After EDS, Perot and ACS? merger with hardware vendors, CSC is one of the few independent software services companies. Managed services sector president, Russ Owen is confident of going alone and expects customers to trust them more. Having posted a quarterly profit ahead of analysts? predictions, the company is bullish on managed services business and expects about $14 billion in opportunities, scheduled to be decided by the end of fiscal year 2011. It just bagged a $2.9 billion deal with Zurich Financial Services to modernise and virtualise its data centre environment. As business picks up, Owen expects to increase offshore content to 50% for his division in next 12 months. In a conversation with Pragati Verma, he describes the changing outsourcing landscape and the potential for managed services and cloud computing. Excerpts:

Indian IT companies have been talking of signs of growth for a couple of quarters now. How is the revival impacting managed services market?

We are excited and still growing. Like many other companies, we went through some turbulence when recession hit the global markets. Some of our clients and partners went bankrupt due to which some projects were hit. Since then, we have seen a lot of interest in cost saving and offshoring. What I am seeing is that our clients that have survived in the recession have cut back on the discretionary spend. But, we?re seeing big success in new business.

Merger of software services companies like Perot, EDS and ACS with hardware vendors is widely seen as a gamechanger in the outsourcing industry. How does CSC reposition in the new dynamics?

If you are in hardware business, you know that it has become commoditised and margins are dropping and you need to do something different. So, you will look at the service model as a way to improve your margins and long term relationships with clients; but it comes with a conflict of interest. It?s a shift for their business model to offer services with their hardware.

For us to be able to approach a customer with a business transformation?I can do an applications redesign and I can pay for it by restructuring infrastructure services and use offshore to help you with modernisation programme?that?s a very different value proposition. A product company will always have a conflict of interest.

We have 50 years experience in managing very large and very complex relationships and our clients trust us for doing mission critical work. We have a very deep heritage in IT security that no other supplier has because we do it for the US, UK and Australian governments and many others.

We can thus provide a knowledgeable approach on protecting infrastructure when we do systems integration across the world. It helps us be at the forefront of cloud computing. The market is moving towards us. And we?re focused on our core competencies. There?s plenty of market share for all of us to grow and we don?t have to beat up each other.

You have recently announced a $2.9 billion deal with Zurich. Are big deals coming back to the market?

I think it is going to be mixed. We probably will see a similar number of large deals as we have had historically but not the majority.

The market is growing and we have a big increase in what we at CSC call mid-sized deals, which frankly are large deals for pure play companies.

We are a large company, so we will probably see a few multi-billion dollars deals a year and also decent number of mid-sized deals between $35 million to $350 million. And this is driven by industry trends, selective sourcing. We?ve shifting our focus on doing more medium sized transactions because they are foots in the door to getting multiple towers and expand.

You are also expanding your offshore presence to other countries. How big will India be in the long term?

We are expanding our operations in India by 5,000 heads in the next 12-18 months. We are offshoring big parts of our recent mega wins. In fact, we won one of our recent biggest account expansion because of the just terrific service our India business unit provides to them. India has about 40% of our global managed services workforce and will grow to 50% in next 12 months. We are working on various other growth areas and are optimistic. We have 47,000 employees across the globe and India is the second largest in terms of people employed. India today accounts for 40% of the total workforce. We have seven centres here. We have other offshore centres such as Malaysia and Vietnam, but India is by far the largest offshoring centre. Our target is to have at least 50% work offshored?for some clients it?ll be more and for others it?ll be less but on an average we?ll offshore 50%.

You seem excited about the move to cloud. Are CIOs ready?

In an outsourcing contract, we take over clients? data centre, networks, desktops, service desks and we sell it back as a managed service on utilisation basis to our clients, but it would be dedicated and private.

As technology has evolved and the applications portfolio becomes Web-enabled, our core outsourcing business has evolved to a private cloud. It is just that the marketing hype has recently caught up. So a lot of our top clients are receiving services in a cloud enabled way that?s private, which is very secure, very insular and dedicated to them. For example, a client may decide that is no longer worthwhile to spend millions of dollars to develop a custom CRM solution, but use a CRM cloud vendor. But the client may not want to put in all information in the vendors cloud?some of it may be extremely sensitive. So CSC can orchestrate an integration where you can plan the goals, use the standard facilities of the vendor as it is. We will provide a bit of customisation around it, and we?ll put the data that the client is not terribly concerned about in the vendor cloud, but we will give the client a private cloud so all your secure transactions will tunnel through your private cloud only. And we?ll keep all that together.

This is an opportunity for us to make our services to not just large clients but to smaller clients as well from remote locations like India in a secure way. We plan to take some of our products and make them available over the Web as services. My expectation is that it?ll be a slower growth at first and then it?ll ramp up very quickly. In two to three years, we?ll start to convert our existing base with new services. We at CSC are growing ahead of it well in advance. I see an explosive growth market, starting from a small base and moving to a large base quickly.