Infrastructure Management Outsourcing: A Growing Market
The infrastructure management outsourcing (IMO) industry was one of the few sectors to be boosted by the global recession, as companies looked to reduc...
The infrastructure management outsourcing (IMO) industry was one of the few sectors to be boosted by the global recession, as companies looked to reduce costs and increase efficiency in their IT function.
The IMO market, which is set to be worth $180 billion by 2013, provides: network operation services, including traffic monitoring and network performance management; network planning, design and engineering; service integration and compliance testing; environment management, including data back-up and recovery and software administration; and system monitoring, including performance analysis and emergency action in case of system crashes.
Benefits of IMO are effective infrastructure management, which ensures high standards, while improving the flow of information throughout businesses. It also helps control and reduce costs because vendors use shared engineers to support multiple customers, enabling them to offer better prices.
Growing to meet demand
Initially, remote infrastructure management outsourcing (RIMO) was resorted to by large companies who were familiar with outsourcing or offshoring, but has now shifted to smaller companies.
Growth in IMO has most recently been seen in the retail, financial services, energy and utilities, high-tech, media and manufacturing sectors. “We have also seen the medical industry start to pick up on these trends,” says Gary Marzec, programme manager - supply chain management at Northrop Grumman Information Systems.
In the past five years, geographic growth in demand has come from the U.S. and Europe, but in the past 18 months India has seen the largest growth.
The expansion of IMO has attracted new players, according to V.M. Kumar, chief marketing officer at Microland. “Global product vendors like Cisco, Dell and Xerox have started offering infrastructure services on their own and through acquisitions,” he said.
“Traditional software outsourcers from India have also added on infrastructure management capabilities to their portfolio. Many new venture funded start ups have also come up in India. Besides this, we see various local players who have traditionally been in the hardware distribution and system integration business, attempting to reposition themselves as infrastructure management service providers.”
Chuck Vermillion, chief executive of OneNeck IT Services, adds: “[The growth] has been from both organic U.S. startups as well as from large international firms launching new U.S. based entities. The international firms are often from Western Europe, Japan and India.”
Indian-based IMO companies are blooming, with many seeing their share prices reaching record highs in 2010. At the beginning of October the Reuters India Investment Summit heard from several large IMO specialists, including Tech Mahindra and MindTree, who said they are looking to expand their presence through overseas acquisitions. Many believe it’s the countries’ ability to offer a low cost workforce, therefore a more cost-effective solution, which makes it so attractive.
India's National Association of Software and Services Companies published a report in 2008 which said that up to three-quarters of all IMO roles could be offshored, creating a revenue opportunity of up to $28 billion by 2013, of which Indian companies could capture about half.
Ferenc Szelenyi, vice-president Europe, Middle East and Asia public sector services at Dell Services, says: “The big Indian outsource vendors are competing with U.S. infrastructure vendors directly. After witnessing Indian and U.S. IT companies’ success, providers from China, Philippines, Brazil, and Eastern Europe are also entering the market.”
The expansion of IMO
Recently IMO has seen deals move from large bundled contracts, to stand alone deals, as companies choose to work with specialists. Bala Subramanian, vice president of Europe operations at ITC Infotech, explains: “IT outsourcing providers come from a fragmented past, where most contracts were different and they couldn't create economies of scale. IMO has given rise to a whole ecosystem of specialist vendors who come in with niche skills and leverage partnerships to manage an IMO deal.
“This used to be the forte of the behemoths like HP, IBM, Accenture and their clients would only be the mega corporations. With small- to medium-sized businesses opening their estates to IMO, this not only has expanded the markets by vast proportions, but created a whole different plane of the vendor ecosystem.”
The entrance of new IMO providers is certain to lead to the development of services and opportunities. Deepak Jain, global head – technology infrastructure practice at Wipro Technologies, explains: “This market is going to grow ... so many organizations that were in wait and watch mode will now start evaluating outsourcing options.”
However, he believes that like other industries, the sector will see vendor consolidation.
Meanwhile, Subramanian predicts that subscription based services will be the next big thing. “This is basically embedding the service catalogue in the IMO footprint, with a difference that users can now buy a specific service on pay-per-use. Product investments from the clients will diminish and on demand services will gain popularity,” he explains.
Meanwhile Doru Mardare, managing director of Luxoft Romania, believes that in the future the infrastructure will be totally virtualized or cloud-based. He believes that all resources – such as servers and storage space - will be hosted in virtual spaces at a low cost.
“IMO services will be related to such virtual environments and not necessarily to customer physical premises. This will create a strong dependency between IMO services and virtual hosting solutions,” he says.
So the future for IMO service providers looks bright, and they are set to receive another boost as global economies move out of recession - as the demand on IT functions to support business growth rapidly increases.
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.