At Bangalore-based Wipro Technologies, India’s third largest information technology outsourcing company, an important experiment is under way.
About 500 employees are hooked up to a central computing “cloud” – a collection of shared servers and software – in a pilot programme to study the potential of a trend that could change the way the outsourcing industry works.
The pilot found that, whereas in the past, an employee at an outsourcing company might take about 43 days to set up a new project, including sourcing servers and hiring staff, it can take about 36 minutes to set up on a cloud network, says Girish Paranjpe, Wipro co-chief executive. With just a password, all the necessary computing power and software is available on the cloud.
“The potential is huge,” says Mr Paranjpe.
Cloud computing – in which customers ultimately buy computing power and services and applications over the internet from a third party – is poised to become the new battlefield between Indian and global IT outsourcing companies.
Indian groups Tata Consultancy Services, Infosys Technologies and Wipro, lead an industry that expects to report revenue from services exports of $56bn by March 2011, up 13 per cent on a year earlier. Opposite them is the global outsourcing sector, including US-based IBM and Accenture and France’s Cap Gemini.
Until now, the typical customer of these firms has kept much of its IT hardware in-house and bought and maintained its own software. Within large companies, different divisions will have their own servers and hardware, leading to duplication and an excess of computing power across the organisation.
Wipro calculates that because of this the world’s servers are running at only 27 per cent capacity.
With cloud computing customers purchase computing power and applications on a pay per use basis. This is much like how a consumer uses electricity, paying only when the lights are on.
Mr Paranjpe calculates that cloud computing can increase server usage to 75 per cent of capacity. Others say it can reduce computing costs for companies to a tenth of their former levels.
For India’s computer services companies, cloud computing offers a chance to capture a client’s entire IT budget and a large part of their business process work, for instance, their billing and customer relationship management functions.
“It’s a huge opportunity – you’re already managing the software, data and infrastructure of your clients,” said Pramod Bhasin, chairman of Nasscom, India’s outsourcing industry body. “Now you have a far greater ability to provide that on a much cheaper level to [parts] of the world which today remain underserved for IT.”
But to capture this business, outsourcing companies need strong consultancy practices to work with the chief executives of their customers.Western groups have an edge over their Indian rivals because of their large better established consulting divisions.
Cloud computing’s rise is fuelling consolidation in the global industry. Dell’s $3.9bn acquisition of Perot Systems last year married hardware with consultancy services. Hewlett-Packard paid $14bn for services business EDS in 2008.
India’s outsourcing companies, minnows compared with their international peers, might be forced to think about consolidation. So far most, like Wipro, are experimenting only with internal clouds.
“The private cloud computing solutions are working very well but there is still a long way to go in the public cloud computing domain to address data security and privacy,” says Kumar Parakala, global head of sourcing advisory at KPMG.