SINGAPORE--Price-sensitive Indian market has driven cloud and IT services provider to customize offerings to target local customers, revealed a Savvis executive who noted this serves as a "good lesson" on how to target other similar markets.
Describing India as the most price-sensitive market the company has ventured into, Savvis President Bill Fathers said: "The target price-points in India are 50 to 60 percent lower than the price-points we normally try to deliver in the United States." This forced the company to look at how it can cut cost to provide a "very low cost offering" to customers in the Indian market, said Fathers at a briefing here Friday.
The company entered the Indian market early this year through a partnership with Bharti Airtel, in which the latter sells Savvis' hosting and cloud services which are hosted in the telco's data centers.
According to Fathers, the hosting services company was able to reduce the cost of their service by providing "good enough" level of service for Indian clients.
"In India, service level agreements are not required [so] we were able to reduce our overhead for support," he said. "[Customers] are actually saying, 'You know what? If it doesn't work for 5 minutes, we're fine. If it means 25 percent off the price, count me in'."
Another way it was able to drive down cost was bypassing the need to acquire new hardware. Fathers noted that Indian clients did not really require Savvis to use only the best hardware systems available in the market, and were instead happy with three-year-old hardware equipment which were previously used in its New York data center and later transferred for use in Savvis' Indian data center.
To reduce cost in software, the company turned to open source hypervisors such as the Xen platform, he said, adding that spending on hypervisors accounted for the biggest component in software.
Savvis now plans to bring these cost-cutting measures into other price-sensitive markets as well, said Fathers. "The model of 'good enough' is very compelling," he said, noting that IT heads would be happy for a "good enough" service level if they could gain 30 percent in cost savings.
That said, he stressed that some 20 to 30 percent of enterprise applications would still require "Rolls Royce" or higher levels of service, which Savvis had started out providing.
By entering the Indian market, the vendor realized that the "other 80 percent of applications did not need 100 percent service level", he noted.
Singapore firms open to outsourcing
During the briefing, Fathers also presented findings of a survey on IT infrastructure outsourcing trend which found that 75 percent of Singapore organizations planned to outsource the majority of their IT infrastructure by 2021.
Commission by Savvis and conducted by Vanson Bourne, the survey polled a total of 480 IT decision makers in companies in the U.S., United Kingdom, Singapore, France and Germany.
According to the study, Singapore led in IT infrastructure outsourcing, where 43 percent of organizations polled said the majority of their IT infrastructure were managed in-house, compared to 59 percent globally.
The top two reasons Singapore companies avoided outsourcing their IT infrastructure were contractual obligations and company culture.
In addition, the top strategic priority for these companies was to dedicate their resources to the development or management of business-critical applications. Fathers elaborated that organizations would want to hire more people that were "close to the business", which meant they were open to purchasing infrastructure-as-a-service instead of hiring in-house IT people to manage the IT infrastructure.
He said Savvis has about 300 clients on their cloud platform, with many hosting mission-critical applications such as equity trading platforms, air traffic control and critical medical record.
He noted that the advancement of encryption technology has made a positive impact on cloud-hosted applications, where organizations now realize they do not need to be "draconian" about the apps they host outside their own network if the information is encrypted securely.
Fathers also touched on the company's acquisition by U.S. telco CenturyLink, which he said allowed Savvis to have "greater access to capital" to expand faster.
The hosting services vendor currently has 48 data centers worldwide and is expected to increase the number of facilities to 52 by year-end, he said.