The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

February - 2008 - issue > India Development Center

Beating the slump by thinking offshore

Ravi Thummarukudy
Saturday, June 28, 2008
Ravi Thummarukudy
Successful business strategies are often designed in response to rapidly changing business conditions and therefore need to be dynamic. We’re going to look back today and study some success stories from past Indian design center strategies that may enable us to make some recommendations for the future. Of course, one could quote similar arguments for offshoring design to other parts of the world, but I am restricting my strategies to India for obvious reasons.

Imagine, then, that today we are back to the edge of that precipice, peering down at what we perceive as the next business slump. The feeling of uncertainty is all-pervasive, except that this time around the tech managers and the entrepreneurs have a few more options than what they had last time. The last downturn forced several players, both big and small, to seek low-cost resources across the globe, specifically in India. Since then, however, many have pulled back, citing operational issues or an easing of pressure from top management. The employee retention issues coupled with the exchange rate fluctuations has given business people much to consider with regard to offshoring. In my humble opinion, however, these developments do nothing to change one basic reality: companies that planned and executed an India strategy outsmarted and outlasted those that did not!

The truth is loud and clear that a carefully crafted India design strategy can still give the strategic edge for big companies or a fresh lease of life to the startups. The semi-conductor design manager, for example, would do well to carefully study the existing IP and design services capabilities of third-party vendors in India to gain an edge in this changed environment. Last time around, the Indian semi-conductor industry was in its infancy with only a few big names boasting of capabilities that were locked in for in-house use. Today, things have changed substantially.

Of course, one needs to keep in mind that strategies vary based on given situations, which means that what worked well in the past may fall flat now. I was at the front-end of the outsourcing wave while working with Tata Consultancy Services in the late 1980s and again at Cadence in the early 1990s. Both companies were pioneers in their domains, deriving substantial value from their foresight. It should be no surprise, then, that when I co-founded GDA Technologies; our first hardware development center was at Chennai in 1998, long before others thought of having an Indian design center. Then came the 2001 crash, and software and hardware offshoring became the norm rather than an exception. In today’s declining business environment, I am confident of an even bigger outsourcing wave but the strategies and their execution will be diametrically different.

The semiconductor design outsourcing wave over the past six years created design teams under service and IP companies that are as good as the ones that could be found anywhere in the world, but at one-third the costs of U.S.-based teams. An Indian design center is by itself no longer a differentiator, however. Many of those who attempted to walk this path have since realized that setting up and running such a center can become a major challenge if it fails to attain the necessary scale fairly quickly. Though setting up a proprietary design center often seems a logical option especially for that Program Manager who wants to return to India many companies have come to realize the inherent challenges of such a move. Of course, the challenges of hiring and retaining semi-conductor design engineers, especially by startups, are quite well known. The probability of your key manager suddenly wanting to relocate back to the U.S. due to non-work-related pressures must also be considered, as this puts you in the position of tasking middle-level managers with managing junior staff. This is surely one of the most unenviable tasks that one can pass on to their HR department!

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