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This year's three domestic IT outsourcing deals- Bharti-IBM,
Dabur-Accenture and BOI-HP- largely define the content, context, and the
direction the domestic IT services industry would take in the next couple of
years. Taken together, the deals represent a level of maturity achieved among
Indian enterprises, and their willingness to opt for a more evolved approach in
managing technology while handling the core competencies of their businesses.
The domestic IT services market grew at a robust 31% to touch Rs 11,553 crore,
growing faster compared to the previous year's growth rate of 25%. Leading the
growth clearly were three categories of services-facilities management,
managed services and total outsourcing-each getting to be sizeable market
segments. Software implementation and turnkey projects are the other significant
growth drivers.
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 have shown steady
growth in this area, to the order of 85% this year to touch Rs 555 crore.
Vendors with resources to service a national customer base like Accel ICIM, HCL
Insys, Wipro, CMS and CMC have been the primary vendors in this space.
Distinctions within the ambit of facilities management services (FMS) are
also developing as new models of engagement. Managed services, technical
helpdesk, availability services are all the new strains of specialized service
operations. Large vendors like IBM Global Services, HP Services, Wipro Infotech,
HCL Comnet 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) is estimated to be a Rs 234
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 offer
value-added services like disaster recovery 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
slower pace of 16% compared to last year to reach Rs 2,277 crore. Deployment of
equipment beyond servers, desktops and network elements in the form of storage,
ATMs, kiosks, and others is providing growth to this area. At Rs 1,710 crore,
software development activity has reduced considerably due to extensive use of
packaged application software in various areas like core-banking applications,
insurance solutions, retail back-ends, ERP, SCM, CRM and BI.
However, packaged software implementation leads to an overall rise in service
revenues in three areas: pre-sales consulting, implementation services and
software/application maintenance. Of these, the market size for implementation
of packaged software is estimated to be Rs 600 crore, excluding the license fee.
Growth in the services segment continues to be largely driven by infrastructure
creation. The boom in the BPO sector, the scramble to go in for strategic
deployment of IT by PSU banks, e-governance projects, capacity expansion plans
by telecom service providers, SMEs readying the infrastructure for packaged
applications, and new projects like the tax information network by UTI and NSDL-all
gave a thrust to almost every IT service activity. The direct beneficiaries are
large systems and network integrators. Notably, there is the rise of a healthy
mid-market segment in services (see next story: The Middle Order Challenge).
Finally, the domestic BPO segment, driven by outsourcing of business
processes-customer service, document processing and outbound marketing-saw
more people being added. On a small base, the domestic BPO market grew by nearly
50% to touch Rs 1,450 crore.
Ishwar Daas Nair in Mumbai
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