The "cultural" impediments to offshore infrastructure services

If you were to ask most offshore executives about a market which has not blossomed to their original expectations, many would identify IT infrastructure services as one. The promise of network monitoring, database tuning, IT help desk and other services delivered from afar has not caught fire in the market.

McKinsey thinks that is about to change (see article here - sub required).

I am not sure - and it deals with cultural issues. No, not accents and ethnic issues. Business model and culture issues:

• Most offshore firms have shown an allergy to capital investments. Their investments are in human capital - recruiting, training etc. But you cannot effectively compete for infrastructure services against hardware and network centric vendors who culturally are used to big Capex as part of their DNA.
• The leverage in remote infrastructure services comes from "virtualized labor" - so one network engineer monitoring networks of multiple clients. For various client security and IP protection reasons, offshore firms have historically resisted shared services across clients.
• Many infrastructure services - at least the move, adds, changes, repairs - require physical proximity to the infrastructure assets. This challenges the traditional business model of offshore firms which prefer 80% or higher of work done at their low-cost locations.
• Infrastructure services, particularly in the cloud, are based on "utility pricing models" driven by units of consumption - e.g. per gigabyte of storage per month. Offshore firms have historically been driven by headcount driven pricing.
• As I have written before the Data Center is currently a beehive of innovation. Most of the innovation from virtualization, to green computing to consolidations has not been pioneered by offshore vendors. In fairness, even the western outsourcing firms have not; many of the innovations have come from the amazon's and the Google's.

Methinks, it will take a fundamental rethink and investment strategy for offshore firms to make a big dent in IT infrastructure services.