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Business News/ Home-page / Hardware management is next for tech vendors
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Hardware management is next for tech vendors

Hardware management is next for tech vendors

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Chennai / Bangalore: After years of writing software applications and maintaining it for global clients, Indian tech service firms are moving into an area that has long been the fiefdom of large global vendors: information technology infrastructure management, which involves managing desktops, servers and communication networks of large global companies.

Global firms such as Accenture Ltd and IBM Corp. are increasingly coming up against Tata Consultancy Services Ltd, HCL Technologies Ltd and Wipro Ltd while vying for so-called remote IT infrastructure management annual deals at clients such as General Electric Corp. and Dutch financial house ABN Amro NV that are outsourcing such work to specialists for better quality of service at lower costs.

Cambridge, Massachusetts-based research firm Forrester Research Inc., for the first time last week, listed Indian vendors TCS, Wipro, HCL and Infosys Technologies Ltd among leaders in a study of 19 vendors, which included IBM, Accenture and Hewlett Packard Co., that offer infrastructure management services to customers.

The vendors analyzed by Forrester offer remote and on-site support services for about 15 million desktops and over one million servers, apart from providing help desk services to nearly 18 million end users globally. These vendors make around $70 billion (Rs287,000 crore) in revenues annually from IT infrastructure management.

Although dwarfed in overall market presence by giants such as IBM, HP and EDS Corp, “India-based firms showed strong delivery capability, good reference client scores, and solid value-based strategies for the future," wrote Forrester analyst Paul Roehrig.

Large outsourcing contracts involving infrastructure management have always gone to vendors such as EDS and IBM. In September 2005, ABN Amro, the Dutch financial powerhouse that is up for sale, outsourced $400 million worth of application development work to TCS, Infosys and Patni Computers Ltd, while IBM walked away with a $1.8 billion infrastructure management piece.

The leader among the India-based providers is the country’s largest software company TCS, Forrester said. TCS doubled its revenues from remote IT infrastructure work to around $250 million in fiscal 2007 from the year-ago period. P. R. Krishnan, who heads the infrastructure services for TCS, said Indian vendors have so far exploited just 2-3% of this business last year. Krishnan expects revenues from such services to grow at about 70% every year.

HCL Technologies, which turned in to a billion dollar company last year, is even more ambitious. It aims to clock over $1 billion from remote infrastructure management services in five years. Currently, about 13%—equivalent to about $168 million—of its $1.29 billion revenues come from this emerging practice, said Swapan Johri, vice-president of emerging services, HCL’s infrastructure services division.

Technology infrastructure management has matured, over the years, from outsourcing maintenance of computers and network gear to third-parties to a model now where a vendor takes over the entire function: right from staffing requirements to purchase of hardware.

IBM, for instance, which derived around $24 billion in 2006 from infrastructure management services, “takes over IT assets of customer organizations as part of the deal, helping customers part with the risk of managing complex projects," said Peter Lorenzen, vice-president of IBM’s India delivery centre.

But, Indian vendors such as Infosys and Cognizant Technology Solutions Ltd have traditionally shied away from taking on the IT assets of customers on to their balance sheets, as it leads to more complex engagements. Moreover, “there is too much pressure on margins and we would rather focus on our ability to deliver these processes from an offshore location such as India," said Kalyan Mohan, who heads infrastructure management practice of Chennai-based Cognizant.

With almost $2.45 billion worth of infrastructure management contracts to be awarded by European enterprises this year, Indian companies are now beginning to bid for these contracts by planning to manage IT infrastructure remotely, without having to own the IT assets.

“We are also bidding for infrastructure management piece of the project now, but may partner with other companies for executing such projects," S. Gopalakrishnan, chief executive officer of Infosys, India’s second largest software company, said in an March interview.

Mohan of Cognizant added that his company would consider partnering with onsite vendors, who would own the assets, while Cognizant would take over the day-to-day running of the entire show remotely.

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Published: 20 Jun 2007, 07:48 PM IST
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