TECHNOLOGY
A paradigm shift
PAROMITA PAIN
| India's BPO segment is booming. How does it fare in the
outsourced product development space? |
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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