Powering Businesses
Clients are increasingly demanding a partner who can offer end-to-end services-from consulting, project management, and integration to offering managed services. Therefore, it is not simply the case of uptime SLAs anymore. The clients now want the managed service provider to do disaster management, bandwidth management, application response time management and coordination with telcos for availability of lines and security implementation as well. The entire accountability lies with the managed services provider and, therefore, unified SLAs have become more popular in the recent past.

The most widely offered services from quite a few players are onsite infrastructure managed services (also referred to as Facility Management by some) wherein the customer outsources its IT management to third party vendors with multi party skill-sets, says Bimal Raj of Allied Digital. The remote infrastructure management model is one in which remote network application management and server management is done by the vendor, albeit remotely from a centralized location, adds he. Although the latter is being offered by some, it's still not widely adopted in India as compared to onsite
services.

Generically, the offering looks the same from every vendor, but the actual delivery, and quality processes to back the delivery vary widely between service providers. Frontier Business Systems, for example, has a structured delivery process and follows ITIL-based practices in its IMS service delivery to customers. It has a robust process-based back office with a wide set of skill-sets to monitor and manage service delivery, handle escalations and minimize infrastructure downtime.

And like all new market places, the space today has mostly MSPs who offer varied flavors of the generic network and server monitoring services. "As technology infrastructure becomes more and more critical to business, the space will witness a shift to a more value-based and domain centric offering which encompasses the entire IT stack-servers, networks storage, applications and desktops," Rangarajan believes. Vitage is keen to pioneer this shift and as a step in this direction is marketing itself as a provider of Business Service Management which bridges the gap between business processes and technology by using technology based on business process demands.

Closer Look
The trend is towards more and more organizations looking at outsourcing IT to managed service providers. The extent of outsourcing varies between organizations but the market players predict a large scale outsourcing happening over the next five years. Raj of Allied Digital believes that there is huge amount of growth in the large customers consolidating their network space.

"The big outsourcing deals that have hitherto been limited to the big players will now spread to medium sized players as well with the size of deals continuing to be significant," forecasts Rangarajan. There will also be some movement towards open source based tools, adds he.

Chopra of Team Computers predicts that Remote Infrastructure Management is one of the key offerings that is quite new. While most large companies use very expensive software, Team, on the other hand, has invested in building its own platform over a period of two years for ensuring flexibility, cost effectiveness and value to the end customer.

Most players agree that any segment that is totally commoditized will become a volume game or a size driven market-the MSP business is still not there. Service deliverables and responsiveness backed by a decent ability to react and handle problems for customers will be the prime reason behind the relatively smaller players beating the larger ones.

However, organizations now have more stringent quality parameters and are looking at SLA-based contracts and compensation. Customers are also more discerning about quality and do differentiate between service providers based on multiple performance parameters.

While the business is expanding, existing players are improving their efficiencies and the market is quite competitive and margins can get squeezed. "On the flip side is the fact that selling and marketing costs of business acquisition or customer retention are lower, especially when one is dealing with the same customer for several other IT requirements," says Prasad. Bimal Raj, however, feels that the tier-II portfolio includes plain vanilla services like facility management and AMC, which some players are trying to include in managed services.

Most of the existing players do not host applications since most customers are reluctant and have issues in hosting their applications on MSP servers. But a small number of players have started hosting simple applications that help do their jobs better. For instance, while Vitage has started messaging applications and plans to add other business application in due course, Targus uses PatchEasy which helps in patch management and mass deployment of patches across an enterprise, and a Service desk which manages service calls (request for service from end users) and helps them manage the SLAs signed. Allied Digital too does not host applications and instead provides consultancy services to clients. Team Computers, on the other hand, apart from ofering the usual IT services that range from desktop support, network support, data centre support, application support, etc, also offers a web-based service monitoring dashboard which allows key personnel of the customer to slice and dice service delivery information on a real time basis.

Service deliverables and responsiveness backed by an ability to react and handle problems for customers are the prime reason behind the relatively smaller players beating the larger ones

On the margins front, Chopra says that these are decided depending upon the deal size, duration of the contract and deliverables. However, it is safe to say that margins are between 20-25%, he adds.

Is the Market Big Enough?
One of the key developments has been the realization that larger brands may not always be the best bet for managed services. This is because the flexibility that businesses expect IT to have is not easily deliverable when larger players are involved. So CIOs have started looking at companies that follow processes as the enabler and not as a limiter.

With the market itself growing and no single player poised to address, individually or together, the entire market segment, there is a fairly large market segment open to these tier-II MSPs to tap into.

While the big players have the advantage of several years of market presence in the services segment, the tier-II players have a single point of management and accountability. They also have good technical and management skills and service delivery capabilities are at par. The in-depth information about local requirements is another advantage that these smaller players have. "The tier-II MSPs have knowledge of the local requirement in terms of local language, each vertical having its own share of problems and cost advantage," says Raj.

Singh of Targus Technologies says that one of the sure shot ways of competing with the bigger players is to offer value additions, keeping the customers satisfied by not just honoring the SLAs but also exceeding them and being more flexible. This is an industry where referral checks work and the MSP has to build its reputation over the years.

Another way of growing in the cut-throat market is by focussing on specific vertical domain segments where these small players can deliver significant value through their technology and domain competency. "We can also register growth by focusing and building on the BSM methodology and application management," says Rangarajan.

As the needs of the organizations continously change, it is always a challenge for the MSPs to ensure that their offerings are in tune with the consistently fluid technology space. This segment too has not been spared and has its own unique set of problems. One of the major being availability of skilled and trained manpower although most players are trying to mitigate the problem by introducing trainee programs, proactive recruitment and deployment of bench strength into the system integration support process.

These problems, however, pale when one considers the quantum of growth this market is seeing. The players agree that the tier-II MSP market offers tremendous opportunity. And, most importantly, with no single big player poised to address, individually or together, the entire market segment there is room for everyone.

Stuti Das
stutid@cybermedia.co.in

Page(s)   1  2