Back in January, I blogged about theimpact that software-as-a-service could have on outsourcing. Some folks, including Gartner, contend that SaaS gives companies "a viable alternative" to relationships with traditional outsourcing providers.
Indeed, Indian blogger Sramana Mitra wrote about an Indian company whose 150 employees were laid off after it was purchased by a Silicon Valley company that provided the same lead generation and marketing research services via a SaaS model.
Similarly, THINKStrategies' Jeff Kaplan notes that SaaS could boost the efficiency of outsourcing providers by reducing their reliance on manual labor.
So it's less than a huge surprise that Tata Consultancy Services, India's largest -- and one of its smartest -- service providers, is introducing a hybrid SaaS/services model that it calls IT-as-a-service.
The product, which combines hardware, software and underlying network infrastructure, is aimed at local SMBs, an "underserved" market segment that could be worth up to $9 billion a year, reports The Economic Times.
TCS has been tweaking the business model for about a year and expects to move it to other geographies should it prove successful in India. It hopes to find new clients in industries not typically targeted by services providers, such as real estate. Says the company's COO:
The business won't be people-intensive because the solutions and process are standardized. This will break the linearity of revenues... The opportunity size is very large but the problem is it is very fragmented. In the first year, our focus will be to get the right customers and the delivery model. We will go to other countries but not in a hurry.
TCS has already signed 10 clients for ITaaS, which is expected to go live in April, according to the article. It will form partnerships with other vendors for hardware, connectivity and other areas outside of its core expertise.
TCS is rolling out the new business unit just as it begins to feel some clear financial repercussions from the slowing U.S. economy. Two of its 10 largest clents,i both Wall Street banks, canceled projects that had been slated to begin this quarter, reports Times Online. The article also quotes Infosys' CEO as saying some of its U.S. and European bank clients are freezing budgets and/or looking to move work to lower-cost countries.
Though TCS did not say how much the canceled projects would affect its bottom line, the company's 10 largest clients account for nearly a third of its revenues and more than half of its earnings result from its contracts with U.S. companies.