The Hindu Business Line : Product developers need to change strategies: Forrester

Indian software product developers have to change their mid-term business strategies or else they will not be able to grow up the value chain, according to a Forrester Research on ‘Selecting the right offshore product development provider for your goals’, targeted at product companies seeking offshore vendors.

Recent results by Infosys Technologies and HCL Technologies show that the dent in revenues from the banking and financial services industry has been compensated for by increased revenues from hi-tech product engineering and development services.

“Every services player is now aiming for a pie of the product development market. But growth will not come with existing practices because offshoring has changed in the last few years,” said Mr Sudin Apte, Senior Analyst, Forrester Research.

‘Take another look’

The appreciating rupee, talent shortage, attrition and wage hikes have forced global product companies to have a re-look at the way business is done. From 2003 to 2006, about 500 companies entered India to develop and maintain their products — a majority of them setting up a captive facility in Bangalore, Chennai, Hyderabad and Pune. However, their capacity ramp-up has been slow.

Indian product development vendors, a sizable number of mid-size companies and few large ones, largely offer cost arbitrage through their services. Few offer domain expertise or innovation, says Forrester.

About 70 per cent of global product development work happens in India and the offshore product development market is estimated to be about $35 billion (Rs 1.4 lakh crore) in four years. China currently holds 20 per cent market share and is fast developing.

“The (Indian) market is not mature and if companies want to stand out, they need to re-jig their work flow and methodology. They need to have a roadmap for capacity ramp-up and decide what client work is core and what is not. Accordingly they can educate the client on different ways to collaborate,” Mr Apte told Business Line on a visit to the city.

Companies such as Infosys and TCS need to significantly increase their commitment, including investment, in product development, he said. Also, offshore product development lacks well-established processes and the best practices. Indian vendors can leverage some of their IT services best practices here, he said.

Forrester is looking at putting together a set of best practices for vendors to adopt. It also plans to conduct a series of workshops starting next month to help companies to have a re-look at their offshore product development strategy.

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