Just like services, the clients of IT companies in the IMS space can also be segregated. They are divided into two categories.

The distributed computing clients take advantage of low cost associated with offshoring. They retain the infrastructure and investments on future infrastructure with them and just offshore day-to-day operations to the Indian services providers. The key advantage here for the client is reduction in costs of maintenance.

Coming to data centre clients, here the client takes advantage of large economies of scale by installing the client’s infrastructure in data centre facilities of large IT services provider like Wipro. In this, the benefit to the client apart from cost advantage also includes reduction in capital investment.

Why companies are running after this?
The main reason IT companies are chasing this is the enormous size of the IT Infrastructure industry, which is projected to reach US$ 234 bn by FY10. According to Gartner, the IMS revenues of Indian services providers grew by 72% in 2QCY08. Secondly, IMS is the entry point for gaining access into other large customer accounts.

To explain this in a simple way, suppose an IT company wants to service a large client. Its entry point to that company will be the IMS. If it serves the client well, then the client will allow it to move up the value chain and further outsource some of its other functions like the HR and F&A operations. Success here is likely to lead to still higher value added job of maintaining and developing applications and so on and so forth. The entire process might take at least 2 years to 3 years. But this is how IT companies gain access to larger accounts and a 5 million dollar client turns into a 50 million dollar client.

The Indian players are new entrants in this field. Currently, the leader in this space is HCL Tech, which derives 14% of its revenues from IMS. Wipro derives 11%, TCS 6% and Satyam 4%. The Indian companies are bound to face stiff competition from its global counterparts like EDS. Another concern in this arena is lack of entry barriers, which make the field even more competitive. On the positive side, the IMS market is growing at a very fast pace and Indian IT companies can certainly target a bigger pie in this.


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