Managed services supplanting outsourcing in India

Enterprise Innovation Editors
13 May 2010

The managed IT services market in India is beginning to surpass traditional outsourcing markets in the country—considered to be the outsourcing capital of the world—as the segment inches to a projected US$3.8 billion growth rate by 2013, up from just $1.6 billion in 2009.

Springboard found that the managed services model has rapidly and significantly begun to encroach upon traditional strategic outsourcing engagements. 66% of CIO’s surveyed plan to adopt and engage with a managed services model rather than strategic outsourcing due to perceptions of “convenience” with managed services. Another key reason as stated by CIOs for adoption of managed services over strategic outsourcing is access to best of breed services without the fear of losing control of IT.

“Managed IT services in India have existed in varied forms for more than 20 years. In this time, the market has matured and transformed from body shopping contracts or facility management services to a process-oriented delivery model”, said Sudip Saha, Senior Analyst, IT Services at Springboard Research. “After the initial delivery of onsite managed services, the market started to transform to a hybrid of offsite services delivery either through Remote Infrastructure Management (RIM) or a combination of RIM services and onsite delivery”, added Mr. Saha.

Adoption among large enterprises vs. small and medium businesses
The Springboard report notes that while the large enterprises in India were the early adopters of managed services, the Small and Medium Businesses (SMBs) have also started adoption due to the similar competitive pressures and operational concerns that they face.

Whilst large corporate entities often have skilled internal IT teams to support day-to-day operations, typically SMBs prefer to adopt the managed services model in a phased manner. Managed network services, workplace management services and managed server services have the highest uptake among SMBs.

In terms of adoption among verticals, Banking, Financial Services and Insurance (BFSI) organizations remain the largest contributors to the managed IT services market with a share of 28.2%, followed by the Manufacturing and Government verticals.

Use of managed services as a business enabler
According to Springboard, the key reason for managed services market growth in India is not just cost savings, but the use of managed services as a business optimization and growth driver.

Managed services provide opportunities for enterprises to focus on their core business competencies while leaving day-to-day IT operations to a third-party service provider. ‘Flexibility’ is yet another key outcome that managed services provide to enterprises. It gives enterprises the option to convert “Capex” to “Opex” and allows enterprises to convert traditionally unpredictable, reactive and costly IT services to a single tangible cost. Furthermore, enterprises gain access to high-quality, expert support and best-of-breed management tools with a minimum investment.

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