Everest ITO Study: Infrastructure Outsourcing Market Sees Offshore Suppliers Return to Traditional RIMO Model

Traditional IO Suppliers Seeing Large IO Deals with Rimo Delivery in Scope

DALLAS--(BUSINESS WIRE)--After a noticeable development in recent years that witnessed the convergence of the Remote Infrastructure Management Outsourcing (RIMO) and traditional Infrastructure Outsourcing (IO) models, RIMO suppliers returned to their roots and, if they remain loyal to the traditional RIMO model, could see promising growth moving forward, according to Everest, a global consulting and research firm.

“In recent years, offshore IO suppliers targeted traditional IO suppliers and larger deals with larger buyers, but they veered too far away from the core characteristics of the RIMO model in terms of pricing, deal scope and buyer segment”

Tier-I offshore suppliers of RIMO saw healthy growth in their infrastructure business lines during the recession, unlike competing traditional multinational companies (MNCs), by leveraging the unique flexibility of their foundational model, according to a new Everest IT Outsourcing (ITO) study, Remote Infrastructure Management – RIMO Strategy – Stick to the Basics, but Fine-Tune, Too. The RIMO model is gaining wider acceptance with buyers, resulting in a larger number of high-value IO deals with offshore delivery in scope, including new engagements signed by traditional IO suppliers.

Everest projects the offshore IO supplier market, estimated at US$2.9 billion as of March 2010, to increase to US$3.5 billion by March 2011. By 2011, Everest estimates Tier-I offshore RIMO suppliers will hold about 90 percent of market share for IO services. In 2009, 86 percent of offshore IO deals, in terms of annual contract value, were between US$1-5 million compared to 46 percent a year earlier; the average deal size in ACV was US$3.2 million in 2009 compared to $7.2 million in 2008.

“In recent years, offshore IO suppliers targeted traditional IO suppliers and larger deals with larger buyers, but they veered too far away from the core characteristics of the RIMO model in terms of pricing, deal scope and buyer segment,” said Ross Tisnovsky, vice president, Research. “The inherent flexibility of the RIMO model allowed offshore IO suppliers to tweak strategies and win business during the recession. With buyers continuing to remain reluctant to engage in mega deals of long duration that involve complex and risky transformations, RIMO suppliers are in a favorable position and only need to stay the course and fine-tune their offerings.”

The Everest study analyzes the key trends in the RIMO market, providing an analysis of the fundamental value levers in various IO models and how the RIMO model offers different value to buyers compared to its traditional counterpart. The study discusses an earlier trend, the convergence of the RIMO model and traditional model, and how the recession influenced RIMO suppliers to refocus on their unique characteristics and hence diverge from the traditional model. The report also discusses the strategy RIMO players need to adopt to continue their growth without compromising on the fundamentals of the RIMO model.

For more information about the report, Remote Infrastructure Management – RIMO Strategy – Stick to the Basics, but Fine-Tune, Too, other ITO research reports or other research services, please visit www.everestresearchinstitute.com, email [e-mail] or call [phone].

The following documents provide additional insights on this topic or complementary content that may be of interest:

• Hype and Reality of Cloud Computing – Mind the Gap!
• Remote Infrastructure Management: Impending Crisis of Genre

About Everest

Everest Group is a global consulting and research firm that comprehensively serves the outsourcing and offshoring market. An industry leader since creating the sourcing consultancy practice in 1991, Everest has earned a worldwide reputation for ongoing innovation by helping clients capture optimum value through sourcing strategies and implementation. Everest provides information, insight, and advice to help buyers, suppliers, and enablers of services effectively navigate all stages of the sourcing lifecycle. Committed to thought leadership, Everest is noted for its fact-based analyses and insights on the outsourcing and offshoring marketplace. For more information, please visit www.everestgrp.com and www.everestresearchinstitute.com.