs of IT
assets. In last two years, managed services has outpaced Indian IT growth as
well as overall IT services growth. The domestic managed services market has
cornered growth rate as high as 2.7 times the rate of GDP, albeit at a small
base," Saha opined.

For this year, Springboard Research has predicted that MITS market to grow by
23 percent.

Vikram Sharma, VP-Service Provider, Cisco India and SAARC suggested that
according to a recent research by Forrester, the 2013 managed services
opportunity in India is about Rs 391.5 billion with a total CAGR of 19 percent.
"For the past few years, the MITS domain has been dominated by managed
infrastructure services but things will change in the future. By 2013, the
highest growth will be recorded by managed application services that are
predicted to grow at a CAGR of 26.2 percent," Sharma predicted.

The adopters

Over the years, large enterprises have been the early adopters of MITS primarily
because of their huge IT framework. In the SMB space, the MITS adoption has been
slow.

"With the emergence of the Indian economy in recent times, Indian SMBs face
similar competitive pressures and operational concerns as many large
enterprises. However, large corporate entities often have skilled internal IT
teams for supporting day-to-day operations while SMBs can't afford to maintain
such extensive internal IT teams. SMBs prefer to adopt the managed services
model in a phased manner. Currently, managed network services, workplace
management services and managed server services are priorities for them," Saha
added.

The BFSI sector remained the top vertical for the MITS space, with a share of
more than quarter, followed by manufacturing and government verticals. This is a
sharp contrast to the telecom sector, which continues to remain loyal to the
total outsourcing model. The new emerging verticals with high uptake of MITS in
the Indian context are IT, ITeS and the logistics segment.

The models

Currently in India, IT infrastructure includes desktops, laptops and devices,
which are maintained in a model 'break-fix'. In this model, service providers (SPs)
from IT departments react to fix a problem only when it takes place. The same
option can be remotely handled. However, the trend now is moving towards an
automated managed services (AMS) model where the 'issue' occurrences are not
allowed to take place or are averted altogether.

"In the new AMS model you can eliminate most of the issues by proactively
automating using technology. If you implement automated managed services, over a
period, you can eliminate more than 80 percent of issues, with the help of IT
engineers. This model will immensely help IT enterprises like financial
services, where the downtime cost of IT infrastructure are very high," said
Girish Krishnamurthy, CEO, Kaseya.

In voice communication, managed IP communications (MIPC) is fast becoming the
core of all managed network services that are offered in the country. Sharma
added, "Traditionally, companies have maintained separate networks for data and
voice. However, most companies have realized that with a converged voice and
data network, they reduce costs and gain productivity benefits such as
four-digit dialing between branches, intelligent call routing, and the ability
to use IP phones instead of computers to access information and applications."

For many businesses, however, the cost of implementing and managing the IP
communication solution internally is prohibitive. The more affordable option is
to out-task IP communications to a managed services provider. Realizing the
business opportunity, service providers have forged partnerships with key
technology providers to be able to offer these services to customers.

"A recent example of MIPC is the alliance between Bharti Airtel and Cisco
where, as part of the alliance, the partners work together to create and sell in
a phased manner a set of unique products and services, including managed data
services, hosted unified communications, connected branch services and Cisco
Tele Presence," Sharma concluded.

With MIPC and the AMS model gaining momentum in the MITS space, the latest
buzzword however, is in printing solutions with the concept of managed printing
services (MPS), evolving at a faster pace compared to other solutions.

India presents huge growth opportunities for MPS as large businesses continue
to use paper and traditional means of storage. There is an increased need for
automation within enterprises.

According to Xerox India, IDC has recently predicted that enterprises spend
10 percent of their revenues on document products, management and distribution.
Documents have a critical role to play in increasing productivity, improving
customer service and reducing an organization's cost base. Whether they are
digital or paper based, documents allow to store, retrieve and manage the
company records, communications as well as archive.

"It is important that the MPS solution is robust, future-ready and helps in
simplifying the existing processes rather than building new processes.
Successful MPS implementation demands user friendliness and secure access to
information along with compatibility with the existing infrastructure," said
Vipin Tuteja, Executive Director-Marketing, Business Support and International
Business, Xerox India while discussing about MPS.

Elucidating on the same, H Sivaramakrishnan, Director-Marketing, Pitney Bowes
said, "The complex process involved in generating documents like bank
statements, telephone bills, insurance policies, etc has made many companies opt
for document generation consolidation at one branch. Further, the firms are
seeking optimized processes in place for cost efficiency. These factors have
majorly contributed to the growth in MPS recently."

The opportunities

According to Cisco, the recent economic recession had an impact on the IT
strategy of the enterprise segment. Most enterprises are thinking about
outsourcing some of their IT services, while focusing on their core competencies
to drive profitability and to develop a competitive edge. Thus, in a way, the
phase of recovery has quickened the pace of adoption of MITS.

"Kaseya forecasts that the SMB sector will invest heavily on AMS for their IT
needs, given the size of their operations, lack of knowledge on latest IT
trends, limited IT budgets and manpower resources. In most cases, upfront
investment in IT infrastructure is not feasible, and hence, pay-per-use model
suits their requirements," Krishnamurthy opined.

MITS, in the form of break fix services or in an outsourcing model will
continue to be a key focus for service providers as it helps them to make
incremental revenue out of any product resale or system integration contract.
"Ideally a single dollar product creates an opportunity to sell about Rs 135 of
SI services revenue, which again create opportunities for another Rs 315 of
resale opportunity approximately," Saha concluded.

A CIO today is caught in the middle, between increasing demand for IT
Infrastructure and reduced spending on IT. There is increasing pressure on CIOs
to justify investments and fully utilize current IT facilities.

"Maintaining IT operations at optimal productivity levels becomes a critical
element in managing the budget as well as managing skilled resources to manage
IT systems in house. This is where SPs come in to play," Krishnamurthy said.

"However, SPs who have been managing end-points of their clients in this
traditional fashion are becoming aware of the myriad of challenges. Firstly, the
number of end-points that they now manage has gone up exponentially over the
last few years. Since, most of these end-points are serviced manually, it calls
for a big staff of qualified technicians, who can be a huge drain on the service
providers' finances," he concluded.

The SP take

In the SP space, although the growth of MITS has not been exponential in terms
of revenue generation, the latest concepts have given it a boost and the market
prospects looks healthy. MK Shah, Director, Pecon Infotech opined, "The MITS
market looks promising with huge potential, although there is much to explore.
Remote services has lately picked up well in the MITS space while MPS, and UTM
security is the latest buzzword in terms of technology."

Sharing a similar perspective, Hemant Chabria of Chabria Infotech said, "With
the concept of cloud still picking up in the Indian SMB market, and MITS is also
following suit. Although the growth has been commendable, the consumer verticals
still need to become more aware. The corporate sector has opted for the MITS in
a big way with the SMBs following suit. In terms of service patterns, the SME
sector is satisfied with remote assistance with outsourced network security,
while in the corporate segment, CIOs opt for in-house hosting with a complete
package. In the coming few years, provided effective communication is made to
the SMBs, this vertical will majorly contribute to the MITS space.

"Concepts like virtualization, storage, platform hosting and others have
become the latest buzzword with the SMB segment opening up to MS consumption.
The SME segment has started hosting the servers and managing it with
outsourcing, which has opened up the arena of managed services," opined B Hari
of Ontrack Systems.

The lesson

Most of the vendors and market research agencies have opined that the ongoing
European financial crisis will not have an advert effect on the MITS market in
India.

Saha opined, "After emerging from the economic crisis, Indian enterprises
took a more conscious view of IT investment. They understood technology
investments are evolutionary in nature and

they should not try to create a revolution through such investments. The next
wave of growth from 2008 to 2012 will be the stabilization period where CIOs
will undertake any IT investment, which will influence their business directly.
Having said this, the European crisis will have no direct impact as enterprises
are already trying to optimize their prior investments and this will continue
for next two to three years."

Krishnamorthy concluded, "Organizations are increasingly realizing the
importance of IT and the role they can play in contributing to the business
bottom line and businesses worldwide. They are subscribing to AMS, which is fast
emerging as the new paradigm in ensuring optimized performance of IT
infrastructures."

Avishek Rakshit

avishekr@cybermedia.co.in