Huge uptake in managed IT services spending among SMBs

Mumbai

September 14th, 2007

Small and medium businesses (SMBs or companies with up to 999 employees) in
India are on track to top $900 million in IT services spending, including both
product support and professional services. This is up more than 19 percent from
last year, which is a similarly high growth rate from the year before. This
comes from the latest report by New York-based Access Markets International
(AMI) Partners, Inc.

Overall, the report found that long-term managed services are gaining
strength even as traditional sectors like applications development and
integration are losing traction. In India, managed IT services consist of
end-to-end outsourcing, and discrete managed services. The latter dominates the
managed IT services expenditure of SMBs currently.

"Managed IT services constitute a good chunk of the overall IT services
package, which is growing faster than average market growth," said Nirupam
Chaudhuri, Research Manager with AMI Partners. "Managed services contracts,
such as application and network management, desktop and server management and
managed hosting services, are becoming mainstays for SMBs in India now."

"In most cases, the primary point of contact for SMBs is the IT channel
partner where a system/network integrator doubles up as the managed services
vendor," Chaudhuri said. "A good working relationship needs to be
established first. The CIO or head of an SMB ideally wants to have a single
point of contact while dealing with various issues related to IT infrastructure
and facilities. Till now annual maintenance contracts (AMC) for hardware and
software applications have constituted the bulk of SMB managed IT services spend
in India. Gradually even AMC will mature into full-fledged discrete outsourcing
deals, where the deal would entail risk sharing, 24/7 support and facilities
management services."

SMBs expect clear SLAs from services providers, including network uptime,
adherence to SLA clauses, and fault-free integration with existing business and
IT processes and applications. "Cost reduction, RoI and openness to
out-tasking are becoming important driving factors for such engagements,"
Chaudhuri noted.

Routine desktop management services options have high traction and users are
becoming selective while choosing the service provider. SMBs are also looking at
speed of delivery, a standards-based approach, optimization of existing
resources, performance measurement and proactive management before deciding
infrastructure services contracts.

In India, the competition among vendors in desktop management and routine
network management services is huge. The number of deals in applications
management engagements - which entails SLA driven reactive/proactive application
maintenance, applications optimization, upgrades automation services - is
growing.

There is also traction for fault, configuration, accounting, performance and
security (FACPS) based network management from service providers. The upper tier
of MBs (companies with 100 to 999 staff) has begun availing NOC (network
operation centers)-based remote infrastructure management facilities as well.

(Courtesy: AMI Partners)