To cut development costs, independent software vendors (ISVs) are increasingly outsourcing end-to-end product development to companies in India.
If previously the preferred route for low-cost, offshore development in India was to set up a captive development subsidiary, ISVs are now looking at alternatives such as third-party outsourcers that specialize in end-to-end product development, said Sarath Sura, managing director of the Indian operations of Sierra Atlantic Based in Fremont, California, Sierra Atlantic provides outsourced IT services and has a product development facility in Hyderabad in south India.
In end-to-end development, outsourcers do everything from the architecture to development, testing, and release of the product, Sura said.
Cartesis SA, a vendor of business performance management software in Paris, decided to outsource application development to Ness Technologies (India) Ltd. in Bangalore last November, after evaluating China, Eastern Europe and Canada as possible outsourcing locations, according to Pierre Samec, senior vice president of Cartesis' product group. "We wanted to get the best skills in the world at the best cost," he said.
A subsidiary of Ness Technologies Inc. in Tel Aviv, Ness Technologies (India) offers offshore product development, maintenance, testing and release automation services to midsized independent software vendors. "It is a headache to set up a subsidiary, build the infrastructure and hire people," Samec said. "It does not make sense to do it yourself when there are companies like Ness who will do it for you."
A large number of startups are bucking the trend to outsource rather than do product development in-house at an Indian subsidiary. The startups prefer to focus resources on marketing and brand building, and farm out the product development to Indian companies.
TeleGrow LLC, a Denton, Texas-based application service provider (ASP) for organic food buying clubs, for example, is outsourcing to India the development of its first product called CoopShopper. The Web product, which allows different organic food buyers to collaboratively order in quantity from a supplier, is being developed by Aspire Systems (India) Pvt. Ltd. in Chennai in south India. Aspire focuses on outsourced development of niche enterprise applications for vertical markets.
"As a startup company we had limited development funds, and we found that our user requirements were growing well beyond what we had initially anticipated," said Tom Murray, chief executive officer of TeleGrow. "It became clear given our budget constraints and our desire to access the market as quickly as possible that we needed to have a larger development team, and since we were resources limited, the offshore model was the best option," Murray added.
Although TeleGrow did evaluate setting up a wholly owned development subsidiary in India, it realized that as a small company it couldn't hire staff and manage a company in India from the U.S., Murray said. By outsourcing to Aspire, TeleGrow has saved about 60 percent of its development costs, he added.
Startups don't want to go through the pain and cost of building an engineering team, according to Gowri Shankar Subramanian, chief executive officer of Aspire. "We are seeing a repeat of the trend in manufacturing where companies that designed and built their own boxes, realized that they could get them designed and built by contract manufacturers, and focus instead on marketing and branding," Subramanian added.