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Software update: Infrastructure Mgt.

Aug 24, 2007

As a part of this series of articles on various verticals of the software industry, this week we delve deeper into the Infrastructure Management Services (IMS) space, which has evoked much interest among the leading tech players in the country. What is Infrastructure Management Services?
IMS refers to services provided by IT companies with regards to desktop support, application support, maintaining databases and servers. As per NASSCOM estimates, the global IT infrastructure market has been projected to be US$ 150 bn and the global market opportunity for remote infrastructure management services has been predicted to reach US$ 70 bn.

The current scenario
In India, currently HCL Tech and Wipro are the major players in this segment. The advantage of focusing on IMS comes from the fact that it is a volume game. A company focused in this area work on large volumes. However, margins are the dampening part, as onsite proportion of revenue is high. However, going forward around 75% of the IT service surrounding data centre applications can be remotely executed 9as per Forrester). Secondly, companies focusing on IMS need to have onsite delivery centres and this involves huge investment in IP, technology solutions and infrastructure.

The pricing models in IMS
Services rendered Pricing model
Desktop support Per seat or per call
Application support Per instance (T&M)
Database management Per instance (T&M)
Server management Per server (T&M)
While there has been a major shift when compared to traditional infrastructure outsourcing, the focus has clearly moved to reducing costs. In a traditional infrastructure outsourcing contract, the assets and people were taken over as a part of the contract and leased back to the customer with added cost of capital and vendor margins. Today, IMS involves bulk of service delivery for a process being done from a cost effective location and also creates cost savings from technological transformation. The pricing models in IMS also differs based on services offered.

Going forward…
The future holds tremendous promise for companies focused in this area as most of the clients outsourcing their infrastructure management services are focused only on reducing costs. While the overall market for IMS is large and is growing steadily, the pure play offshore players can very well record strong annual growth going forward. However, the key over here is that when a deal in the US takes place particularly for IMS, vendors having delivery centres based in the US are given a preference.

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