TECHNOLOGY
A paradigm shift
PAROMITA PAIN
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India's BPO segment is booming. How does it fare in the outsourced product development space?
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AFTER having established their credentials in developing software applications primarily to enhance back-offices of organisations across the globe, Indian software companies are now all revved up to embrace the development of customer-facing software products and are growing significantly in the outsourced product development (OPD) space, thus bringing forth a paradigm shift in outsourcing.
Seen as an indicator of the maturity of the outsourcing business in India, the Indian OPD market is expected to grow to $11 billion by 2008 (Nasscom-McKinsey report). While major players like Oracle, Microsoft and Sun Microsystems have product development centres in India, venture capitalists are investing significantly in smaller players.
Some differences
"With offshore outsourcing being accepted as a key strategy to stay competitive in the global economy, the production cycle for technology-centred products will require global resources and global delivery. Leveraging outsourcing allows a company to pack in more features in every release and shorten release cycles," says, Rajul Garg, VP, Corporate Development, Induslogic.
Explaining basic differences, Dr. Santanu Paul, General Manager, Hyderabad ATC, Virtusa (India) Pvt Ltd says, "To use a simple analogy, the difference between product development and application development is the difference between being an automobile engineer and being an auto mechanic. The automobile engineer specialises in designing and launching new cars that millions around the world will use, while an auto mechanic specialises in fine-tuning cars for a small clientele."
"Hence product testing is more rigorous and there are more frequent releases while applications require fewer enhancements. This puts an extra challenge on product development teams to pay more attention to take on new releases in tandem," further clarifies Sreenivasan Narayanan, Vice President and Global Head of ISG NovaSoft.
Outsourced product development requires the offshore team to work in very close collaboration with the client's engineering team. Working with the best innovators in the world can be demanding and daunting. Yet as Dr. Anand Deshpande, Chairman and Managing Director, Persistent Systems, says, "Over the years, Indian IT companies have built strong domain knowledge, global exposure and strong brand equity worldwide. As OPD service providers, they also offer a strong value proposition, low time to market, reduced development costs and quality manpower, which is what independent software vendors (ISVs) look for while partnering with software product development companies."
Building a "well-engineered" product requires a much higher level of skills than just building an application that needs to work. "Typically, customers for application development look at and test the screens of the application to know whether it works. Whereas, product customers look into the code base to see how it meets the attributes of scalability, robustness, customisability and architecture adherence. Hence, the engineers working on product development need to have a much higher order of skills," asserts Gowri Shankar Subramanian, CEO of Aspire Systems that registered 150 per cent growth in the last two years, mainly because of OPD.
Market demands
Praveen Kankariya, CEO, Impetus Technologies, believes that though Indian companies have only recently started emerging as serious contenders for this high-value and premium work; initiatives, such as those taken by NASSCOM, push the product's cause and try to get more work to come into India.
Though market sizes are on the increase, intellectual property (IP) rights and security issues cannot be ignored and companies are gearing up to meet these challenges. Deshpande explains, "There is always the issue of lack of confidence amongst Independent Software Vendors (ISVs) when it comes to protection of IP Rights. We need to be sensitive toward this concern and ensure absolute protection."
Often the vital issue is convincing product companies that product development is best outsourced to an expert. As Garg explains, "Today, product companies outsource only certain portions of development. The industry must work together to change this mindset. If achieved, it will create hugely positive implications for India and the world. The availability of skilled product development professionals is another point. The industry is already addressing this issue through extensive training, and associating junior engineers with mentors. For a long-term perspective, we require some significant changes in our education system to inculcate a `perfect-engineering mindset' in our people."
Blocks
Kankariya cites the lack of funds for developing and commercialising products and product piracy in India as important blocks for greater development. He emphasises, "The lack of IT penetration, which reduces the domestic market size; brain drain of highly skilled product engineers since product opportunities in India have as yet been relatively limited; the lack of clear IP protection policies; and the fact that India doesn't have the necessary patent protection policy in place are contributing factors for the slow increase."
The need for product engineers is on the upswing. "The total revenue estimate from product development is $8-$11 billion by 2008. This translates into a need for approximately 2,00,000 to 2,50,000 product development engineers," says Subramanium.
A study conducted by META Group, a leading provider of IT research, advisory services and strategic consulting, says global sourcing of product development will no longer be an optional strategy by 2007-08. In a market dictated by expertise rather than cost, it is to be seen how the industry taps available talent and meets the impending challenges thrown by increasing market requirements.
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