Product firms move up the value chain

A few years ago, venture firms in the US and Europe had a simple mandate for their portfolio companies. "Look at outsourcing product development to Indian firms to save costs".

The scenario is rapidly changing. Global product companies are now approaching offshore product development (OPD) firms like Aztecsoft, Symphony Services, Persistent Systems, Aspire and Aditi Technologies to participate in the full product lifecycle (from concept to launch) of many of their global customers. OPD players are indeed moving up the value chain.

Consider this. Some six months ago, Chennai-based Aspire Systems, an OPD provider, was roped in by a US-based global corporation to build a product for them -- starting from the concept stage to its launch.

"We developed the concept and built the complete architecture. Finally, we integrated the software and hardware before bringing out the complete products in six months," says Gowri Shankar Subramanian, CEO, Aspire Systems.

Ajay Kela, Managing Director & COO, Global Operations, Symphony Services, corroborates: "Four years ago, we had to sell to product companies. We had to make a pitch that 'we can build your products'. Today, they all want to come here on their own."

Many of these firms are now graduating to the next phase. "Apart from driving innovation with new product development, we are now in an advisory role with many of our customers. Sometimes, they approach us for guidance from time-to-market to go-to-market," claims Pradeep Rathinam, President, N. America, Aditi.

Symphony Services, for example, provides its product development expertise to many start-ups which comprise about 40 per cent of its total customer base.

"We do 80-90 per cent of the engineering works for over 40 per cent of our customers who are in the start-up phase. We also do 30-40 per cent of the product development for many of our high-value customers who have large operations in India. It is no more a non-core work," says Kela.

"We are experiencing a rapid growth in the number of customers. I am sure the trend will continue in the future," corroborates Rathinam of Aditi Technologies.

Many Indian product services companies say that barring a very few large companies who are present in India, many big players like BEA Systems, Yahoo! and Oracle that have significant operations in India are also choosing third-party services providers.

Symphony claims 40-50 per cent of its revenue comes from clients who have captive centres in India. Both Aditi and Aspire Systems say about 15 per cent of its clients have captive operations in India.

Forrester country (India) head, Sudin Apte, notes: "The industry is around $15-18 billion in India in the product development space. There's an opportunity to build one more Infosys or TCS in this space."