The Hindu Business Line : Firms no longer coy about outsourcing

Times are changing
Such disclosures help vendor and client, says Symphony.
Aztec leaves the choice to customers.
Recent mega delas were disclosed by both.

Bangalore , April 3

Secrecy surrounding outsourcing strategies of global software product companies may soon be a thing of the past.

Software product firms, which were forced to keep their outsourcing plans under wraps following the tech meltdown early this decade, may soon start disclosing their plans publicly, especially in India.

This is because some of the India-based outsourced product development (OPD) firms are seen convincing their clientele to open up and declare that their products are being developed here.

"We are trying to adopt a joint strategy with our customers to announce the partnerships and the kind of work we are doing with them," said Mr Ajay Kela, President, Symphony Services, an OPD firm.

"By declaring that their products are being developed in India not only helps these firms to create awareness about themselves and their products in emerging markets like India, but also helps vendors like us to create visibility in the marketplace to attract talent," Mr Kela added.

Symphony, Mr Kela said, was recently successful in convincing its client Iron Mountain, the Boston-based information protection and storage services provider, to disclose its outsourcing plans.

About 80 engineers of Symphony at its centres in Bangalore and Pune would be working on developing Iron Mountain's products.

"We are also in talks with several of our other customers who are expected to announce the kind of work they are outsourcing to us," Mr Kela said.

Brand-building

Analysts said this kind of a strategy might work well with the software firms who are keen on building their brands in markets such as India. For majority of the US and European software firms India and China are emerging as the fastest growing markets for their products.

This kind of an initiative would help them create awareness and establish their brands, they said.

However, Mr V. Sundararajan, CFO, Aztec Software Ltd, said that his company prefers to leave it to customers to decide on making their plans public.

Backlash fears too linger

Disclosing client wins, deal sizes and outsourcing engagements may still be an issue, especially for IT services firms because of the fear of adverse fallouts. This could be in the form of a backlash in the US and Europe, where outsourcing is a politically sensitive issue in view of job losses.

It may be recalled that Indian IT services vendors had stopped disclosing their deal wins especially after the backlash increased a couple of years ago against outsourcing.

The situation seems to be improving off-late and almost all the mega deals in the recent past including that of General Motors, ABN-Amro among others were disclosed by both the outsourcer and the vendors.

On the other hand, OPD has gained momentum over last two years as changing market dynamics, increasing cost pressure and the need to shrink time-to-market strategy among others are forcing software firms to outsource their product development to India.

While biggies such as Microsoft, Oracle, SAP have set up captive centres in India, others including start-ups have been outsourcing their product development to Indian vendors as the cost of developing products is about one third or one fourth of the costs in the US.

Its estimated that 400-500 releases a year of software products are happening from India annually.