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This is a story waiting to be told. A story of how mid- and small-sized systems integrators (SIs) and solution providers in the country are fast ramping up their services business. No longer contended with the fringe margins, offered by pure hardware solutions, these SIs today are investing time, money and people to ensure that their service offerings contribute a significant share to their toplines and even more to the bottomlines. And having scaled up the entire value chain of products, they are now looking to make a similar climb on the value ladder of services.

Share in the Revenue Pie
A quick look at the revenue break-up of many mid-sized SIs (with revenues between Rs 20-200 crore), and one can notice a very significant affinity towards services. Most of these companies today have between 20-30% revenue contribution, coming from services while in terms of profitability, it goes as high as 50%. Even the growth in service revenues on a year-on-year basis has been between 30-50% for these players. But growth figures apart, noteworthy is the fact that these SIs are looking much beyond AMCs. Today their service portfolio proudly speaks of offerings like facilities management, application management, network design and audit, disaster recovery services, information security services, remote management and even consultancy to some extent.

Not only that, they are also adopting frameworks like ITSM (IT Service Management) for service delivery and going for standards like BS 15000. Another significant trend that's giving these mid-sized SIs an advantage over other bigger players like HP Services, IBM Global Services or Wipro Infotech, is their increasing geographical footprint in the domestic market. Companies like Allied Digital boast of a direct presence across over 50 locations in the country while others like Network Solutions, Apara Enterprises and Omnitech Infosolutions too talk of similar reach (either directly or through partners). This clubbed with the inherent cost-advantage that they carry by virtue of being a mid-sized organization has made the landscape very competitive.

On a different note, HP Services, IBM Global Services and Wipro Infotech even engage a large number of SI partners like the ones mentioned above for last-mile service delivery or implementation. "In fact, more and more partners would be responsible for carrying out last-mile activities for the projects acquired by us in the days to come. Currently only 20% of that is done by them," says Rajat Mathur, business head-Solutions Division, Wipro Infotech.

Product Development for Differentiation 
What makes the entire domestic services more exciting is the deft move by these mid-sized systems integrators to enter into the indigenous product business apart from custom application development. Quite a few of these have put large resources to develop software products in-house that they are clubbing with their overall solution. These companies claim the products to be at par with similar solutions offered by many MNC vendors. Netsol, for example, has used its expertise in the network integration business to develop tools for network management, application management and help-desk or other service-related functionalities. Last year, the company did a business of Rs 8 crore purely from its software tools (SNAPiMON, QWAN, WAN Insight, IP Meter, AV Detect, coDesk, etc).

Some of the integrators have even started productizing their service and support offerings. This way, they are finding it more easier to get their customers pay for the same. However, making them realize that any kind of service comes at a cost, is a big challenge that these SIs continue to face.

"Making our clients appreciate and hence pay for the value that we add by way of our service offerings is a Herculean task as services are still an intangible entity. Hence productization of the same helps to an extent," says Bimal Raj, CEO, Allied Digital Services. Another noticeable development is that most SIs have converted their service activity into independent cost centers. This way, they ensure that their services team doesn't come under undue pressure from product sales team to compromise on pricing.

Further, realizing the fact that profitability factor is much higher in services, the integrators are not shying away from investing on training and certifications to further ramp up their service capabilities. "Around 6% of our last year's service revenue is invested back on training alone and we intend increasing the percentage in coming times," says Avinash Pitale, director, Omnitech Infosolutions, adding, training investment to improve service capabilities in niche areas would differentiate it from competition more distinctly.

Entering Foreign Waters
Finally, this is one move by the mid-sized systems integration organizations that would surely make the big 5 players sit up and take notice. They are going offshore!

While until recently, only large SIs like Wipro Infotech, CMS or Tata Infotech were offering a bouquet of services in the international market, the mid-sized players have also joined the party. And between them, they are spanning the better part of the globe with their diverse infrastructure management service offerings. Currently, Middle-East and African markets are the hottest among these players. Moreover, recognizing the immense potential that exists in the emerging trend of total IT outsourcing, the SIs are also sprucing up their infrastructure and skill sets to remotely manage the IT infrastructures of global clients. Companies like Netsol have already put in place a Remote Management Center (RMC) to monitor and manage IT infrastructures existing in foreign shores.

Companies worldwide are looking at improving their RoIs on IT investments, outsourcing the management services to low-cost yet high-skill destinations like India is inevitable as is already evident by the ongoing BPO boom.

Realizing this fact early enough, the mid-sized companies are slowly exiting the game of Rs 500 per PC-kind of AMC business to graduate into becoming value-added service companies. And in the way software services exports are currently bringing wide recognition to India, domestic service business-with significant impetus from these mid-sized SIs-too promises to shine brightly on its own. And soon!

Goldie in Bangalore

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