Is outsourcing


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Changing relevance of IS Outsourcing drivers altering core value proposition

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Is outsourcing

  1. 1. India’s IS Outsourcing Market:Adapting to Megatrends – Reinventing Business
  2. 2. Next phase of growth will ride on end to end infrastructure management 2000 - 2008 2008 - 2012 2012 - 2020 Phase 1: Provide Phase 2: Automate Phase 3: Manage Lower TCO Delivery excellence through End to end IT infrastructure Core Value Talent pool and expertise automation management Proposition Transformational capabilities Business enablement Service desk End computing devices Applications stack Focus Data centre and networks Core infrastructure, hardware Core infrastructure, hardware areas Hardware support Databases End computing devices Available talent and skills Automation tools and platforms Optimising & operating capabilities Bandwidth availability at Standardised processes SLA maturity Enablers affordable prices Domain knowledge Service providers Transformation experts Business process owners Provider Ticket based resolution Consulting led services Proactive approach scenario Global delivery capabilities Expansion of remote services Broader scope of services Credibility in brand and Automation of L1,L2, L3 Outcome based pricing models Outcome customer confidence IP based process and delivery Non-linear growth model Mature business model tools Transformed brand imageSource: Frost & Sullivan Analysis
  3. 3. Changing relevance of IS Outsourcing drivers altering core valueproposition Relative importance IS Outsourcing Drivers 2012 2015 2020 Achieving lower Total Cost of Ownership (TCO) Access to skilled talent pool and capabilities Need to standardise IT operations and align to business Technology mega trends demanding greater transformation Importance High Medium LowSource: Frost & Sullivan Analysis
  4. 4. Emerging growth opportunities demand extending beyond core markets Services FY2012 Verticals FY2012 Geography FY2012 Traditional Emerging Traditional Emerging Traditional Emerging 90% 80% 70% 10% 20% 30% Revenue Share FY2012 (%)Revenue Share FY2012 (%) Revenue Share FY2012 (%) 10 15 20 13 8 11 Cloud Computing 15 APAC 6 Healthcare 9 7 10 India 4 Retail 5 Mobility 3 5 2 1 Middle East Education Unified Communications 0 ‐1 0 • Data centre and network services form bulk  • Mature outsourcing verticals like BFSI,  • Traditional markets comprising of US and  of IS outsourcing revenues manufacturing and government contributed   Europe contribute > 70 per cent of  • Among emerging services, cloud computing  nearly 70 per cent in FY2012 revenues contributes 70–80 per cent of the revenues  • Healthcare is a rapidly growing vertical  • APAC ‐ increasingly important from   with rapid growth rates of >30 per cent segment and forms a sizeable share in terms  revenue and growth perspective  • Enterprise mobility and UC related services  of revenue • Continental Europe emerging; already  opening up new service line opportunities • Retail and education are the other emerging  has mature outsourcing practices verticals driving IS Outsourcing growth  • Domestic market witnessing  traction  Source: Primary interviews, Frost & Sullivan Analysis • Government, a large untapped opportunity making it an important target segment
  5. 5. Transformational needs dominating customer expectationsChanging customer expectations Transform and operate infrastructure Holistic approach to IT with increased accountability Higher sensitivity to industry domain and business dynamics Overcoming inclination towards multi vendor engagements Demand greater visibility to operations and control over processes Investments in best in class infrastructure, tools and solutions Acceptance of  shared services models Outcome based pricing and risk / reward sharing Large gamut of bundled value added services (for e.g.: advisory on emerging  technologies)Source: Frost & Sullivan Analysis
  6. 6. Global offshoring locations offers strategic advantage Europe Middle East Locations: Locations: • Germany, Hungary, • Dubai Luxembourg, Spain, UK Advantage: Advantage: Access to Arabic speaking workforce Access to local workforce Serve MENA clients Proximity to European clients America Locations: APAC India • Chile, Brazil, Mexico, Argentina, Canada (Toronto, Montreal) Locations: Locations: Advantage: • India (Mysore, Chennai, Pune, • China ( Tianjin, Shenzhen, Ensure inclusive growth through Noida, Hyderabad, Bengaluru, Hangzhou), Malaysia (Kuala recruitment of local talent Kolkata) Lumpur), Philippines (Manila) Time zone advantage for regional Advantage: Advantage: markets Cost advantage from labour Leverage local language arbitrage workforce and BPO presence Availability of skillsets Serve China, East Asian nations (Japan, Malaysia, Singapore) Tap domestic market India continues to enjoy advantages of strong fundamentals over other emerging low cost offshoring locations Extent of delivery centre focus GDCs enabling penetration of new markets & build customer confidence Sample listSource: Frost & Sullivan Analysis
  7. 7. Indian IS Outsourcing market – OverviewIS Outsourcing: Fastest growing segment in IT services at ~20 per cent IS Outsourcing Revenues* • Fastest y-o-y growth segment within IT services (~20 per cent in FY2012) USD billion • Revenue growth: nearly 2x over five years (CAGR ~18 per cent) • Exports: • ~90 per cent share of revenues Trends 7.2 • ~26 per cent share of incremental IT services exports • Contributes ~8-10 per cent of revenues for Tier I Indian IT services firms – highlighting its strategic importance • Deal sizes for Tier I Indian offshore providers comparable to those of MNCs over the recent past • Large total strategic outsourcing gaining significance 3.7 • Exports: • Leverage expertise to manage increasingly complex IT infrastructure landscape Growth Drivers • High maturity of Indian providers in delivering services globally • Compelling cost competitiveness • Domestic: FY2008 FY2012 • Increasingly global nature of Indian firms demanding heightened focus on core business • Adoption new technologies and maintaining global standards • Lack of standard global practices for technology deployment necessitating outsourcing of infrastructure management* Includes exports and domestic revenuesSource: Frost & Sullivan Analysis, NASSCOM
  8. 8. Indian IS Outsourcing market – DomesticChanging customer value demands re-architecting market strategy Characteristics Trends Rapid adoption of private and Preferred onsite managed public cloud across enterprises model Close proximity of provider’s Domestic Shift from T&M based to SLAinfrastructure set up preferred market and delivery led deals Market dominated by few Tier I players Majority of business growth from existing customer base Large un-penetrated market offers high potential Distinct proposition required to tap domestic markets Segmenting market based on nature of enterprise critical for success Opportunities for smaller providers through sub contracted L1 supportSource: Frost & Sullivan Analysis
  9. 9. Mega trends disrupting conventional business models Impact Rate of Impact on Impact on Mega Trend Adoption Organisations business Mobility Cloud Computing • Rapid adoption of cloud computing Unified Communications accelerates the need to define strategic roadmap and align business plans High • High impact of mobility provides industry players the potential to enhance customer value • UC brings in incremental revenue opportunities through strategicChanges required in Cloud Computing vendor partnerships Business Model Enterprise Mobility Unified Communications Strong Weak Low Source: Frost & Sullivan Analysis Low Extent of New Opportunities High
  10. 10. Hybrid cloud dominates the preferred cloud deployment model USD billion Cloud Computing - Trends • Supply and demand side drivers cohesively result in rapid adoption rates • Drivers and delivery models for large and SMB firms are different 650 • Growth implies a phenomenal change in the enterprise IT landscape • Enabling cloud consumption for enterprises brings in new opportunities for application vendors, services firms and infrastructure service providers • Capitalising on the impact of cloud computing however will need re- 40 evalutaion of service portfolio, business models and growth strategies 2010 2020 Global Cloud Computing Private Hybrid  Public Private Hybrid Public• Managed by organisation or third • Balance of on-cloud and on- • OPEX based model party premise workloads • Utility based pay per use model• Flexibility for customisation • Best of breed solutions • Off-premise management• Greater control • Better integration and security • IT management responsibility with• Higher degree of ownership • Mitigates vendor lock-in concerns service provider• Data privacy and stronger SLAs • Demands increased management • Greater impact on infrastructure and governance landscapeSource: Frost & Sullivan Analysis, NASSCOM,-Deloitte Cloud Computing report
  11. 11. Convergence driven by need to collaborate driving demand for Unified Communications globally Key Adoption Trends IP Gateways Tele presence Contact Centres IP Telephony Instant Messaging Unified Collaboration Platforms Audio/ Web Conferencing Work e-mails Video Conferencing Voice Mails & Messages Office Phones UC adoption is growing at over 11 per cent driven by multiple internal and external factors Need for multi channel communication Global nature of Need for cost cutting enterprises Adoption of enterprise and higher productivity mobilitySource: Frost & Sullivan Analysis
  12. 12. Devising strategies around mega trends essential for accelerated growth Shifting customer value Emerging service Mega Trends portfolio 1 Define role in cloud ecosystem and align datacenter strategy 2 Build value proposition around IP led differentiation 3 Strengthen end to end provisioning and SI capabilities 4 Develop operational readiness to provide business centric SLAs 5 Form strategic partnerships to bridge execution gaps Changing competitive Emerging verticals landscape Emerging geographiesSource: Frost & Sullivan Analysis
  13. 13. Cohesive ecosystem effort needed for winning value proposition over thenext decade Global • Tapping discretionary spending through innovation economic • Strengthening client relationships with differentiated slowdown offerings• Strong IP laws Business Industry Global • Value beyond cost advantage• Mitigating customer data security environment challenges competition • Leading the business model concerns reinvention from the front • Grooming available talent pool for new services Skilled talent • Aligning academia to industry needs availability • Inclusive growth through near shore delivery Key NASSCOM Initiatives FY2012 Brand Building Industry support • Annual conference to showcase capabilities of IS • Educational initiatives to identify talent pool Outsourcing services providers in India requirements of the industry and building industry wide • Showcasing projects executed by firms through case interventions on skilling the available talent pool studies on NASSCOM web site • Governance structure of steering committee to identify • Regional chapters for RIM at Pune, Bengaluru, key areas and driving actions like government level Chennai to provide thrust to the sector and build on policy interventions the image of RIM as a sector for potential employees