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Dr Jason Carter
Industry service industry Overview Industry service industry transformation Business model Competitive advantage Outlook Major Players Rivalry among existing players Company Overview SWOT Analysis Factor evaluation Matrix Competitive Strategies in Economic Downturn
524
803.9
0
200
400
600
800
1000
2003 2009
Size & Growth ($B)
IT Service Industry : OverviewIT Service Industry : Overview• On-shore incumbents are
still larger: IBM, Accenture
• Off-shore players growing : TCS, Wipro, Infosys
Technology
• 47% Annual growth (2003 vs. 2004)
• Still 0.8% market share
Fragmented market
Steadily growing industry $150 million in 1991-92 to $5.7 billion in 1999-2000
( $4 billion worth of software exports ) Annual growth rate of Software Exports - over 50
percent Software exports to around 95 countries around the
world More than one –third of the global Fortune 500
companies outsource requirements to India Upcoming market openings for IT industry
◦ IT Services◦ Software products◦ IT- enables services◦ E-business
Source: Gartner
IT Service Industry : IT Service Industry : TransformationTransformation
Change in Customer Needs
Change in Offerings
• Invest in new technologies on faith and without strong links to ROI
measurements (Over-purchase!)
• Traditional enterprise application packages
• Homogeneous infrastructure
• More demanding in ROI
• Get more out of tech investment
• Rapid adaption /modification
• Specific point solutions
• Off-shore IT services
• SOA (Service-oriented Architecture) & Web services
• Applications as services
Business Business ModelModelDefinition
“The process of breaking projects down into their
logical components and then distributing
those components to locations (onsite, near
shore, or offshore) where
they can be delivered at
maximum value.”
Modular Global Sourcing
Framework
Innovation
to Meet New
Customer
Needs
Lower Cost
Faster Implementation
Lower Risk
Measurable
Customer Value
Proposed development and
Internet marketing center
And Virtual; resource bench
Vehicles
Business ModelBusiness Model“1-1-3” Model
Definition
“Integrate the business
consulting and technology
implementation lifecycle. ‘1-1-3’ model gives one
client one resource onsite, one FR resource onsite, and 3 FR Tech resources
offshore.”
Vehicles
• On-shore management
consulting talent
•On-shore liaisons
•Off-shore resources
“1-1-3”combined with GDM
Customer Value
• Lower blended rates
• Faster Implementation
• Integratio
n
What are the Competitive What are the Competitive Advantages?Advantages?
“1-1-3” Model
•Blend on/off shore
•Cost efficient
Strong operational
skills
Access to Infosys Technologies
clientsLarge supply of low-cost
IT/process resources
Cost & speed
advantage coming
from “1-1-3” and GDM
model
Unique,
blended model Easier to integrate offshore
with onshore
If company guidance's are anything to go by, then the outlook for the industry seems bleak http://www.businessweek.com/globalbiz/content/jan2009/gb20090121_832742.htm
Collapse of the US car industry to impact TCS, Wipro and Infosys
• During recessions, tech spending has historically fallen by more than the GDP
• A McKinsey study indicates that IT spending has typically fallen by 5-7 times the GDP in the past recessions
• The BFSI sector that pioneered the move offshore idea has been butchered and is expected to worsen
IT Consulting Market Context & IT Consulting Market Context & StructureStructure
• Subset of overall IT services market • Projected single-digit growth of 5% Largely fragmented market with 2 key segments:
• On-shore consulting and IT services players (Accenture, IBM, Cape Gemini, EDS)
• Off-shore IT services players (Wipro and TCS)
• Largest shares held by Accenture and IBM
Infosys Technologies Wipro Technologies Tata Consultancy Services IBM Global Services HCL Info systems Cognizant technology solutions
Multiple players:◦ TCS◦ Accenture◦ Wipro◦ Infosys◦ Cognizant◦ HCL Tech◦ Patni …. …. …. …. The list
is large Competition is global in
nature and stretches across boundaries and geographies
Replication of the off shoring model by MNC IT majors
RIVALRY AMONGST EXISTING RIVALRY AMONGST EXISTING PLAYERS ( CONTD )PLAYERS ( CONTD ) Until the recent crisis,
the market as a whole was expanding
A growing market meant that there was enough and more for all the players in the market
• The problem of stagnating markets• Implies that all the players need to gun it out
amongst themselves to grow revenues• Rivalry expected amongst existing players to
intensify
Specializes in delivering technology enabled business
Business and technology consulting Systems Integration Application services IT outsourcing Business Process outsourcing IT infrastructure services Web Development and internet marketing Interim Resources and subject matter
experts
Technologies – SWOT Technologies – SWOT AnalysisAnalysisStrengths Weaknesses
Opportunities Threats
Significance of Impact
H High
M Medium
LL Low
• Operational excellence to deliver
GDM
• Capability to attract & keep talents
• Strong relationship
• More cost/speed conscious customers
• Market growth
• Higher awareness on Out Sourced model
• Over-reliance on UK economy
• Limited position in value chain (i.e. No
presence or relationship with
consulting business)
• Wage inflation due to competition on talents
(15+% / year)
• Newer disruptive business models (i.e.
web services, web 2.0)
H
H
H
M
M
M
H
M
LL
LL
M
SWOT ANALYSISSWOT ANALYSIS• Strengths:
– Enhanced competitive edge – Indian based operations
– Low labor costs, high relative rates of inflation
– Relatively high skill levels in IT– Extremely strong position – Brand – respected across the world– Varied Domains of Businesses – foray into
products and services
SWOT ANALYSIS SWOT ANALYSIS ( CONTD )( CONTD ) Weaknesses◦ Occasionally falters to secure contracts in North
America – missing out on lucrative business◦ Small player as far as global players are
concerned◦ Multi – cultural environment◦ Business consulting practices dominated by
major players like Accenture and IBM◦ Word of mouth marketing of offering◦ Lack of expansion◦ Outsourced offshore resource
SWOT ANALYSIS SWOT ANALYSIS ( CONTD )( CONTD ) Opportunities◦Lucrative expansion options in China◦European and North – American
companies to outsource a portion of BPO /ITO operations
◦Provides outsourcing and Cost reduction strategies – help clients during global recession
SWOT ANALYSIS SWOT ANALYSIS ( CONTD )( CONTD ) Threats◦Move to offshore service companies in
countries like China or Korea◦Has to compete for skilled labor – may
affect wage levels and retaining staff◦Competitors coming from China, Korea
– low cost labor and adaptive to western practices
INTERNAL FACTOR EVALUATION MATRIX
IFE Matrix indicates that India IT Inc. is strong and it has done well, so far, to overcome its weakness
EXTERNAL FACTOR EVALUATION MATRIX
• EFE Matrix indicates that India IT Inc. is not responsive in exploiting opportunities and in
mitigating the impact of threats
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