Services Break-Up The Top Players The Big Seven Trends Are You Being Served? These Few Have Been... The Hot Properties The Numbers Game
	Domestic IT services market grew 25% to Rs 8,809 cr in fiscal 2002-03
	The market showed signs of maturity—facilities management, outsourcing of IT operations, consolidation of servers, storage and networks into data centers
	Consulting revenues jumped 18% to Rs 1,155 cr—security, business continuity, IT architecture, storage and applications were the prime areas of consulting
	Infrastructure creation and expansion continued to be strong growth drivers, with turnkey projects being valued at Rs 2,541 cr

While the services market remained strong in fiscal 2002-03, it was signs of maturity that showed the real move forward. First, the numbers—growing at a clip of 25%, the domestic IT services market inched closer to the Rs 9,000-crore mark, stopping just short of it at Rs 8,809 crore. In global terms, this was just over a billion-and-a-half dollars—diminutive in comparison to global standards for a country of India’s size. Yet, the market showed some early signs of maturity. Consider the trend of facilities management and outsourcing of IT operations. Or still, the move toward consolidation of servers, storage and networks into data centers. Or the consideration for an automated help-desk and IT services management. Or the formulation of security policies and procedures.

None of these, though, became the norm, but there was method in the madness, in that organizations got over the curve of automation and computerization to get into managing information across the enterprise.

Facilities management
Large user organizations that have IT resources spread over the country with mission-critical applications running over the network are the first candidates for outsourcing facilities management. The past three years has shown steady growth in this area, to the order of 87.5% this year to touch Rs 300 crore. Vendors with resources to service a national customer base like Accel ICIM, HCL Infosystems, Wipro, CMS and CMC have been the primary vendors in this space.

According to these vendors, the real potential for facilities management is still to be exploited. Distinctions within the overall ambit of facilities management services are also developing. Managed services, technical help-desk, and availability services—are the new strains of specialized service operations. The large vendors like IBM Global Services, Wipro Infotech, and HCL Insys are able to attract clients to deliver infrastructure build-manage-support services covering the entire life cycle.

Specialized network management services (NMS) have not been included here. It is estimated that NMS is a Rs 171-crore market. Primarily served by the network integration companies like Datacraft, HCL Comnet, Wipro Infotech, GTL, Comsat Max, Sify and others, NMS has become critical for application uptime. Some of the vendors even offered value added services like disaster recovery services as part of their service bouquet. In terms of customer segments, BFSI companies followed by MNCs and the service sector went in for NMS during the year.

Traditional hardware maintenance comprising maintenance of own systems and third party maintenance grew at a staid pace of 17.5% to stand at Rs 1,963 crore. Deployment of equipment beyond servers, desktops, and network elements in the form of storage, automated teller machines, kiosks, and others is providing growth to this area. Another trend is of warranty outsourcing services for OEMs, a new business in itself. A combination of any or all of a call-center, part logistics center, and repair center constitutes this. Hardware vendors like Intel, Epson, Sun, APC, Dell, and others have outsourced their warranty operations to third-party companies.

For example, Tata Infotech handles warranty and technical services for Dell, Rolex Logistics for APC and Sun, and Accel-ICIM for some other MNCs.

The largest chunk of the services market, nearly 74% of it comes from software development, software maintenance, turnkey projects, implementation services, managed services, and consulting. Admittedly, the lines between these activities are blurring. In 2002-03, nearly Rs 6,000 crore came in from a mixed bag of technology service activities in these areas. Pure customized software development and software maintenance actually recorded a dip but still brought in close to a third of the overall non-hardware related service areas.

At Rs 1,900 crore, customized software development and software maintenance actually gave way to more packaged software implementations in the area of messaging, core-banking applications, insurance solutions, retail back-ends, ERP, SCM, CRM and business intelligence. The license revenues of these packaged software are accounted for separately. This software requires heavy implementation effort preceded by consulting. Consulting revenues are pegged at Rs 1,100 crore, up by 18%. E-governance projects taken up by many of the state governments involved quite a bit of custom software development too.

Growth in the services segment is still largely driven by infrastructure creation and expansion. The boom in the BPO sector, the scramble to go in for strategic deployment of IT by PSU banks, the rush towards e-governance projects by various states, and the hectic expansion plans by telecom service providers—all gave a thrust to service activity in the IT sector. The direct beneficiaries of this phenomenon are the large systems and network integration players.

Turnkey projects—a combination of systems integration and network integration activities grew by 40 % to touch Rs 2,541 crore. The key driving factor is consolidation towards centralization of resources followed by technology upgrades. Across verticals, especially in BFSI (banking, financial services and insurance) and large manufacturing sites, resources are getting aggregated at the center. Consequently, organizations are setting up data-centers.

Concerns about business continuity have spurred organizations to consider setting up disaster recovery centers. In fact, the RBI has mandated that all banks under its purview should have a business continuity policy and a disaster recovery center in place. Also, the RBI directive on real-time gross settlement (RTGS) has had its implication in terms of infrastructure preparation to meet with the regime. For banks and FIs, creation of dealing rooms has been another focus area this year—ICICI and the Bank of Baroda have already set up dealing rooms, and other banks are planning to do so in the coming year.

Necessitated by enterprise-wide applications like ERP and aided by the availability of bandwidth, organizations are also aggressively considering new technologies like IP-VPNs, IP telephony, and wireless to cut overall operative costs. Further, with the emergence of converged multimedia like voice, and video, data has now become a reality due to bandwidth availability. Organizations that talked about extranets are now in the process of actually deploying them, while intranets are now a given.

Pure Web-based commercial applications are not being developed on a large scale, though its adaptation in the form of knowledge management, content management, workflow, and sales force automation have been done. Another trend that is clearly emerging is the increasing adoption of IP-VPNs (virtual private networks based on Internet Protocol). Apart from the economics involved, IP-VPNs offer far more benefits than star-based networks. In March, the Frame Relay Forum merged with MPLS (multi-protocol label switching) because of which IP has now become commercial.

The two other key areas that managed to bag a fair chunk of technology spending were storage and security. Primarily, organizations have begun to bring in the dimension of planning to manage their storage requirements. As long as they were adding storage on the fly by attaching storage directly to the server and the desktops, organizations did not confront the issue of managing storage. As the size of the IT infrastructure and the applications grew, storage became an issue.

Meanwhile technologies like storage area network, storage resource management, and the like showed the way in which organizations could have control over storage resources and manage them in a service-mode. Over the past one-year storage solutions’ vendors like IBM, HP, Network Appliances, and CA have seen a lot of traction in this area. The services component in storage is also increasing with the increasing sophistication in the storage infrastructures being deployed.

Similarly, security is now getting institutionalized; organizations have begun to formulate security policies and procedures, conducting security audits, going in for certifications, considering secure identity management solutions and the like. Consultancy and implementation revenues are therefore on the rise. The rise of Linux has important implications for the services market because the Linux solutions business thrives on the services component. However, zeroing in on a number for this market is not possible as yet.

Finally, the large and untapped SME market is a ripe candidate to be exploited by the vendors of services. A good part of the technology delivery be it applications, networks, storage, security, or Linux, will happen in this segment. Some initial activity is on but the explosion of the market is about two years away…. but that is when the dynamics of the services business would be redefined.

Easwardas Satyan