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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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PUNE, INDIA: Year 2004. A Nasscom-Mckinsey analysis had predicted the opportunity in the products and technology services space would be worth $8-11 billion by 2008. Year 2007. Nasscom estimates that OPD exports will grow from the current $2 billion to over $7 billion by 2010.

Back to year 2004. For companies and geeks around the world, Indian IT prowess was synonymous to application development, coding or testing. The global platter was ripe but India was still delivering the starters (testing), the mock tails (applications) or the desserts (maintenance and support). The main course (core product development) was still not under India's IT province.

But some adventurous and plucky chefs woke up to the challenge, that was at the same time, a delicious opportunity. If companies could offshore peripheral work, why not the products too? And so began the experiments with a new recipe –OPD or Offshore Product Development.

So has the recipe worked?

Whipping up the right mixture

There is no arguing the fact that India's well equipped to handle the OPD challenge. Challenge it is, for it is not without its own set of reservations. Product development is no small feat. It needs the upper-tier of development skills, domain grip, insight into the end-requirements and time-to-market imperatives. More than that, it is not easy for a company to let go of its life-blood and entrust a third party for its core work. No matter how much one talks about one's track record in OPD, unless it is evidently demonstrated that an OPD vendor is more of a partner in the product, it is not easy to win and sustain business.

As Shirish Deodhar, senior vice president for Symphony Services, a formidable player in the OPD market that has clocked a CAGR of 190 per cent over the last four years, reasons, "Reservations are not absent. Any time there is an offshoring transaction from the US, the operational level needs time and proof to go over the initial resistance. But when India is able to deliver, the hitches are ironed out."

With over 80 customers and 225 Products Under Management (PUM), he surely has enough experience to support that. Symphony, for instance, has over 1650 deliveries to its credit with 644 deliveries last year. Ten releases last year constituted de la crème 'white board to market' category. "We are doing a couple of major releases per week and some minor ones on a per day basis," he says.

The score of 400 minor releases and 225 major ones is enough of a glimpse but more what tickles one's curiosity is that 10 per cent of its PUM belongs to the complete ownership league, where Symphony has traversed the whole hog, from design to support stages of a product. "This is an example of maturing of the market. This wasn't the case earlier," Deodhar says.

Persistent Systems that has added 64 new customers (including license sales) in FY07 and reported consolidated revenues of $70 million in FY07, is another upbeat player in this market. Almost a pioneer over the past seventeen years, with a CAGR of 60 per cent over the last three years, its delivery record shows 170 global software companies, including companies in the start-up phase and has undertaken over 1200 product releases.

Dr. Anand Deshpande, chairman and managing director of Persistent Systems, cites the Nasscom & Booz Allen Hamilton report for a flavour of how tantalizing the market is. Outsourced Engineering and Design Segment is set to touch $40 billion by 2020 while total Offshoring spend to grow to $150-225 billion by 2020. "These figures are proof enough of the upswing the industry has witnessed in the past few years and how it is expected to grow in the future."

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