The Hindu Business Line : US recession to spur remote infrastructure management industry

A blessing in disguise
The US credit crunch — behind several cancellations or postponements of IT projects (especially in the financial services space), is propelling demand for infrastructure management outsourcing, say RIM experts.

Adith Charlie

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Mumbai, May 11 A US recession, it appears, evokes different sentiments from different segments within the same IT company!

What is ‘challenging’ to say the least for head of the financial services vertical, appears a ‘blessing in disguise’ for chief of the remote infrastructure management (RIM) practice.

The very reason — the US credit crunch — behind several cancellations or postponements of IT projects (especially in the financial services space), is propelling demand for infrastructure management outsourcing, RIM experts told Business Line.

Companies such as Patni are seeing enhanced traction in demand and are hence able to quickly close multiple small and medium size deals with significant RIM portion, according to Mr Ajay Soni, Vice President, Infrastructure Management Services, Patni.

An Infosys spokesperson said that his company has been able to close four-five large deals having a significant RIM component in the last two quarters.

What is RIM

RIM refers to the practice of managing the customer’s IT infrastructure such as networks and hardware, from a low-cost location like India.

According to a joint study by Nasscom and McKinsey & Co, India is positioned to capture $13-15 billion of the global opportunity in RIM by 2013. At present, RIM services revenues for the Indian IT industry stand at $3.2-3.6 billion.

Being a part of the company’s opex spend (and not capex spend), RIM spends come from the non-discretionary part of the IT budget, says Mr Nitin Shah, CMD of Allied Digital Services.

When the discretionary spend is curtailed in a slowdown, it becomes even more imperative to go in for RIM.

Mr Pradeep Bindal, Senior Vice-President, Global Business, HCL Technologies Infrastructure Services Division, says that infrastructure management costs are what a company has to pay “for keeping the lights on”; the company has no option but to incur the cost.

Savings

“Moreover, RIM enables customers save up to 25 per cent of their IT infrastructure budget over the period of the engagement,” says Mr Bindal. These savings from the run side of the business can then be utilised into the build side, according to a senior technology analyst. Thanks to the availability of high-end computing, about 75-80 per cent of the infrastructure management activity can be done offshore, the Infosys spokesperson said.

Mr Viral Thakker, Director – IT Advisory Services, KPMG India, says that currently many of the RIM offshoring contracts are served domestically in the US or from near shore locations in Canada and Latin America.

Research and advisory Frost & Sullivan has been predicting the RIM market for India to show annual growth rate of 30 per cent. However, there could be a significant acceleration in this expected rate of growth, depending on how severe the recession in the US turns out to be, says Mr Sourabh Kaushal, Industry Manager, ICT Practice, Frost & Sullivan.

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