Offshore Product Development

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Offshore Product Development

  1. 1. Offshore Product Development Key Features Another breeze undulating outsourcing… Evolution of OPD …………………………………………………………………………………… approach: Outsourcing jobs is not a Beneficial For Summary new concept; it has been evolved since centuries, For any person who In an industry full of trends, buzzwords and step by step. Looking at would like to gain an acronyms, there’s a new one in town – OPD the outsourcing insight about the concepts (Offshore Product Development). advantage, Offshoring of software development took its longest jump in in some other country, the 1980’s and then Y2K generally phrased as Globalization, increasing cost pressures, compliance, body Offshore Software changing market dynamics, the need for fast shopping in the year 2000 Development. time-to-market and many other factors has can be seen as the rising driven many product companies to engage in • Vendor or Service sun in the IT sector for an outsourcing relationship. The gravity of provider countries like India & the situation is such that an estimated 500+ China. Since then the no. releases a year of various software products • Software engineers or of companies looking for are happening from INDIA. consultants Offshore product development are • Software companies increasing by leaps & who are planning (or Trust begets trust... due to the value vendors bring to the table and proven ways to look bounds. already) to go offshore for the development of after clients IP, software companies even their software product begin to share Intellectual Property (IP) and The next wave in and reap critical core of their business with them. benefits of the so Information Technology much talked about (IT) industry…… Offshore “OPD model” in the Product Development. present scenario. Globally the Software product market is worth $180bn, and in order to reap the benefits of …………………………………………………………………………………… Offshoring, OPD market is growing exponentially. OPD : A strategy with the help For a software company, selling its software undoubtedly is its bread & butter. Now, the of which software faster the product is released the better it is for the company giving it a first mover companies can advantage along with various other benefits. Having said this, there are various extensively lower their important components to be kept in mind like cost, flexibility, attitude, skills, knowledge cost and intensively focus & expertise & last but the not the least the quality of the product. on strategic priorities such as marketing of the Here comes the need for an approach that can let a software company achieve its product, looking for next goals, i.e. Offshore Product Development. Makes sense if some company can provide generation products. The its client with such benefits leading to a win – win situation. When it comes to offshore product can be released software development, countries like China and India represent the fastest growing faster in the market by markets. opting the OPD approach and exploiting the time zone advantage giving Let us understand OPD in details... the company the benefits of 24 hours development. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  2. 2. Key Features Evolution of OPD Evolution of OPD approach: Outsourcing jobs is not a new concept; it has been evolved since centuries, step by step. Looking at Offshore Manufacturing became the outsourcing commonplace advantage, Offshoring took its longest jump in the 1980’s and then Y2K compliance, body shopping in the year 2000 Concept of using low cost can be seen as the rising resources to develop software sun in the IT sector for came into being…. countries like India & China. Since then the no. of companies looking for Offshore product development are increasing by leaps & Exploitation of the benefits of bounds. Global product development The next wave in Information Technology (IT) industry…… Offshore In the 1980’s manufacturing companies were looking to reduce their labor costs and Product Development. maximize their profits by moving some, or most, of their manufacturing capacity to low- Globally the Software cost labor markets like Mexico, South Korea, and Taiwan – Offshore Manufacturing product market is worth though became a commonplace and the one full proof solution to this objective. This $180bn, and in order to enabled the manufacturing companies to have: reap the benefits of Offshoring, OPD market is a cost-saving approach growing exponentially. exploit low-wage regions minimize risk and preserve intellectual capital OPD : Gain tax incentives around the globe. A strategy with the help of which software Mid 1990’s – An era of Internet and Web-based software technology revolution, the companies can concept of using low cost resources to develop software and maintain existing extensively lower their systems came into being. From here Offshore Development facilities in countries like cost and intensively focus India, China, Ireland and the Czech Republic started to flourish. Software companies on strategic priorities began to offshore low-intensity functions like documentation, quality assurance, and such as marketing of the product maintenance for maturing products. Over time, as the talent gained domain product, looking for next expertise, whole business processes, like help desk support, claims processing, and generation products. The other traditional call center functions, were moved offshore. product can be released faster in the market by Today, we can witness more core activities coming down to India, China and such opting the OPD approach countries. Information technology (IT)-enabled product development, sophisticated data and exploiting the time synchronization is some common offshore activities in existence and flourishing zone advantage giving overtime showing a phenomenal growth. Well known companies like Ferrari, Boeing, the company the benefits GE have leveraged there technology, in conjunction with low-cost offshore engineering, of 24 hours development. to exploit the benefits of global product development. While balancing and mitigating risk, they have maximized productivity and minimized long term cost. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  3. 3. Key Features OPD – Definition The next wave in Information Technology (IT) industry…… According to NASSCOM- Evolution of OPD McKinsey report the market size of OPD in India is around US $3 billion and is expected to approach: grow to US $11 billion by 2008. Outsourcing jobs is not a new concept; it has been The outsourcing of specific activities or all activities related to the development or evolved since centuries, maintenance of a product or building software products for vendors & taking up step by step. Looking at responsibility of all aspects of the product life cycle which includes R&D, Development the outsourcing Testing, Prototyping & maintenance support and enables product companies to tap the advantage, Offshoring product-building expertise and global talent pools available with OPD providers. took its longest jump in OPD is divided into three parts the 1980’s and then Y2K compliance, body shopping in the year 2000 Offshore Product can be seen as the rising Development sun in the IT sector for countries like India & China. Since then the no. Start-up market Mature Market Sunset Market of companies looking for Offshore product development are increasing by leaps & bounds. The start-up market is the entry-level phase where the company plans and develops the product. The next wave in A mature market is one where a product is already in existence; Developers just Information Technology need to add features or services to it. (IT) industry…… Offshore A sunset market is where an older version needs to be upgraded and new Product Development. versions need to be added. Globally the Software product market is worth Projections $180bn, and in order to reap the benefits of According to Business World, Global Software Product market is about $180bn.India has Offshoring, OPD market is been able to capture only a meager 0.2 per cent of this market growing exponentially. According to Nasscom estimates, Offshore Product Development is expected to grow to OPD : around $7bn business by 2008-10 from existing $1bn business. Export of software A strategy with the help products, including development services, accounted for $710 million FY 2004, up from of which software $560 million in FY 2003 companies can extensively lower their Product development in INDIA has grown 10-fold from $300 million in 2001 to over $3 cost and intensively focus billion in 2005. This growth is being fuelled by companies across a range of verticals on strategic priorities from aerospace to medical equipment seeking to load more value-added software such as marketing of the onto their products while cutting R&D costs. product, looking for next generation products. The Unlike the traditional IT Services, OPD companies are looked at as partners who can product can be released contribute to the future business initiatives of product companies specifically by faster in the market by contributing to the product roadmap. opting the OPD approach and exploiting the time There are a no. of big fishes that provides IT services such as TCS, Wipro Technologies, zone advantage giving Infosys Technologies and HCL Technologies. Although they operate in this space but have the company the benefits restricted their exposure as part of their de-risking strategy. The credit goes to the smaller of 24 hours development. offshore product development companies that have been all time active in talking and creating awareness about the Offshore Development concept and no doubt this has gained momentum over the past three years. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  4. 4. Key Features Evaluating a vendor becomes crucial that too given the critical task of product development, which requires superior capabilities, and specific expertise. Evolution of OPD approach: Take steady steps… Outsourcing jobs is not a In order to exploit or reap real benefits of outsourcing software development offshore, new concept; it has been one should climb up the stairs one at a time – safe & steady. evolved since centuries, step by step. Looking at the outsourcing advantage, Offshoring took its longest jump in the 1980’s and then Y2K compliance, body Joint Venture Continuing Dedicated Teams shopping in the year 2000 Trial Project With can be seen as the rising Trial Project sun in the IT sector for countries like India & Step – I China. Since then the no. of companies looking for Trial Project Offshore product If you want to know how a dish tastes you will need to have a bite of the same. Having development are said this, in order to really understand the advantages of Offshoring software increasing by leaps & development it becomes inevitable to try out an offshore software vendor. Almost every bounds. software vendor has a policy of pilot projects or trial projects of say 15 days to 1 month wherein the client can be sure of the quality and commitment of an unknown vendor. The next wave in There is not much to lose and after a convinced frame of mind along with proper mutual Information Technology understanding it might prove to be a win-win situation at the end of the day. (IT) industry…… Offshore Product Development. Step – II Globally the Software Continuing on a project basis product market is worth Once both the parties are on the same page and have a clear understanding as well as $180bn, and in order to convinced approach, the activity can be continued over a period of time by outsourcing reap the benefits of small or big projects to the same vendor. Offshoring, OPD market is growing exponentially. Step – III OPD : Dedicated Teams A strategy with the help Offshore Development Centre (ODC) again a very much known and heard about term in of which software the field of Offshore Software Development. When the project seems to be of an companies can incremental nature, it is no doubt practical to have a dedicated team with the offshore extensively lower their solutions provider. Having said this, ODC enables the vendor: cost and intensively focus on strategic priorities • To have a better control over the team or the process of development such as marketing of the • Have an offshore team exclusively working on the particular project or for the product, looking for next particular vendor. generation products. The • To decide upon ramping up or ramping down the team size depending upon the product can be released size, scope and frequency of the projects faster in the market by • And, further save costs. opting the OPD approach and exploiting the time Step – IV zone advantage giving Joint Venture the company the benefits Hope the economies keep up the boom in all the industries and the more the booming of 24 hours development. scenario the more the projects leading to a step further and establish a joint venture with the offshore vendor with whom the relationship continued till this phase. This undoubtedly is the easiest way of entry into offshore centers like India or China and further gain a competitive edge by further lowering the costs or we can say increase profit margins. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  5. 5. Level of importance – Various factors while choosing an offshore partner Key Features Evolution of OPD approach: Outsourcing jobs is not a new concept; it has been evolved since centuries, step by step. Looking at the outsourcing advantage, Offshoring took its longest jump in the 1980’s and then Y2K compliance, body shopping in the year 2000 can be seen as the rising sun in the IT sector for countries like India & China. Since then the no. of companies looking for Offshore product development are increasing by leaps & bounds. Better domain expertise: more & more critical activities offshored The next wave in Information Technology (IT) industry…… Offshore Product Development. Globally the Software product market is worth $180bn, and in order to reap the benefits of Value & Innovation Offshoring, OPD market is growing exponentially. OPD : A strategy with the help of which software companies can extensively lower their cost and intensively focus on strategic priorities such as marketing of the product, looking for next generation products. The product can be released faster in the market by opting the OPD approach and exploiting the time zone advantage giving the company the benefits of 24 hours development. Domain Expertise Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  6. 6. Key Features Various activities outsourced and the suitability…. Evolution of OPD approach: Outsourcing jobs is not a Product Design Development new concept; it has been Concept evolved since centuries, step by step. Looking at the outsourcing advantage, Offshoring took its longest jump in the 1980’s and then Y2K Testing Support compliance, body shopping in the year 2000 can be seen as the rising sun in the IT sector for countries like India & China. Since then the no. Phases Objective Steps Involved of companies looking for Product Concept To come up with an Concept Definition3 Offshore product innovative solution of Concept Evaluation3 development are customer’s problem Prototype Design2 increasing by leaps & Technology Evaluation2 bounds. Prototype Development1 Prototype Validation2 Design Design a scalable, high Requirements Collection and The next wave in performance, modular analysis2 Information Technology product Software Architecture2 (IT) industry…… Offshore Feature Definition1 Product Development. Project Planning1 Globally the Software Development Develop the product Requirement Management2 product market is worth keeping a close watch Project Management2 $180bn, and in order to on changing market Product Development1 reap the benefits of trends Product Maintenance1 Offshoring, OPD market is Re-engineering & Migration1 growing exponentially. Testing To ensure the quality Unit/Interface Testing1 and a defect free Component/Feature Testing1 OPD : product is ready Regression Testing1 A strategy with the help Testing Automation1 of which software Product Validation/Acceptance1 companies can Support Providing post Technical Support2 extensively lower their development technical Customer Support1 cost and intensively focus support to the client Professional Services2 on strategic priorities Documentation Services2 such as marketing of the Performance Benchmarking1 product, looking for next generation products. The product can be released 1- Commonly Offshored faster in the market by 2- High potential opting the OPD approach 3- Not suitable and exploiting the time zone advantage giving the company the benefits of 24 hours development. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  7. 7. Key Features An Example Let us analyze an example of a trial project assuming a 5 man-month project (640 Evolution of OPD hours) in terms of costs deployed. Also assuming that there would not be a need for the approach: vendor firm to have an onsite presence and most of the coordination required would be Outsourcing jobs is not a done through phone and emails. new concept; it has been evolved since centuries, step by step. Looking at Offshore Development Inhouse Development the outsourcing Rate Rate advantage, Offshoring Team Primary took its longest jump in Hours per Total Hours per Total Location the 1980’s and then Y2K hour hour Project compliance, body Offshore 160 $25 $4,000 160 $80 $12,800 shopping in the year 2000 Manager (1) Onsite can be seen as the rising Project (Clients 80 $50 $4,000 - - - sun in the IT sector for Coordinator Resource) countries like India & China. Since then the no. Software Offshore 480 $15 $7,200 480 $50 $24,000 of companies looking for Engineer (3) Offshore product development are QA Engineer Offshore 160 $15 $2,400 160 $50 $8,000 increasing by leaps & (1) bounds. 880 $17,600 $44,800 Total The next wave in Information Technology (IT) industry…… Offshore Product Development. Globally the Software Savings up to product market is worth $180bn, and in order to $27,200 or 60.7% reap the benefits of Offshoring, OPD market is growing exponentially. Having analyzed the above scenario, let us have a look at a larger project. Assumption OPD : being a 120 man-month project (19,200 hours) executed over 8 months having a team A strategy with the help of 15 people. Also assuming that there will be travel expenses included when the of which software offshore team will be visiting the client’s site as well as the vendor firm has a constant companies can onsite presence at the client’s site having one or more of its engineers there during the extensively lower their entire course of the project. cost and intensively focus on strategic priorities such as marketing of the product, looking for next generation products. The product can be released faster in the market by opting the OPD approach and exploiting the time zone advantage giving the company the benefits of 24 hours development. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us
  8. 8. Key Features Offshore Development Inhouse Development Evolution of OPD Team Rate Rate approach: Primary Hours per Total Hours per Total Outsourcing jobs is not a Location hour hour new concept; it has been Project evolved since centuries, Offshore 1280 $25 $32,000 1280 $80 $102,400 step by step. Looking at Manager (1) Project the outsourcing Coordinator Onsite 1280 $35 $44,800 0 $0 $0 advantage, Offshoring (1) took its longest jump in Module the 1980’s and then Y2K Architects Offshore 3840 $22 $84,480 5120 $70 $358,400 compliance, body (3) shopping in the year 2000 QA can be seen as the rising Offshore 2560 $15 $38,400 0 $0 $0 Engineer (2) sun in the IT sector for QA countries like India & Onsite 1280 $30 $38,400 3840 $50 $192,000 Engineer (1) China. Since then the no. Software of companies looking for Engineers Offshore 8960 $15 $134,400 8960 $50 $448,000 Offshore product (7) development are Travel increasing by leaps & $12,000 0 $0 $0 Expenses bounds. Total 19200 $384,480 19200 $1,100,800 The next wave in Information Technology (IT) industry…… Offshore Savings up to Product Development. Globally the Software $716,320 or 65% product market is worth $180bn, and in order to We can conclude that the larger projects could potentially mean more savings. reap the benefits of Offshoring, OPD market is growing exponentially. Let us have a sneak peek into a situation... OPD : A Point-Of-Sale software provider for the pharmaceutical and Retail markets wanted to A strategy with the help find ways to speed up their product development efforts. With this objective, they of which software outsourced the creation of one module on a trial basis to an OPD provider. companies can extensively lower their When this assignment proved successful, the ISV rapidly ramped up the team with the cost and intensively focus OPD provider to 20 people, with most of them operating at an offshore location to take on strategic priorities advantage of the cost differentials. The ISV's team and the outsourced team worked in such as marketing of the a “co-development” model, sharing the development work on the 10-12 modules that product, looking for next were required for every release. generation products. The product can be released The long-term relationship with the OPD provider existed for over 3 years and faster in the market by helped the ISV: opting the OPD approach Release 3-4 versions of their product every year (on a hosted model) and exploiting the time Crash the product roadmap and include features earlier than planned, leading zone advantage giving to faster customer acquisition the company the benefits Focus more on product management, as opposed to dealing with the of 24 hours development. overheads of managing a team. Achieve higher R&D productivity for every development dollar spent. Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

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