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March - 2003 - issue > Cover Feature
Pradeep Shankar & Subhash Desai
Thursday, February 27, 2003
A FEW YEARS BACK THERE WAS MAINFRAME legacy. Today there is the ERP legacy. Companies have deployed many enterprise packages and are yet to extract value out of them. The idea-rich, cash-crunched CIO today is looking at easier ways of integrating the enterprise packages that exists in his company. This throws up an enormous opportunity for Indian IT service providers, who have established the ‘offshorabilty’ of EAI services,” says Kalyana Rao, Chief Technology Officer of Satyam Computer Services.

He speaks about the largest EAI project he has undertaken that thousands of adapters, hundreds of brokers, interfaces to more than 50 applications, EAI operations interface management, 80-120 events and more than 1000 concurrent users per portal. According to a recent Gartner Dataquest report, the global EAI services market was worth $56 billion, and this is expected to grow to $98 billion at a CAGR of 15 percent over the next two to three years.

To grab a piece of this cake, the top-tier Indian IT service players have formed alliances with leading EAI vendors. For instance Satyam has allied with Tibco, Vitria and Iona. CTOs like Rao believe that it is vital to have partnerships and strong alliances with the EAI vendors to keep abreast of the EAI products, due to the rapid pace at which the market is moving.

Krishnan Ramanjan, global practice head of E-Commerce & EAI, Tata Consultancy Services, claims that there is no company in the world that can boast of the level of strategic partnership that TCS has with WebMethods. What he means is that TCS’ jointly developing EAI product and solutions for specific industry verticals with WebMethods places the company in a separate league, bringing in a major chunk of revenue, besides acting as consulting wing of WebMethods.

Whenever quick fixes or new adapters are needed, especially in a real-time implementation, the product-vendor partnership guides the implementation partner about the availability of such solutions.

“It is an ecosystem through which there is a mutual benefit, both for the service provider as well as the product vendor,” says Rao.

Competency centers
Alliances are just one end of the spectrum. Invariably, each of the top-tier Indian IT services players has built EAI competency centers to provide them an edge in this space. Such centers provide its engineers, the necessary domain expertise and technical competence for executing EAI projects. These centers are known for their geographic nearness to the market that those companies address.

Apart from competency centers, groups, dedicated to EAI, have been formed in these companies that address opportunities in this space. Satyam’s EAI group has about 400 engineers who build adapters, integration, consulting and message brokering. But the exception is this group does not include the larger number of engineers involved in building integration portals, workflow engines, operations and maintenance. TCS has 350 workforce dedicated to EAI services.

In the last few years, Indian companies have built considerable competencies in EAI by giving importance to the technical talent and building domain expertise. “This combination is quite formidable to offer EAI services to the clients, specially in the ability to provide business solutions rather than just technology solutions,” says Ramachandran Kallankara, Head - EAI practice at Infosys Technologies.

EAI services has many components: Middleware, Message Broking, Application Servers and Process Automation and Workflow. Each of the service providers is pushing these components to offshore, which in turn would save cost for the customer. From what was 80 percent onsite, Satyam today does 50% onsite and the rest in its offshore centers. “As we go further, we will be able to increase the offshore component. We can do about 70% offshore and 30% onsite,” predicts Rao. Kallankara of Infosys concurs with Rao’s prediction. It is not an easy task, though.

“Given its [EAI] pervasive nature (by virtue of integration), it is a challenge to convince the clients of the offshorability aspects of EAI services,” says Kallankara. To achieve what Rao predicts, the service provider needs to have sufficient knowledge about his customer’s information infrastructure and his business processes. The service provider should be able to demonstrate their insight into the customer’s ‘process landscape’ and convince his customer about ‘offshoring’ the EAI project. Knowledge of multiple domains and multiple business processes of the client is a critical success factor.

“The amount of work done offshore is significantly lower in EAI projects compared to other product development or packaging implementation projects. Typically, in a development projects 70% of the work can be done offshore, whereas in EAI project the number range between 20-25%,” says Ramanjan of TCS, which churned out $20 million revenues from EAI services alone last fiscal year. However, the company’s percentage of revenue compared to total revenue is mere 1.5%.

There are other challenges too. “Capturing that customer’s business knowledge isn’t the end. The biggest task is having a multidisciplinary team, “ says Rao.

Of all the EAI components, work related to platform and operations is currently done onsite. “ We can take this offshore once we have a more secure connectivity,” says Rao. In fact such a connectivity between the customer and the service provider will improve their relationship and the customer will have a greater level of trust in the network.

Trends suggest that integration requirements from the U.S. corporations are on the increase due to more frequent business changes, mergers, acquisitions. EAI services could be ‘the next big wave’ as Rao foresees. And this, for sure, depends on the way Indian IT companies are going to build up ‘customer intimacy’ over the next few years. The global five IT services companies have known their customers for over a decade and hence they stand a chance over the Indian firms in getting the EAI projects. However, the proven offshore model, cost advantage and quality of service that Indian IT services companies deliver will attract more U.S corporations to outsource their EAI projects to Indian firms.

Going forward, what we would witness is a healthy competition among the Indian firms in the EAI services space. Each player has their own EAI strategy. For instance, TCS sticks to specialized implementations from WebMethods, while Infosys from Tibco. But that doesn’t mean TCS would not venture into Tibco or Infosys would not implement WebMethod products. “The lines are clearly getting drawn along the product lines. The alignment is beginning to happen. That’s a good sign to become specialized solution providers, rather than being called as jack of all and master of none,” says Ramanjan.

Whatever the strategy, each one believes that they have a better footing than their counterparts. Such a competition is welcome and we may shortly witness “the next big wave.”

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