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What's cooking at OPD?

Offshore Product Development or OPD has been in the limelight for quite some time as a new chapter in the Indian IT success story

Pratima Harigunani

Tuesday, August 28, 2007

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Still catching up

For many, however, there's more to be done and a realistic assessment points out other chinks in the armor. Customers still not completely and easily perceive the difference between a generic provider and an OPD provider. Bhoovarahan Thirumalai, EVP and co-founder of Aspire Systems, another player in OPD that claims nearly 80 per cent growth, opines that customers are still 'offshoring' not 'outsourcing product development'.

"The differentiation is even more confusing – from a customer's perspective – when the generic IT service providers – including the tier-1 companies claiming to specialize in the OPD space. So, while OPD companies have reported impressive growth – the generic growth of the industry matches with that. The larger players in OPD have reported around 40 per cent revenue growth – in fact one public company in the OPD space has reported a 35 per cent increase in revenue but only a 5 per cent increase in profit. But, that growth is in line with what Infy or TCS have reported, at a much smaller base. What that means is – it is the 'offshoring' buzz, that is giving the growth, and OPD buzz is still catching up," says Thirumalai.

His argument is simple. The momentum to grow beyond the speed of generic offshoring industry will be with companies that perfect the art of product engineering – not just from the technical angle, but also from the overall packaging angle.

The pie has changed

Throughout the OPD journey treaded by India so far, the roster of work has visibly changed. This is palpable not only in the complexity of the work that is coming to India but also in the strategic thrust that clients put behind it and of course, the deal sizes which have enlarged the pie.

"Clients are no more just putting a toe in the water but they are ready to jump in the pool. Not only that, when they come to India now, they already have a plan, a transformational mindset," Deodhar says as he points at how the market has changed from transactional to strategic nature.

Another big change is in the perspective from the client's side. More cutting-edge work is now happening from India. As Deodhar explains, "Instead of asking an Indian company to do something, clients are now saying that teach us what we may do. This change is backed by their reckoning that while a client might just do ten releases in a given period, as an OPD vendor we are doing 1600 at the same time and hence our spectrum of work and expertise is no less."

Another ripe market, in Deodhar's estimate, is emerging fast and wide – the software enabled business, where the company already has over 12 customers. "It is an exploding market. From Google to ebay to even traditional companies are looking at in-house products for their internal requirements. From $six billion in 2006 it is projected to go up to $20 billion in 2011. We are increasing our action here."

Persistent on the other hand is increasing its action space from traditionally strongholds like infrastructure ISV, application ISVs, telecom, life sciences and business intelligence to verticals like communication, media entertainment. Deshpande shares, "There is an interesting category of players such as the next generation platform players on the internet, and other B2B, and B2C plays; here the platform is the product. We are also actively involved with some established players in this space as well as next generation web 2.0 plays."

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