OPD: New mantra on IT street

Chennai, Jan 28 | Updated: Jan 29 2005, 06:31am hrs
The current crop of leading software and services companies in India such as Infosys Ltd, Tata Consultancy Services (TCS), Wipro Technologies, Satyam Computer Services etc might soon be displaced by a new breed of companies in the Outsourced Product Development (OPD) space, industry experts said.

Speaking at a NASSCOM seminar on `Offshore Product Development and Application Services' here on Friday, Gowri Subramanian, chief executive officer, Aspire Systems said OPD presented a huge business opportunity for India. "OPD might well be the third wave of outsourcing. Lesser known firms which have been operating in this space can take advantage of this fact to replace the existing leaders like Infosys, TCS and Wipro. The IT majors have been traditionally known for being specialists in the application development space and it will not be easy for them to position themselves as product companies", he said.

Mr Subramanian said the present boom in the IT industry relied on the cost arbitrage model which was not sustainable. "Costs in India has been on the rise and we will have to look at moving to a model which relies on creating value for the clients. OPD which involves a whole lot of things like product development, maintenance etc can help companies earn more revenue rather than mere cost reduction".

According to an estimate, the global OPD business was estimated at $9 billion. The global software product revenue was $180 billion and around $36 billion of this constituted the R&D expenditure by the software firms. Mr Subramanian said the potential for India was 25% of the $36 billion which translates into $9 billion.

Subu D Subramanian, director and senior vice-president, Satyam, said India was on the threshold of a third outsourcing wave. The first outsourcing wave started with onsite consulting which later gave way to offshore software development. The third wave could well be OPD, he said.

T Shankar of Management Solutions said the IT majors could retain their leadership position by foraying into the OPD business. "IT majors which have so far concentrated on the software services business, can easily form a separate division to tap the potential in the OPD business", he said.

Anjana Kaul, chief operating officer, Aditi Technologies, said that companies operating in the OPD space must be able to deliver faster and user friendly products to their.

Ashok Kumar Sharma, director and chief technology officer, Cranes Software, said India ranked third, after Korea and China in patents registration. "We will lose out to our competitors if we fail to patent our products in the IT, healthcare and pharmaceutical sector," he said.