IT service industry
Good Evening Toastmaster of the day fellow toastmasters
& guests. There are two main varieties of industry in IT. They are product
industry & the service industry. Microsoft, Google etc are example of
product industry where as Accenture, TCS etc are examples of service industry. Today
I am going to share information about the IT service industry.
Like most of the hardware’s are manufactured in China, Most
of the IT service/product industry majors operates from India as they can have affordable
human resources. There are many types of services in the IT service industry.
Some of the familiar are
1.
Application maintenance & support.
2.
Major enhancement/Projects
3.
IT Consulting
1.
Application maintenance & support.
In any big organization (Eg: Toyota,
MetLife), there will be a huge number of applications both back office &
external facing will be there. These are used to support the daily operations
& enable business. For example, in insurance companies, there are
departments for operations, Distribution & marketing, new product
enhancements, Application & maintenance support. All these departments will
have many applications either external facing or internal facing. Now I am
working for an Insurance major where they are having 250+ applications. They
are spending more than $10 million dollars yearly for the support &
maintenance. To support these applications, having staff by the parent company
is not an optimal solution. To support these applications, contract will be
provided to the external vendors for 4-5 years contract. These are called as
Application maintenance & support.
2.
Major enhancements/Projects
If the organization wants to do a
major enhancement or develop a product, they have to go for major enhancement
or a project. For this as per the defined internal process of the organization,
the Request for proposal (RFP) will be floated with the preferred vendors. Then
bidding process will be initiated & the vendor for that project will be
selected for execution. For example in any insurance companies, yearly they
will be releasing 3-4 new products. For each product, new project will be
initiated.
3.
IT Consulting
In IT consulting, there are two major
types, they are
1.
To do analysis on the problem & give a
probable roadmap/solution. This will be normally 4-6 weeks of engagement where
expensive consultant will be deployed to the client facility. They will
gather/analyze data & propose a roadmap/solution to the customer. Then the
customer can continue with the same vendor for execution or switch to another
vendor depending on the approval of cost/solution.
2.
Another one is to provide resources alone, this
is purely body shopping where the customer executes the project. The customer
will request specialized resources & they will be charged on hourly rates.
Some major companies like IBM/HP provide both products &
services. In any big customer organization, there will be preferred vendors
& all the IT service request for App maintenance & support, consulting,
major enhancement/projects will be executed through these vendors. Some of the major IT service companies in the
world are
1.
Accenture
2.
Tata Consulting Services.
3.
IBM
4.
Infosys
5.
Cognizant
6.
Cap Gemini
Etc
All these companies will have their
majority of their bases in India. For language intensive region like Japan,
bases are established in China also. The IT services will be provided with the
Onsite/Offshore model of 25%~70% so that cost effectiveness can be managed. For
example, in my current customer organization IBM is providing the App
maintenance support with the support team sitting in China.
Onsite billing will be costly & offshore
billing is cheap. Normally Onsite billing will be 3 times more than offshore
billing. So customer prefers more offshoring of the projects to reduce the
costs. From the employees in the service industry, most of them will prefer for
onsite roles as the pay will be more compared to offshore.
These markets are so huge. For eg, my current
customer organization in japan spends $200 million annually for IT alone. Now
the service industry is spreading fast in China, Philippines etc.
Hope my
speech has provided some info on the operation of IT service industry. If you
are working for any big organization, check internally to know about the
current vendors who are providing IT app development & support. You will be
more familiar with the type of activities that your IT department is doing.
Over to the TMOE
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