Offshore product development details

1. Offshore Product Development Key Features
Another breeze undulating outsourcing… Evolution of OPD
…………………………………………………………………………………… approach:
Outsourcing jobs is not a
Beneficial For Summary new concept; it has been
evolved since centuries,
For any person who In an industry full of trends, buzzwords and
step by step. Looking at
would like to gain an acronyms, there’s a new one in town – OPD
the outsourcing
insight about the concepts (Offshore Product Development).
advantage, Offshoring
of software development took its longest jump in
in some other country, the 1980’s and then Y2K
generally phrased as Globalization, increasing cost pressures,
compliance, body
Offshore Software changing market dynamics, the need for fast
shopping in the year 2000
Development. time-to-market and many other factors has
can be seen as the rising
driven many product companies to engage in
• Vendor or Service sun in the IT sector for
an outsourcing relationship. The gravity of
provider countries like India &
the situation is such that an estimated 500+
China. Since then the no.
releases a year of various software products
• Software engineers or of companies looking for
are happening from INDIA.
consultants Offshore product
development are
• Software companies increasing by leaps &
who are planning (or Trust begets trust... due to the value vendors
bring to the table and proven ways to look bounds.
already) to go offshore
for the development of after clients IP, software companies even
their software product begin to share Intellectual Property (IP) and The next wave in
and reap critical core of their business with them.
benefits of the so
Information Technology
much talked about (IT) industry…… Offshore
“OPD model” in the Product Development.
present scenario. Globally the Software
product market is worth
$180bn, and in order to
reap the benefits of
…………………………………………………………………………………… Offshoring, OPD market is
growing exponentially.
OPD :
A strategy with the help
For a software company, selling its software undoubtedly is its bread & butter. Now, the of which software
faster the product is released the better it is for the company giving it a first mover companies can
advantage along with various other benefits. Having said this, there are various extensively lower their
important components to be kept in mind like cost, flexibility, attitude, skills, knowledge cost and intensively focus
& expertise & last but the not the least the quality of the product. on strategic priorities
such as marketing of the
Here comes the need for an approach that can let a software company achieve its product, looking for next
goals, i.e. Offshore Product Development. Makes sense if some company can provide generation products. The
its client with such benefits leading to a win – win situation. When it comes to offshore
product can be released
software development, countries like China and India represent the fastest growing
faster in the market by
markets.
opting the OPD approach
and exploiting the time
zone advantage giving
Let us understand OPD in details...
the company the benefits
of 24 hours development.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

2. Key Features
Evolution of OPD
Evolution of OPD
approach:
Outsourcing jobs is not a
new concept; it has been
evolved since centuries,
step by step. Looking at
Offshore Manufacturing became the outsourcing
commonplace advantage, Offshoring
took its longest jump in
the 1980’s and then Y2K
compliance, body
shopping in the year 2000
Concept of using low cost can be seen as the rising
resources to develop software sun in the IT sector for
came into being….
countries like India &
China. Since then the no.
of companies looking for
Offshore product
development are
increasing by leaps &
Exploitation of the benefits of bounds.
Global product development
The next wave in
Information Technology
(IT) industry…… Offshore
In the 1980’s manufacturing companies were looking to reduce their labor costs and Product Development.
maximize their profits by moving some, or most, of their manufacturing capacity to low- Globally the Software
cost labor markets like Mexico, South Korea, and Taiwan – Offshore Manufacturing product market is worth
though became a commonplace and the one full proof solution to this objective. This $180bn, and in order to
enabled the manufacturing companies to have: reap the benefits of
Offshoring, OPD market is
a cost-saving approach growing exponentially.
exploit low-wage regions
minimize risk and preserve intellectual capital OPD :
Gain tax incentives around the globe. A strategy with the help
of which software
Mid 1990’s – An era of Internet and Web-based software technology revolution, the companies can
concept of using low cost resources to develop software and maintain existing extensively lower their
systems came into being. From here Offshore Development facilities in countries like cost and intensively focus
India, China, Ireland and the Czech Republic started to flourish. Software companies on strategic priorities
began to offshore low-intensity functions like documentation, quality assurance, and such as marketing of the
product maintenance for maturing products. Over time, as the talent gained domain product, looking for next
expertise, whole business processes, like help desk support, claims processing, and generation products. The
other traditional call center functions, were moved offshore. product can be released
faster in the market by
Today, we can witness more core activities coming down to India, China and such opting the OPD approach
countries. Information technology (IT)-enabled product development, sophisticated data and exploiting the time
synchronization is some common offshore activities in existence and flourishing zone advantage giving
overtime showing a phenomenal growth. Well known companies like Ferrari, Boeing, the company the benefits
GE have leveraged there technology, in conjunction with low-cost offshore engineering, of 24 hours development.
to exploit the benefits of global product development. While balancing and
mitigating risk, they have maximized productivity and minimized long term cost.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

3. Key Features
OPD – Definition
The next wave in Information Technology (IT) industry…… According to NASSCOM- Evolution of OPD
McKinsey report the market size of OPD in India is around US $3 billion and is expected to approach:
grow to US $11 billion by 2008. Outsourcing jobs is not a
new concept; it has been
The outsourcing of specific activities or all activities related to the development or evolved since centuries,
maintenance of a product or building software products for vendors & taking up step by step. Looking at
responsibility of all aspects of the product life cycle which includes R&D, Development the outsourcing
Testing, Prototyping & maintenance support and enables product companies to tap the advantage, Offshoring
product-building expertise and global talent pools available with OPD providers.
took its longest jump in
OPD is divided into three parts the 1980’s and then Y2K
compliance, body
shopping in the year 2000
Offshore Product
can be seen as the rising
Development sun in the IT sector for
countries like India &
China. Since then the no.
Start-up market Mature Market Sunset Market of companies looking for
Offshore product
development are
increasing by leaps &
bounds.
The start-up market is the entry-level phase where the company plans and
develops the product. The next wave in
A mature market is one where a product is already in existence; Developers just Information Technology
need to add features or services to it. (IT) industry…… Offshore
A sunset market is where an older version needs to be upgraded and new Product Development.
versions need to be added. Globally the Software
product market is worth
Projections $180bn, and in order to
reap the benefits of
According to Business World, Global Software Product market is about $180bn.India has Offshoring, OPD market is
been able to capture only a meager 0.2 per cent of this market growing exponentially.
According to Nasscom estimates, Offshore Product Development is expected to grow to OPD :
around $7bn business by 2008-10 from existing $1bn business. Export of software A strategy with the help
products, including development services, accounted for $710 million FY 2004, up from of which software
$560 million in FY 2003 companies can
extensively lower their
Product development in INDIA has grown 10-fold from $300 million in 2001 to over $3 cost and intensively focus
billion in 2005. This growth is being fuelled by companies across a range of verticals on strategic priorities
from aerospace to medical equipment seeking to load more value-added software such as marketing of the
onto their products while cutting R&D costs. product, looking for next
generation products. The
Unlike the traditional IT Services, OPD companies are looked at as partners who can product can be released
contribute to the future business initiatives of product companies specifically by faster in the market by
contributing to the product roadmap. opting the OPD approach
and exploiting the time
There are a no. of big fishes that provides IT services such as TCS, Wipro Technologies, zone advantage giving
Infosys Technologies and HCL Technologies. Although they operate in this space but have the company the benefits
restricted their exposure as part of their de-risking strategy. The credit goes to the smaller of 24 hours development.
offshore product development companies that have been all time active in talking and
creating awareness about the Offshore Development concept and no doubt this has gained
momentum over the past three years.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

4. Key Features
Evaluating a vendor becomes crucial that too given the critical task of product
development, which requires superior capabilities, and specific expertise.
Evolution of OPD
approach:
Take steady steps…
Outsourcing jobs is not a
In order to exploit or reap real benefits of outsourcing software development offshore, new concept; it has been
one should climb up the stairs one at a time – safe & steady. evolved since centuries,
step by step. Looking at
the outsourcing
advantage, Offshoring
took its longest jump in
the 1980’s and then Y2K
compliance, body
Joint Venture
Continuing Dedicated Teams shopping in the year 2000
Trial Project
With can be seen as the rising
Trial Project sun in the IT sector for
countries like India &
Step – I China. Since then the no.
of companies looking for
Trial Project Offshore product
If you want to know how a dish tastes you will need to have a bite of the same. Having development are
said this, in order to really understand the advantages of Offshoring software increasing by leaps &
development it becomes inevitable to try out an offshore software vendor. Almost every bounds.
software vendor has a policy of pilot projects or trial projects of say 15 days to 1 month
wherein the client can be sure of the quality and commitment of an unknown vendor. The next wave in
There is not much to lose and after a convinced frame of mind along with proper mutual Information Technology
understanding it might prove to be a win-win situation at the end of the day. (IT) industry…… Offshore
Product Development.
Step – II Globally the Software
Continuing on a project basis product market is worth
Once both the parties are on the same page and have a clear understanding as well as $180bn, and in order to
convinced approach, the activity can be continued over a period of time by outsourcing reap the benefits of
small or big projects to the same vendor. Offshoring, OPD market is
growing exponentially.
Step – III
OPD :
Dedicated Teams A strategy with the help
Offshore Development Centre (ODC) again a very much known and heard about term in of which software
the field of Offshore Software Development. When the project seems to be of an companies can
incremental nature, it is no doubt practical to have a dedicated team with the offshore extensively lower their
solutions provider. Having said this, ODC enables the vendor: cost and intensively focus
on strategic priorities
• To have a better control over the team or the process of development such as marketing of the
• Have an offshore team exclusively working on the particular project or for the product, looking for next
particular vendor. generation products. The
• To decide upon ramping up or ramping down the team size depending upon the product can be released
size, scope and frequency of the projects faster in the market by
• And, further save costs. opting the OPD approach
and exploiting the time
Step – IV zone advantage giving
Joint Venture the company the benefits
Hope the economies keep up the boom in all the industries and the more the booming of 24 hours development.
scenario the more the projects leading to a step further and establish a joint venture with
the offshore vendor with whom the relationship continued till this phase. This undoubtedly
is the easiest way of entry into offshore centers like India or China and further gain a
competitive edge by further lowering the costs or we can say increase profit margins.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

5. Level of importance – Various factors while choosing an offshore partner Key Features
Evolution of OPD
approach:
Outsourcing jobs is not a
new concept; it has been
evolved since centuries,
step by step. Looking at
the outsourcing
advantage, Offshoring
took its longest jump in
the 1980’s and then Y2K
compliance, body
shopping in the year 2000
can be seen as the rising
sun in the IT sector for
countries like India &
China. Since then the no.
of companies looking for
Offshore product
development are
increasing by leaps &
bounds.
Better domain expertise: more & more critical activities offshored
The next wave in
Information Technology
(IT) industry…… Offshore
Product Development.
Globally the Software
product market is worth
$180bn, and in order to
reap the benefits of
Value & Innovation
Offshoring, OPD market is
growing exponentially.
OPD :
A strategy with the help
of which software
companies can
extensively lower their
cost and intensively focus
on strategic priorities
such as marketing of the
product, looking for next
generation products. The
product can be released
faster in the market by
opting the OPD approach
and exploiting the time
zone advantage giving
the company the benefits
of 24 hours development.
Domain Expertise
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

6. Key Features
Various activities outsourced and the suitability….
Evolution of OPD
approach:
Outsourcing jobs is not a
Product Design Development new concept; it has been
Concept
evolved since centuries,
step by step. Looking at
the outsourcing
advantage, Offshoring
took its longest jump in
the 1980’s and then Y2K
Testing Support compliance, body
shopping in the year 2000
can be seen as the rising
sun in the IT sector for
countries like India &
China. Since then the no.
Phases Objective Steps Involved
of companies looking for
Product Concept To come up with an Concept Definition3
Offshore product
innovative solution of Concept Evaluation3
development are
customer’s problem Prototype Design2
increasing by leaps &
Technology Evaluation2
bounds.
Prototype Development1
Prototype Validation2
Design Design a scalable, high Requirements Collection and The next wave in
performance, modular analysis2 Information Technology
product Software Architecture2 (IT) industry…… Offshore
Feature Definition1 Product Development.
Project Planning1 Globally the Software
Development Develop the product Requirement Management2 product market is worth
keeping a close watch Project Management2 $180bn, and in order to
on changing market Product Development1 reap the benefits of
trends Product Maintenance1 Offshoring, OPD market is
Re-engineering & Migration1 growing exponentially.
Testing To ensure the quality Unit/Interface Testing1
and a defect free Component/Feature Testing1 OPD :
product is ready Regression Testing1 A strategy with the help
Testing Automation1 of which software
Product Validation/Acceptance1 companies can
Support Providing post Technical Support2 extensively lower their
development technical Customer Support1 cost and intensively focus
support to the client Professional Services2 on strategic priorities
Documentation Services2 such as marketing of the
Performance Benchmarking1 product, looking for next
generation products. The
product can be released
1- Commonly Offshored faster in the market by
2- High potential opting the OPD approach
3- Not suitable and exploiting the time
zone advantage giving
the company the benefits
of 24 hours development.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

7. Key Features
An Example
Let us analyze an example of a trial project assuming a 5 man-month project (640 Evolution of OPD
hours) in terms of costs deployed. Also assuming that there would not be a need for the approach:
vendor firm to have an onsite presence and most of the coordination required would be Outsourcing jobs is not a
done through phone and emails. new concept; it has been
evolved since centuries,
step by step. Looking at
Offshore Development Inhouse Development the outsourcing
Rate Rate advantage, Offshoring
Team Primary took its longest jump in
Hours per Total Hours per Total
Location the 1980’s and then Y2K
hour hour
Project compliance, body
Offshore 160 $25 $4,000 160 $80 $12,800 shopping in the year 2000
Manager (1)
Onsite can be seen as the rising
Project (Clients 80 $50 $4,000 - - - sun in the IT sector for
Coordinator Resource) countries like India &
China. Since then the no.
Software Offshore 480 $15 $7,200 480 $50 $24,000 of companies looking for
Engineer (3) Offshore product
development are
QA Engineer Offshore 160 $15 $2,400 160 $50 $8,000 increasing by leaps &
(1) bounds.
880 $17,600 $44,800
Total The next wave in
Information Technology
(IT) industry…… Offshore
Product Development.
Globally the Software
Savings up to product market is worth
$180bn, and in order to
$27,200 or 60.7% reap the benefits of
Offshoring, OPD market is
growing exponentially.
Having analyzed the above scenario, let us have a look at a larger project. Assumption OPD :
being a 120 man-month project (19,200 hours) executed over 8 months having a team A strategy with the help
of 15 people. Also assuming that there will be travel expenses included when the of which software
offshore team will be visiting the client’s site as well as the vendor firm has a constant companies can
onsite presence at the client’s site having one or more of its engineers there during the extensively lower their
entire course of the project. cost and intensively focus
on strategic priorities
such as marketing of the
product, looking for next
generation products. The
product can be released
faster in the market by
opting the OPD approach
and exploiting the time
zone advantage giving
the company the benefits
of 24 hours development.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us

8. Key Features
Offshore Development Inhouse Development
Evolution of OPD
Team Rate Rate approach:
Primary
Hours per Total Hours per Total Outsourcing jobs is not a
Location
hour hour new concept; it has been
Project evolved since centuries,
Offshore 1280 $25 $32,000 1280 $80 $102,400 step by step. Looking at
Manager (1)
Project the outsourcing
Coordinator Onsite 1280 $35 $44,800 0 $0 $0 advantage, Offshoring
(1) took its longest jump in
Module the 1980’s and then Y2K
Architects Offshore 3840 $22 $84,480 5120 $70 $358,400 compliance, body
(3) shopping in the year 2000
QA can be seen as the rising
Offshore 2560 $15 $38,400 0 $0 $0
Engineer (2) sun in the IT sector for
QA countries like India &
Onsite 1280 $30 $38,400 3840 $50 $192,000
Engineer (1) China. Since then the no.
Software of companies looking for
Engineers Offshore 8960 $15 $134,400 8960 $50 $448,000 Offshore product
(7) development are
Travel increasing by leaps &
$12,000 0 $0 $0
Expenses bounds.
Total 19200 $384,480 19200 $1,100,800
The next wave in
Information Technology
(IT) industry…… Offshore
Savings up to Product Development.
Globally the Software
$716,320 or 65% product market is worth
$180bn, and in order to
We can conclude that the larger projects could potentially mean more savings. reap the benefits of
Offshoring, OPD market is
growing exponentially.
Let us have a sneak peek into a situation...
OPD :
A Point-Of-Sale software provider for the pharmaceutical and Retail markets wanted to A strategy with the help
find ways to speed up their product development efforts. With this objective, they of which software
outsourced the creation of one module on a trial basis to an OPD provider. companies can
extensively lower their
When this assignment proved successful, the ISV rapidly ramped up the team with the cost and intensively focus
OPD provider to 20 people, with most of them operating at an offshore location to take on strategic priorities
advantage of the cost differentials. The ISV's team and the outsourced team worked in such as marketing of the
a “co-development” model, sharing the development work on the 10-12 modules that product, looking for next
were required for every release. generation products. The
product can be released
The long-term relationship with the OPD provider existed for over 3 years and faster in the market by
helped the ISV: opting the OPD approach
Release 3-4 versions of their product every year (on a hosted model) and exploiting the time
Crash the product roadmap and include features earlier than planned, leading zone advantage giving
to faster customer acquisition the company the benefits
Focus more on product management, as opposed to dealing with the of 24 hours development.
overheads of managing a team.
Achieve higher R&D productivity for every development dollar spent.
Copyright 2006-2009 OTS Solutions Inc., USA info@otssolutions.us