IT majors shift gear to tap high-end market

Kavita Nair in Mumbai

India is gradually turning into a technology and knowledge base for a diverse range of companies. While the information technology (IT) services outsourcing model and India’s cost-efficiency have been touted for a while now, what is interesting is that the latest slew of companies to set up developmental initiatives in India are doing so for a varied set of products and services ranging from convergence devices to business consultancy tools. The outsourced work is gradually shifting from back-end work to a more high-end opportunity.

Take for instance research firm Frost & Sullivan’s recently introduced product ‘decision support database’—a multi-functional industry-specific package that covers a set of related market variables in 46 countries over seven years. This ready-to-use measured market variable was developed in India.

Red Hat, NCR and even consumer giant LG—who already have or plan on setting up centres—expect to cater to the parent company’s global customer base out of India.

Consumer giant LG Electronic India’s second manufacturing facility will focus on convergence products—i.e., the integration of two different products into one such as e-enabled refrigerators or washing machines. The products are for LG’s global consumers.

Red Hat’s director, India, Mr Javed Tapia, said his company will not be just a product and distribution support and services training company for the Indian sub-continent, but also be an outsourcing base for the parent company. Red Hat India’s facility in Pune now offers high-end engineering services to support its global business. It will focus on providing Level-4 developer support (the highest level of support) and will look into customisation, product development, version upgrades, and program tools building packages using RPM (Red Hat Package Manager).

NCR Corporation, which will be setting up its centre of expertise, plans to shift its work from the US to India. The centre of expertise will focus on product designs, implementation support and up to Level-4 support of check processing solutions.

Frost and Sullivan’s director for Indian operations, Mr Aditya Sapru, explains that outsourcing which in India started with low-end work, especially in the software industry—typically a code being written, medical and legal transcriptions, or basic call centre work—has evolved over a period of time from operation-oriented work to something more strategic such as a company’s core operation.

“There is now a feeling of comfort in getting things done outside of the companies’ geographical location. The result is that India is now getting the cream of these projects,” Mr Sapru said. “Indian operations of such companies are taking an active role in determining what the future will look like rather acting as mere implementers.” Mr Tapia feels that it is largely the cost consideration that is making these companies shift their projects here. However, NCR Corp’s business manager for Teradata Solutions Group, Mr B Amrish Rau, feels that it is the companies’ recognition of the knowledge management capital available here that has caused the trend. LG, on the other hand,states that it is because of both the cost and manpower.

Mr Tapia also feels that the technology slowdown has forced the companies to consider the advantage in utilising their own subsidiaries for outsourcing work. Red Hat, for example, would save 50 per cent of its development cost if its high-end engineering projects are outsourced to India. LG will save around 50 per cent in infrastructure and networks, and revenues for NCR Corporation would go up by one-third or one-fourth. Mr Tapia explains that the Internet boom has led companies to want to do things at breakneck speed. Today, people are shopping around for not necessarily the fastest way to develop, but also a more cost-effective way. LG sees this as an opportunity. Mr Maheshwari feels that it makes sense in setting up a base today, keeping the future in mind and investing when the costs are low. However, there are risks in outsourcing high-end technology work here. All the companies agree that the infrastructure has to be improved and policies have to be changed. Mr Sapru says, “The hurdles are more than just poor infrastructure and India has a long way to go before it is recognised as a global contender for excellence in outsourced work.”

Mr Rau, however, dismisses these issues. He says, “time-zone coordination and infrastructure are all issues, but one can work around them. It is critical for companies to not miss out on an opportunity to shift their development work here.”