Managed services have huge growth potential in India with businesses increasingly outsourcing their IT infrastructure maintenance in order to focus on their core competencies.
This makes good business sense.While IT is essential to competition, it provides relatively little strategic leverage to an organisation. This is because IT infrastructure has become highly commoditised, is largely replicable and is now more affordable.
Hefty, misplaced IT investments can thus inflict a disproportionate cost disadvantage on a business. It is estimated that corporations currently fritter away as much as 20 per cent of their IT budgets on purchases that underachieve the organisations’ objectives. IT management needs to be prudently planned.
The new mantra for IT optimisation thus becomes: manage costs and risks rigorously, identify and “temper” vulnerabilities, separate essential investments from discretionary, and exercise rigour in evaluating returns from systems investments.
Size and growth trends
In such a backdrop, managed services are not only beneficial but also essential. The global market for managed services is expected to cross $66 billion by 2012, with the Indian market being a large contributor. Research estimates by Ovum Research have pegged growth in the managed services market at a compounded annual growth rate (CAGR) of 27 per cent in the Asia-Pacific region, driven mostly by growth in India and China.
In India, the banks, financial services and insurance sector, manufacturing and pharmaceuticals, are the main enterprise verticals deploying managed services. Small and medium enterprises (SMEs) constitute a key customer segment for managed services, especially managed security services. SMEs are expected to spend $289 million on security in 2008.
Meanwhile, the key growth segments for managed services are managed security, converged communications and managed applications, which are expected to grow at a CAGR of 22 per cent, 29 per cent and 26 per cent respectively.
Managed converged communications will be driven by enterprises replacing their public switched telephone networks with voice over internet protocol (VOIP). Uptake of managed applications will be boosted by the heightened challenge of managing multiple business applications across geographies and expanding user bases.
Managed IP virtual private networks (IP VPNs) also form a major thrust area.IP-based services are expected to grow at a CAGR of 18 per cent over the next four years. IP VPNs constitute the largest global managed services market with revenues totalling $17 billion. It is expected to be the most widely deployed managed service in 2012. The fastest growth is expected in the managed VOIP segment over the next four years with a 39 per cent CAGR. The managed security services market is another booming segment and is expected to exceed $6 billion by 2011.
Opportunities and issues
Managed services offer many benefits to those utilising them. Opting for managed services often leads to lower costs (also overhead cost reduction), better cost predictability, control over capital costs, etc. Many companies suffer from a lack of IT and telecom expertise. Managed services help them keep pace with technology innovation and carry out proactive capacity planning.
By opting for managed services, companies usually gain in terms of service quality improvements and higher output and efficiency. Transparent and actionable service level agreements (SLAs) between managed services providers and enterprises also manage risk for enterprises and deliver measurable value from technology. All in all, managed services channel resources to their core functions, allowing specialists to concentrate on what they were hired to do.
However, there are still some lingering issues and concerns. According to an IDC research report, enterprises are concerned about several issues including loss of control of own infrastructure, security, lack of service provider knowledge specific to domain or industry, risk of downtime, poor return on investment and managing disaster recovery.
There are various ways by which managed services providers can deal with such user issues:
.Security issues: The managed services provider can offer security audits against vertical industry standards.
(Based on a presentation made by Avnish Datt, Country Manager, Global Communications Solutions, Orange Business Services)
