Betting big on outsourced product development (OPD), Mars Telecom Systems, engaged in offering product development to global telecom, networking and converged application providers, is looking at key investments in new product developments. The company is working on new products in the VoIP segment in the emerging convergence spectrum. Besides, the company is going global by setting up offices in newer geographies and hopes to add 8-10 customers in a year.
Speaking to FE, Mahesh Sundaresan, founder and MD said that the new products, to be used in the convergence spectrum, are in an advanced stage of completion. “We hope to take onsite development projects in the US and Europe in the next two to three quarters,” he said adding that the company is looking at major investments in marketing space for new customers with global delivery capabilities. However, he feels that there is a need for huge domain expertise for R&D. While there are support companies but there are very few pure players in core R&D, he adds.
Outsourced product development means offering product development services to clients as service offerings, explains Sundaresan. Engagement horizon includes participation in all stages of product development life cycle. Unlike generic software outsourcing, the OPD partner adds value not just in technical skills but also in defining the product and technology road map. While domain expertise is key to OPD success and is almost mandatory, most product developments that currently happen are thru captive research and development centers. OPD, as a service offering, is still an emerging phenomenon in India but on a high growth path.
In fact, OPD is becoming a trend as there is a level of maturity among customers. This trend is fast catching up in the country as well due to trusted partners for growth. According to estimates, OPD in the telecom sector is claimed to be $8 billion industry with the country contributing just a fraction with just five to seven companies as there is a growing convergence in the data, voice and video bundled together.
With a growth rate of 40-50% envisaged by the company, he says that OPD segment in the county is growing as running a captive centers has larger failures than success. The cost in captive centers is about 30-40% more and requires larger investments and fixed costs.
As per a Forrester report, about two-to-three of the five top-tier firms have sought Forrester’ advice on formulating their strategy for the OPD space. Almost all of them have exposure to the product development/engineering space. Lured by the massive growth potential, top-tier Indian IT services vendors could soon take a major plunge in the OPD space. These firms may acquire specialist vendors to strengthen their presence in the OPD arena, the fastest growing segment of the outsourcing market, predicts research agency Forrester.
As per Nasscom estimates, OPD exports will grow from the current $2 billion to over $7 billion by 2010. Nasscom forecasts that the product and technology services revenue of Indian companies could reach $8 to $11 billion by 2008 as global sourcing will no longer be an optional strategy for product companies. Similarly, Frost & Sullivan, the R&D outsourcing market for IT is estimated to grow to $9.1 billion by 2010 from $1.3 billion in 2003 with 32% compounded annual growth rate.