The Hindu Business Line : `This is how we're doing it'

SOFTWARE companies pressed for both time and money are beginning to favour outsourcing the product development - to their vendors. The trend towards entrusting core work to OPD (outsourced product development) companies is catching on.

The OPD market in India is expected to grow to $11 billion by 2008 from around $3 billion, says a white paper prepared by Nasscom (National Association of Software Companies) and the Chennai-based Aspire Systems.

Senable Technologies Inc, a US-based technology start-up, has outsourced its product development to Aspire Systems. This has allowed its 15-member team in the US to concentrate on the company's vision, leadership, execution and strategy, and let its vendor take care of the entire product development.

Its founder, president and chief executive officer, Andy Pulianda, says, "I am a strong believer in outsourcing. I have been doing it for the last 15 years and will continue to do it in future." He travels to Chennai every other month to give final touches to the product, which, he says, will help clients optimise their existing technologies.

He spoke to eWorld on the company's outsourcing strategy. Excerpts from the interview:

You have been involved in outsourcing for nearly 15 years. Could you elaborate?

Prior to founding Senable, I grew the Strategy and Assessments advisory practice at TPI, a large provider of sourcing advisory services. Before that, I co-founded the Sourcing Strategies consulting practice at the META Group.

However, the most significant was when I was Vice-President at UBS where I was part of the team that executed a $6.25-billion outsourcing transaction for IT services.

When did you decide to outsource your product development?

When we decided to develop the product, the first thing we decided was to outsource it. We looked at around 100 companies across the world, and narrowed down to three in India and finally to Aspire. We looked at specialists in product development, and started the relationship with Aspire in 2003. The product is nearing completion, and we plan to launch it in the first quarter of next year.

Why Aspire?

Unlike other vendors, Aspire does only commercial product development, and does not develop its own product. There is no conflict of interest.

What were the factors that made you outsource?

The cost advantage and, more importantly, the talent pool that is available in India. If we had to set up a similar team as provided by Aspire in the US, we need to incur more than double the cost. For instance, we need to have good people with development skills, hardware, cost and infrastructure in place. However, the most important is that all these things are not in our competency, and if imposed our budget, will have a significant effect on the company's operations.

Is the legal framework a bottleneck in India, especially with regard to intellectual property rights?

I don't think so. The legal framework in India is good, and it is one of the reasons that US companies are increasingly feeling comfortable here.

What does your product do?

Senable is an enterprise performance transformation company. In other words, our technology provides organisations with a transformation foundation. For example, selling, general and administrative expenses include cash incurred in information technology, finance and accounting, human resources, logistics and allied areas. These are necessary for the organisation to be successful, but do not contribute to the company's margins. Some US companies spend $200 million on SG&A. Senable provides companies a way to reduce these expenses.

Could you give an example?

Take invoice processing. If a company spends $100 on processing would that be the right cost? How can the company benchmark the cost with its competitors? For instance, if it is $140 to process an invoice compared to $118 with a competitor, a $32 expense makes it a lot of money for a company. Our technology shows the weaknesses in the entire processing and allows improvement.

It also provides insight into each process and even suggests relocating employees when not required in a particular department. Our solution can deliver 15-20 per cent saving in two months. That is the return on investment for clients. We are also telling clients to outsource non-core areas from a local, national or global company.

Any suggestions for Indian OPD companies?

They need to create a long-term relationship with clients. American companies are willing to outsource their product development with specialists in a particular domain. Indian companies need to educate their clients, tell them how they will provide both benefits and mitigate risks, and how they are able to sustain doing product development over a longer period of time.

raja@thehindu.co.in

Picture by Bijoy Ghosh

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