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RIMO is Dead, Long Live RIMO
February 2014
Proprietary & Confidential. © 2013, Everest Global, Inc. 2
The King is Dead
Long Live the King!
Proprietary & Confidential. © 2013, Everest Global, Inc. 3
RIMO is disrupting the infrastructure market and redistributing the profit pool
IBM
Dell
HP
CSC
TCS
Wipro
HCL
Cognizant
13.3
7.1
8.7
0.4
23.7
19.5
18.2
18.8
Asset-light players more profitable2012; Operating margin in percentage
Proprietary & Confidential. © 2013, Everest Global, Inc. 4
RIMO’s impact is far from over, having only captured a small part of the market to date
Source: Everest Group estimates
Asset-heavy players losing share2010-2012; CAGR in percentage
Annual IT outsourcing revenueUS $000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2010
2011
2012
IBM Dell HP CSC TCS Wipro HCL Cognizant
0.03
0.7
-1.3
-1.4
31.9
15.8
28.3
42.8
As
se
t-H
ea
vy
As
se
t-L
igh
t
IBM
Dell
HP
CSC
TCS
Wipro
HCL
Cognizant
Avg. = -0.6%
Avg. = 27%
Proprietary & Confidential. © 2013, Everest Global, Inc. 5
However, Cloud is growing at a rate that is disruptive
41.9%
19.3%
5.9%
3.1%
1 On-demand, shared IT infrastructure architecture 2 Includes Network and desktop outsourcing, help desk outsourcing, data center outsourcing, storage as a service, and end user compute3 Engagements with infrastructure service in scopeSource: Gartner; Everest Group analysis
2011 2012 2013
404328 307
2011 2012 2013
26
6270
Decrease in traditional ITO deal signings3
Number3
Increase in Cloud-related deal signings3
Number
5
ITO market segment 2012-2016 projected CAGR2012; Percentage
Cloud compute
Infrastructure utility1
ITO market
Traditional ITO segments2
Revenue inUS$ billion
16
250
190
Proprietary & Confidential. © 2013, Everest Global, Inc. 6
New Business Capabilities
ImprovedEfficiencies/
Utilization
50% of all data center workloads are advantaged through cloud delivery
“Big Data”/
Analytics
Wave I Low Risk Extensions
Wave III Attacking the Core
AdoptionDriver
HCM
CRM
Collab.Marketing
Apps
WebSites
Test/Dev
DR/BCP
Backup/ Archive
“Spiky”LOB apps
SCM
VirtualDesktop
ERP
TxnlApps Wave II
Driving Value
ILLUSTRATIVE
Proprietary & Confidential. © 2013, Everest Global, Inc. 7
An example of the nature of Cloud advantage
1 Assumes average workload mix and profile; 15% of total peak workload hours shifted to public Cloud in an on-demand model; does not include application migration costsSource: Everest Group Cloud Value Assessment Model
Relative enterprise workload cost1
US$/GHz hrs
100%
60%
Public cloudVirtualized / Private cloud
Dedicated
60-65%
Hybrid cloud
25%
Peak load - Public cloud
Base load - Private cloud
Proprietary & Confidential. © 2013, Everest Global, Inc. 8
Long term contracts are no defense against cloud
YR0 YR1 YR2 YR3 YR4 YR540
50
60
70
80
90
100
110
120
Cost index
Baseline
Traditional outsourcing procurement
Contracted floor
Next-Generation IT services solution
Solution differences
Structure Services Pricing
Long term commitment for defined service portfolio
Custom services and service level agreements (SLAs)
Resource unit pricing linked to assets
Hybrid roadmap of diverse IT service models
Standard services and SLAs
Pricing linked to model, including consumption-based
Alternative IT infrastructure solutions
Note 1: Baseline and Traditional Outsourcing Procurement based on actual client projections and executed service provider contract, includingtransition costsNote 2: Next Generation IT Services Solution estimates potential from executing roadmap of Next Generation IT initiatives to implement private Cloudand hybrid private/public Cloud solution over 4 years, including projected migration costs
CLIENT EXAMPLE
Proprietary & Confidential. © 2013, Everest Global, Inc. 9
RIMO players are extending the arbitrage model to embrace new models
Provider DescriptionBuyer
Manage and transform the infrastructure landscape – 20 countries,19,000 employees, 80 locations
Management Tools as a Service platform – Transform IT operations desktops, storage,
compute, telecom, security, and databases
Manage SAP environment via a private cloud.– With client, consolidated 9 datacenters into 2,
eliminated over 1,000 servers– 35 locations more than 50% consumers
hosted on it
Source: Publicly available information
Proprietary & Confidential. © 2013, Everest Global, Inc. 10
RIMO players are being out spent
CLIENT EXAMPLE
Approach: Full service public cloud
Softlayer (2013) - US$2 billion – Global Cloud infrastructure
UrbanCode (2013) – Software delivery automation
Green Hat (2012) – Software quality and testing for Cloud environments
Big Fix (2010) – Management and automation for security and compliance software updates
Approach: Management solutions on top of any next generation platform
Plain text Enstratius (2013) – Consolidated
management across multiple Cloud platforms
Multiple acquisitions (2012) - US$5 billion– Credant Software – Data protection– Gale Technologies – Infrastructure
automation– Quest Software – Value-added software
solutions/virtualization Boomi (2010) – SaaS integration
Proprietary & Confidential. © 2013, Everest Global, Inc. 11
To recap
More remote management, fewer FTE’s
New skills set
Automated bursting
Self healing systems
Self-provisioning
SaaS…as a delivery model
Public cloud
Private cloud
Automation
Arbitrage
Delivery
Proprietary & Confidential. © 2013, Everest Global, Inc. 12
The innovator’s dilemma
Traditional IT Infrastructure
RIMO
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