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.

August - 2007 - issue > Cover Feature

OPD: The Wave gets Higher

Aritra Bhattacharya
Monday, August 20, 2007
Aritra Bhattacharya
These days, when CEOs of tech companies the world over get “Jack Welched”, they no longer limit their thoughts to establishing their firm’s own facility i.e. a “captive center” in a low-cost location like India. Rather, they veer towards a phrase fast gaining prominence in the realm of business strategists: outsourced product development.

Outsourced Product Development or OPD refers to a model whereby a company outsources its product development functions to a third party vendor. The rising incidence of the practice among tech companies, mature and startups, has spawned companies like Symphony Services, Pramati Technologies, Persistent Systems, and Aditi Technologies. Many others that are in the traditional IT services space, like Tavant, have made OPD their primary focus area.

Market on the move
As per NASSCOM -McKinsey analysis, the OPD services space, currently valued at $3 billion, is set to touch $8-11 billion by 2008. OPD as a service line took shape around 2003, and over time, the kind of work moving to India has undergone a sea-change. While even three years ago all the product development work outsourced to India was non-critical—in the sphere of importing an application from one platform to another, today, Indian players and their work drive the product release dates and product lifecycles.

“At present,” says Ajay Kela, Chief Operating Officer and Managing Director, Symphony Services—the leader in the OPD space, “only 10 to 15 percent of the product development in large MNCs is offshored to their captives and OPD services firms together, whereas 40 to 50 percent of it is offshoreable.” He believes that a major chunk of this offshoreable component will land in OPD services payers’ lap, since most captive centers today work in partnership with third party vendors.

This line of thought is substantiated by the recent Forrestor research titled “Shattering The Offshore Captive Center Myth”, which points out that more than 60 percent of captive centers struggle with escalating attrition and costs, and around 60 to 70 percent of them follow the exit route through partnering with vendors or providers of various capacities. In fact, in the failure of captives, Kela of Symphony sees an opportunity. “Most executives who set up these captive centers get disillusioned after a year of their functioning, owing to various reasons and return back to their earlier location. Acquisition of such headless captives forms a part of our strategy.”

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