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Managed services, outsourcing and marriage

The last conference on Managed Services I attended in Delhi was a big dissappointment (recall that  it was a mobile VAS conference pretending to be about managed services more generally).    My expectations were low when I attended the Dataquest CIO summit on the same topic couple of weeks ago.  One of my investee companies was sponsoring the conference so I goaded myself into attending.

I was pleasantly surprised to find the panel discussions quite interesting and focused on Managed IT; at the very least they made me aware of an Indian CIO’s’ sensitivities.  He is just beginning to think about outsourcing some key functions and pieces of infrastructure.  The most memorable soundbite from the show came from a panel which featured the CIOs of two retail banks and one mobile operator.

“outsourcing is like marriage, where a CIO and his vendor are partners who make a lot of promises, few of which are kept and yet separation is traumatic.”   To this someone responded, for what it’s worth: “you mean it is an Indian marriage?”

This led to a lot of navel gazing trying to analyze the relationship between CIOs and outsourcing vendors and what needed to be fixed.  The conclusion that the moderator drove the panel to was to hire consultants at every stage of the process; somewhat disingenuous since the moderator was a provider of such services!

Although the discussions at this conference were reassuring they are still a long way away from the sophistication I saw in CIO analyses in the US.    Some of my thoughts related to the show:

  • CIOs continue to think of all-or-nothing outsourcing:  use a large mature vendor (Infosys, Accenture, IBM etc.) to take all their IT infrastructure completely off their hands.  The idea of finding the best vendor for every facet of IT infrastructure and services is very nascent.   Pure-play specialists like Managed Security Services Providers,  RIM vendors, will have to keep feeding off the bottom of the pyramid till their target evolves.
  • Their decisions/ideas are not clearly supported by strategic and financial analysis; at least not as articulated in public fora.  I heard very little about justification for using service providers other than “the directive came down from the CEO” or “the Board wanted me to.”
  • Some CIOs continue to be in non-core asset-intensive infrastructure operations just because it can be run as a profit center.   Even if the ROCE justifies it, I would urge CIOs to look into growth opportunities  in the core business  instead of maintaining infrastructure.  The vendor will make more money than you do but that is a win-win:  good examples are telecoms companies spinning out tower assets into independent infra businesses.  Shared towers imply improved profitability for the telco and for the tower-c0.

The Indian CIO is coming of age quickly but managed services vendors may be front-running most of their buyers at this time.

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