The document summarizes the decline of traditional infrastructure outsourcing models and the rise of next generation outsourcing providers. Specifically: - Traditional outsourcing is declining due to dissatisfaction with rigid contracts and finger-pointing between vendors. New customers expect more flexibility and agility from providers. - Next generation providers are adapting to new technologies and customer expectations by offering flexible, pay-per-use models focused on business value over strict service level agreements. - A case study example shows how one IT provider delivered a mobile solution that improved a manufacturing client's productivity and customer satisfaction through real-time invoice processing.

1. www.niit-tech.com
NIIT Technologies White Paper
Reincarnating Traditional Infrastructure OutsourcingReincarnating Traditional Infrastructure Outsourcing

2. Executive Summary 3
What is Traditional Outsourcing? 4
Effects of Market and Economy on Traditional Outsourcing 4
Next Generation Customers and Service Providers 5
- New Breed of Educated Customers and their Expectations 5
- Next Generation Vendors/Service Providers 5
Our Credentials 6
- Case Study: Manufacturing 6
The Road Ahead 6
CONTENTS

3. MANUFACTURING
SALESSALES
MARKETING
MANUFACTURING
MANUFACTURING
CONSUMPTION
TRAVEL
MARKETING
MARKETING
MARKETING
PROFIT
DELIVERY
FACTORY
PROFIT
PROCUCTION
PRODUCTIONPRODUCTION
PRODUCTIONPRODUCTION
FACTORY
BUSINES
DISTRIBUTION
Executive Summary
Traditional Infrastructure Outsourcing (IO) is on its decline with
increasing levels of dissatisfaction among clients due to its
complex structure, continuous finger-pointing and rigid Service
Level Agreements (SLAs). Many clients, who signed long term
contracts with traditional infrastructure management vendors also
attribute the dissatisfaction to incompetency of incumbent IT
vendors to adapt to dynamic needs; making infrastructure
environment lethargic and rigid.
These reasons driving the decline of traditional IO models are in
turn encouraging clients to shift to and invest more in next
generation service providers that can provide them flexibility and
agility to match the ever changing dynamics of business. A report
from Forrester Research attributes this shift to change in
technologies and innovation. Although traditional IT infrastructure
vendors are adding automation and real-time data analysis
capabilities to their portfolios, clients are still replacing these
vendors at the rate of approximately 40 percent, reflecting
competition from agile competitors and newer service providers.
This paper highlights how and why traditional infrastructure
outsourcing market is shrinking dramatically. It also explains how
the new age vendors can adapt to new technology to provide
benefits to Gen 2.0 clients.
What is Traditional Outsourcing?
In traditional outsourcing, IT outsourcing vendors provide only a
specific service, such as business applications, servers and
storage environments, network and security environment,
operating systems and tools, or databases. A certain number of
vendor employees’ work for a pre-determined number of hours,
per week or month to provide these technical services to the client.
However, they do not help companies decide what else they can
do to achieve business benefits.
The main objective of using traditional IT outsourcing model was
cost optimization and efficiency to manage and build various
heterogeneous components of IT infrastructure. Companies signed
syntactic and semantic agreements generally referred as ‘black
box’ contracts and had full control on vendors providing delivery.
However, reasons like contracting models, loss of control, lack of
flexibility, poor customer-vendor alignment, and every piece of
work being called a change request. This resulted in vendors
pointing fingers at one another when anything went amiss; led to
high levels of dissatisfaction among the companies.
Effects of Market and Economy
on Traditional Outsourcing
Outsourcing is considered to be an effective way to reduce cost
and improve business agility. According to Gartner, IT outsourcing
market is poised to grow more slowly, reaching $288 billion in
2013, a 2.8 percent increase from 2012. Gartner also predicts a
5.4 percent compound annual growth rate (CAGR) in the global
outsourcing market through 2017.
In general, traditional outsourcing models are under unprecedented
pressure due to the following factors:
Uncertain markets, economic downfall and
changing laws/regulations
In the last five years, financial slowdown, uncertain and unstable
markets, and changing laws/regulations have resulted in lower
business value being delivered by traditional outsourcing models.
Many customers are wary of multi-year contracts amid economic
uncertainty and are facing a number of challenges, such as
unpredictable demand cycles, increased cost pressure, and
uncertain revenue streams to focus on cost savings.
After the economic downturn in 2008, customers forced their
service providers to reduce prices and identify potential savings
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along the entire value chain. Common solutions here are to get in
sync with the dynamic environment, and de-bundle services and
assets to address these market and economic uncertainties.
Changing technology contributing to sluggish
growth
The technology landscape also evolved with the emergence of
new, disruptive technologies such as social media, mobility,
analytics and cloud. The emergence of these technologies shook
the foundations of the IT industry and has changed the way we
connect with each other, and how companies do business, and
deliver products and services.
According to Gartner, traditional IT service offerings still represent a
significant market share. However, steady demand from customers
for these new technologies has resulted in failure of traditional IT
outsourcing approach. Companies now feel encouraged to invest
in the new models.
Change in outsourcing models
While traditional outsourcing contracts are primarily based on fixed
cost models, the current trend is pay-per-use models that allow
companies to scale up and down on demand. Companies using
pay-per-use outsourcing models have changed their focus from
SLAs to achieve key metrics and deliver business value, innovation
and superior customer experience. The changing nature of
outsourcing contracts has also helped companies achieve
transformational change and manage uncertainty; further reducing
operational costs and risks. Companies can now concentrate on
creating new capabilities and comprehensively manage critical
business processes.
The change in customer behavior with special attention on what
the service offers is changing the focus from how it is
implemented. For example, customers in the US are using
pay-per-use models in all walks of life. They pay only for services -
data and call plans – based on their usage and need, and not for
the mobile phones they use. Using pay-per-use models is
beneficial as users can easily adapt to any new technology by just
exchanging their old mobile phones with the new ones, without
changing usage plans.
Next Generation Customers and
Service Providers
New breed of educated customers and their
expectations
The 2008 recession was a wakeup call for the new breed of
educated Gen 2.0 customers. After the 2008 financial downturn,
these customers expected shorter business cycles, 24X7 support,
business linked SLAs, evolving business models spawned by
social media, mobility, analytics and cloud, and consumerization of
IT. They completely rejected inflexible vendors and multi-term
contracts in favor of service providers willing to respond to new
situations and important changes.
Changes in technology and clear customer expectations, thus,
drove service providers used to dealing with the intricacies of
technology to adapt, innovate, and transform the way they manage
IT assets.
Next generation vendors/service providers
While IT service providers face increasing pressures due to the
economic downturn, emergence of new technologies and change
in outsourcing models, customers are also forced to simplify their
business processes and enhance efficiency in this increasingly
competitive market conditions. They continue to look for
strategic/solution partners that can:
• Educate and guide them on how to meet customer needs
• Support them in optimizing operations and business processes.
These Gen 2.0+ IT partners can help customers in achieving far
more value than the value delivered by traditional outsourcing
vendors. Figure 1 highlights the key drivers that encourage
customers to outsource their work to Gen2.0+ partners.
Reduce Business Risk
Improve Agility
Improve Scalability
Improve Flexibility
Resource Accessibility
Reduced Cost
0% 20% 40% 60% 80% 100%
Figure1: Top Priorities/Key Drivers [Source: Gartner]

5. Customers can achieve financial improvements and business
efficiency, and improve agility by using services of these strategic
IT partners.
Our Credentials
Case Study: Manufacturing
Business Scenario
The client is a global company employing more than 80,000
people, with production sites in around 70 countries. The clients
core businesses include manufacture and distribution of cement,
and production, processing and distribution of aggregates
(crushed stone, gravel and sand), ready-mix concrete and asphalt.
The client wanted to increase overall productivity by enabling their
delivery people (truck driver) with an enterprise mobility solution.
The mobile solution should enable truck-drivers to deliver material
en-route to the customer, handover a commercial invoice printed
en-route wirelessly on a small Bluetooth printer and allow truck
drivers to collect on-the-spot-payment from the customer.
The client was looking for a technology partner that can provide a
turnkey solution implemented in real-time, vis-à-vis enterprise
SAP system.
Value Delivered
The client partnered with NIIT Technologies to develop a mobile
solution - mINVOICE. The mobile solution enabled truck drivers to
exercise a variety of functionalities using their GPRS enabled
mobile handset. They do not need laptops, desktop computers or
specific application software or internet connectivity to connect to
the enterprise SAP system. Instead, drivers can process and print
invoice on-the-fly in real-time with the handset at the backend and
an application integrated with Enterprise SAP servers in the
front-end. The invoice generated can be printed using a small,
wireless and portable printer that connects to the mobile device
using Bluetooth technology.
The new invoice generated is recorded in SAP for the delivered
quantity. Simultaneously, Stock Transfer Note is also modified in the
SAP system for the quantity delivered. The application also enables
on-the-spot collection of payment by providing retail invoice.
NIIT Technologies’ solution aligned with latest industry trends
provided premier customer experience. The benefits reaped by the
client were:
• Considerable savings on secondary freight as the material is
supplied en-route to the customer
• Marked improvement in bottom-line due to reduced freight costs
• Faster delivery of goods to customer resulting in higher customer
satisfaction.
The Road Ahead
The IT services market is changing and traditional infrastructure
delivery models do not meet the needs of next generation
customers. Service providers need to choose alternative delivery
models that focus on customer priorities and can easily adapt to
new processes. They should also offer flexible and responsive
services aligned to business, and understand customers business
and pain points. Further, to provide business value and adapt to
these alternative delivery models, IT service providers need to
understand sourcing needs of customers and support them in their
business transformational goals. This will help them enter new
markets. Customer’s preferences about service providers and
delivery model should be such that it should help them jointly make
business decisions along with the service provider.
While choosing between available delivery models, customers look
for agility, responsiveness, commitment, and platform, operational,
technology and multi-vendor flexibility. From a technology point of
view, service providers must assist customers in decision making.
They must provide help on IT infrastructure - Labs and Centers of
Competence (CoCs), tools and platforms. Service providers can
also help customers by providing them services that can help them
to stay ahead of the competition.
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Write to us at marketing@niit-tech.com www.niit-tech.com
NIIT Technologies is a leading IT solutions organization, servicing customers in North America,
Europe, Asia and Australia. It offers services in Application Development and Maintenance,
Enterprise Solutions including Managed Services and Business Process Outsourcing to
organisations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and
Government sectors. With employees over 8,000 professionals, NIIT Technologies follows global
standards of software development processes.
Over the years the Company has forged extremely rewarding relationships with global majors, a
testimony to mutual commitment and its ability to retain marquee clients, drawing repeat
business from them. NIIT Technologies has been able to scale its interactions with marquee
clients in the BFSI sector, the Travel Transport & Logistics and Manufacturing & Distribution, into
extremely meaningful, multi-year "collaborations.
NIIT Technologies follows global standards of development, which include ISO 9001:2000
Certification, assessment at Level 5 for SEI-CMMi version 1.2 and ISO 27001 information
security management certification. Its data center operations are assessed at the international
ISO 20000 IT management standards.
About NIIT Technologies
NIIT Technologies Limited
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NIIT Technologies Pte. Limited
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NIIT Technologies Inc.,
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A leading IT solutions organization | 21 locations and 16 countries | 8000 professionals | Level 5 of SEI-CMMi, ver1.2
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