Offshore Product Development

Sadagopan pens a brief note of Offshore Product Development:

“Today in an increasingly shrinking market, software product companies are reeling under pressure. The big gets bigger, the brutal market forces are punishing most of the players with reduced profitability, where it can be counted. While this happens, there is a concurrent pull effect that calls for widening the range of offerings, with reduced resource commitments. We now find that increasingly, in reality, gaining such an advantage through global product development takes a high rank in the order of important things.

Product development is normally seen as an expensive process for software companies. The ballpark estimates suggest that in respect of established vendors, anywhere from 5% to 8% of revenues may get ploughed back into software product development. While the cost structure of the various players may vary, it is generally seen that this would cover amongst other cost elements, personnel cost working across the spectrum of operations. Needless to say, with varying nature of operations & owing to multitude of factors, there would be potentially a wide range of value additions that can be measured relating to various types of operations. In such a scenario, the productivity equation becomes an important operational parameter for review. Like in all competitive industries, companies that can develop great products with defined /lesser budgets compared to peers gain a huge competitive advantage. “


IMHO: I had written earlier (here) that productivity will become a more & more contentious issue as we go along in the services industry, at least. But another problem that offshore, at least India-based companies (experience is limited in this regard, so bear with me) suffer from is the thinness of their competencies. All these companies offer a broad range of services, but there is no real expertise in the resources. The belief is to learn on-the-job-when-it-comes-along. Lack of specialization, high turnover amongst experienced specialists and the jack-of-all-trades attitude plague the industry. Productivity, and specialization, are positively correlated in the context of product development. This is a challenge that both the global big players and the smaller, but increasingly global in outlook, offshore players will have to deal with sooner rather than later.