Asset Takeover - Why Doesn't It Fly With Offshore Based IT Infrastructure Service Providers

There are many differences in approach and delivery model of the traditional IT Infrastructure outsourcing firms (like IBM, CSC, EDS etc.) and the relatively newer kids on the block - the offshore based IT Infrastructure Service providers. While that can be a topic for a full book, one of the key differentiators is that most (and probably all) offshore based IT Infrastructure Service Providers do not get into taking over assets of customers' IT environment. These typically are the servers, desktops etc. The traditional biggies in fact have had this as a core streak in their proposition. How they handled it can be differentiated into two parts - those who were hardware vendors and also had a hardware agenda and those who were pure play services companies. Whatever be the way it was dealt it was always a financial engineering subject. It gave a flash on the topline but the bottomline took a hit.

The offshored based IT Infrastructure Service Providers have traditionally evolved as application service providers and never had assets in their deals. The inclusion of such deals causes a lot of concerns, some of which include:

• Impact on the bottomline which would make it into single digits which they are not used to and do not consider core to their growth strategy
• Lack of a hardware business does not get the extra dollars to offset this "hit" with revenues in some other businesses
• Lack of critical mass and economies of scale (across multiple customers) which the biggies have
• No related business model like hosting services or data centers with leased servers where the residual equipment can be gainfully deployed
• Need for enhanced stickiness as such deals then require a much longer and deeper relationship which the relatively new offshore based IT Infrastructure Service companies have not seen (since they are still new and have not spent as much time in the marketplace)

Now these are the most common but relevant reasons aggregated across various companies. Specifics may vary with companies.

Analysts talking of the emergence of new non-asset linked services and its benefits (which cannot be denied) to the client are only making the market place an exciting place with different players having their own value prop stories.