The latest study report "Indian Managed IT Services Market" by Springboard Research noted that that although Managed Infrastructure services dominate the market in 2010, the highest growth will be recorded by Managed Application services with a CAGR of 26.2 percent from 2009 to 2013.
The study has found that the managed services model has rapidly and significantly begun to encroach upon traditional strategic outsourcing engagements. 66 percent of CIO's surveyed plan to adopt and engage with a managed services model rather than strategic outsourcing due to perceptions of "convenience" with managed services.
Another key reason as stated by CIOs for adoption of managed services over strategic outsourcing is access to best of breed services without the fear of losing control of IT.
"Managed IT services in India have existed in varied forms for more than 20 years. In this time, the market has matured and transformed from body shopping contracts or facility management services to a process-oriented delivery model," said Sudip Saha, Senior Analyst, IT Services at Springboard Research.
The report observed that while the large enterprises in India were the early adopters of managed services, the Small and Medium Businesses (SMBs) have also started adoption due to the similar competitive pressures and operational concerns that they face.
While large corporate entities often have skilled internal IT teams to support day-to-day operations, typically SMBs prefer to adopt the managed services model in a phased manner. Managed network services, workplace management services and managed server services have the highest uptake among SMBs.
In terms of adoption among verticals, Banking, Financial Services and Insurance (BFSI) organizations remain the largest contributors to the managed IT services market with a share of 28.2percent, followed by the Manufacturing and Government verticals.
According to the report, the key reason for managed services market growth in India is not just cost savings, but the use of managed services as a business optimization and growth driver. Managed services provide opportunities for enterprises to focus on their core business competencies while leaving day-to-day IT operations to a third-party service provider.
Springboard observed that the current managed services pricing model in India is Service Level Agreement (SLA) based but as the market evolves, more granular pricing models such as pay-per-user and pay-per-seat are expected to emerge.