Hyderabad, 12 August, 2010
TCS is claiming a new approach to infrastructure outsourcing with its White Box offering. By unbundling the components of traditional infrastructure deals, it claims to deliver greater transparency on costs. Most IT outsourcers offer a range of discrete managed services, but few offer equivalent choice and flexibility for ITO deals. We think the TCS service is best suited to mid-cap enterprises that want to achieve operational efficiencies without relinquishing control of IT to a third party. But for many customers, the chief incentive to “selectively source” services from a single rather than multiple vendors will be cost reduction.
TCS’s approach contrasts with that of traditional outsourcers
TCS isn’t currently a major league player in infrastructure services, so it needs the new White Box offering to succeed. Not that it doesn’t already offer infrastructure services: many such services are already delivered as part of the applications-led outsourcing deals TCS has with multinational corporations.
Most other outsourcers have their own discrete infrastructure services, of course. But where a typical infrastructure outsourcing engagement sees a single vendor swallow up the customer’s IT and keep the workings of the deal under lock and key, White Box reveals all and lets the customer choose what to outsource or retain. It’s what-you-see-is-what-you-get outsourcing that contrasts sharply with the secretive black-box approach of traditional outsourcers.
One of White Box’s key differentiators, for example, is its flexibility around asset ownership. By “unbundling” asset ownership, White Box allows customers to choose whether they retain control over assets, hand over all or part of them to TCS, or use TCS’s hosted resources. By splitting out asset costs from the other associated services, customers can see where the costs and savings are. They can select the mix of services that best suits their needs and their budget.
The result of this unbundling of infrastructure outsourcing is a menu of discrete services that if sourced individually would undoubtedly cost more than a White Box bundle. They include technical consulting, remote infrastructure management, hosting, process and tools optimization, and technical transformation – all things that TCS has offered before and delivered as part of larger applications outsourcing deals.
Perhaps the most interesting new component for TCS is managed infrastructure hosting and, tentatively, hosting from the cloud – though wisely, TCS is refraining from talking up “cloud” at this juncture. It will use partners and sister company Tata Communications to deliver infrastructure-as-a-service, though from what we know of the network operator’s plans, it’s not a service that will be ready for global availability for some time.
A consultative approach to infrastructure outsourcing
White Box also embodies a more consultative approach to the customer. Traditional IT outsourcers start with big, all-inclusive ITO deals and then strip away parts to get to a price the customer finds acceptable. The actual costs are kept “behind the curtain” and it’s up to the client to lock the vendor down on delivery and service levels.
The White Box approach typically starts with a paid-for consulting exercise – discounted if the customer subsequently signs up. The purpose of this consultation is to identify where operational efficiencies can be made. There’s nothing new there, but customers can then choose what they want to outsource or retain on the basis of what each service will cost and the potential value it will offer.
We think it’s an approach that’s best suited to mid-cap enterprises with a manageable number of easily identified processes. These are enterprises that don’t usually have enough clout to beat down the traditional outsourcers; they don’t have the resources to manage multi-sourcing, but they want to see what they’re getting and select services on the basis of value.
But there are gaps in TCS’s capabilities: it doesn’t yet have the purpose-built datacenter/infrastructure hosting capacity of the established infrastructure leaders. Though it has a global presence and has expanded its language and service-desk coverage to include Southern and Northern Europe delivered out of South America and Eastern Europe, its key markets are the US, UK, and Germany, and we expect to see most White Box activity there. Its wider global capabilities are primarily for global multinational corporations rather than the mid-cap enterprises for whom White Box is best suited. But this won’t stop TCS moving beyond remote infrastructure management and the infrastructure optimization approach for which most Indian-heritage players are known.