With the pressure to sustain growth and counter competition from the multinational infrastructure outsourcing (IO) suppliers rising, IT players providing remote infrastructure management outsourcing (RIMO) services are successfully both targeting as well as signing deals with larger buyers, according to a recent study on ?Remote Infrastructure Management: Impending Crisis of Genre? by Everest Research Institute.
The study found that suppliers are being forced to deviate from game-changing innovations they had brought to the IO delivery market, which had once propelled them to current levels. The IO market continues to evolve, with offshore suppliers maturing as infrastructure service providers, enabled by remote infrastructure management (RIM) technology. Offshore (mostly India-based) suppliers are essentially targeting the same buyers as multinational firms and are starting to play by the rules long established by traditional players.
These players are adopting the traditional rules of IO, including offering more complex pricing mechanisms, longer deal durations, more complex SLA-driven metrics and badging employees again. ?As large Indian suppliers started approaching critical mass in IO, they realised that they have to target bigger deals with large buyers to sustain the growth. Their target profiles and deal characteristics started rapidly approaching those of the large multinational legacy suppliers? said Gaurav Gupta, country head and principal, Everest Group.
The RIMO market grew rapidly at 66% CAGR until 2007, when early signs of a sagging economy marked the beginning of the market?s slower growth rate of 18% CAGR. Despite the slowdown, RIMO remains the fastest growing IO delivery model, and offshore suppliers have grown and held their market share. With most MNC players setting up offshore delivery centres, offshore-based suppliers are being compelled to move to other value levers and adopt convergence strategies, which position them between RIMO and the traditional models, he added.
?Indian RIMO players are deviating from some of the innovations they had brought to the market, such as a ?penetrate and radiate? market strategy,? said Shiraz Ritwik, research director, ITO Research, Everest Research Institute. ?They need to build creative IO offerings, respecting the biases of large buyers and capitalising on their gradual change in mindset?, he said, adding, ?Indian RIMO players also need to recognise that their strength is in flexibility and openness to new approaches and should thus avoid getting sucked into traditional rules where they are unlikely to win?.
Talking about the strategy to be adopted by offshore RIMO suppliers, Gaurav Gupta added, ?They need to come up with innovative approaches for infrastructure service delivery, while balancing the offerings to compete with MNC suppliers in the large deals market segment. The industry recognises the innovations that offshore suppliers brought to the market and expects such companies to continue on the path of innovation. A strategy of continued innovations and differentiated service offerings is more likely to be the winning strategy in infrastructure outsourcing.?
The study provides a data-driven analysis of the evolution of IO market models, key differentiators between infrastructure service delivery models and an overview of likely offshore RIMO suppliers? strategies, based on their market signals.
