Spotlight

Riding the OPD wave

The Indian product and technology services development opportunity is likely to touch $8 billion to 11 billion by 2008. GlobalLogic is hungry for a slice of this pie, reports Tanu Talwar.

With the global business environment becoming increasingly competitive, outsourced product development (OPD) seems to be the latest trend to catch the imagination of enterprises worldwide. Product manufacturers are outsourcing bits and pieces of product development to speed up the life-cycle of product development, and thus ship quicker than the competition.

According to a recent Nasscom-McKinsey analysis, the Indian product and technology services development opportunity is poised to grow to $8 billion to 11 billion by 2008. It is this opportunity that GlobalLogic hopes to tap into.

Started as a small company run by a four-member team of IIT graduates with two offices each in India and the US, GlobalLogic has matured and expanded into eight offices across the globe employing 1,400. Formerly known as Induslogic, GlobalLogic was an early mover in outsourced software product development. Established in 2000, a major hurdle was to convince software companies to outsource software development to it. Recalls Peter Harrison, CEO GlobalLogic, “The key challenge before us was to convince software companies to outsource their product development to us. It was exhausting to win their trust and persuade them to relinquish a part of building their product to another company. In six years, we have earned a reputation which has made us a partner of choice for about 90 software companies for building not only edge products but also a complete product from scratch.”

With its headquarters in the US and development centres in Delhi and Ukraine, the company’s clients include IBM, Polaris Wireless, Sony Digital, AutoDesk, Trimble, Mantas (i-flex), America Online and NexTone in industry domains such as VoIP, mobile, telecom, open source and finance. Meanwhile, the company continues to maintain its association with its first client, Avolent, a US-based financial relations management player offering self-service e-billing and e-payment solutions. “We have a 50-member team working on providing and upgrading Avolent’s product requirements,” informs Harrison.

The Indian perspective

"We are scouting for companies which have experience in fields such as telecom, VoIP, finance, security and storage-related products" - Mukul Jain COO & Country Manager GlobalLogic

Underscoring the importance that GlobalLogic attaches to India, Harrison says, “India is the premier destination for OPD. It is the second country after the US which has a talented workforce possessing strong skill-sets in this area. Although the Indian product market is still at a formative stage, the IT market is growing rapidly, and it is this factor which has prompted us to have a strong workforce of 1,100 employees from India out of our overall strength of 1,400 worldwide.”

Since the company decided to take the inorganic route of acquisitions and partnerships, it has acquired or partnered with two Indian OPD companies. First off, in April this year, GlobalLogic acquired the Nagpur-based Lambent Technologies, a provider of outsourced wireless software product development services. Mukul Jain, COO and Country Manager, GlobalLogic tells why. “Lambent is strong in the mobile communications market, which complements what we are doing. We have a strong position in the telecommunications space, and Lambent will help us enhance it.” The agreement with Lambent has enabled GlobalLogic to obtain a workforce of 300 professionals and add marquee names such as Polaris, Autodesk, Sony Digital and 20 other mobile companies to its client list.

The company has also established a strategic alliance with Mantas India, and has transferred the latter’s entire Indian workforce to its payroll. GlobalLogic is now responsible for Mantas’ software product development and behaviour detection technology which covers intelligent analysis and financial data. Comments Harrison, “Mantas has sophisticated and converged products that require higher domain expertise which will be provided by us. This agreement brought to our centre of excellence services with regard to developing and maintaining enterprise-class data warehousing products.”

Although 90 percent of the company’s business comes from the United States, the M&A roadmap adopted by GlobalLogic reveals that it’s determined to strengthen its Indian footprint. The company is currently in talks with 25 Indian companies in the OPD segment and is expected to announce another acquisition by December. Throwing light on the acquisition strategy is Jain. “We are scouting for companies which have experience in fields such as telecom, VoIP, finance, security and storage-related products, with an employee base of 300 to 500 people. Our roadmap involves expanding our offerings both in terms of life-cycle and domains. We provide end-to-end product development services for innovating products, designing products, and developing, testing, porting and supporting products.”

Looking at the huge growth potential in Tier-1 and Tier-2 cities, most of these acquisitions are expected to be in Hyderabad, Pune and Chennai, and will be funded from the $12.5 million raised through Series-B funding led by Sequoia Capital India and New Enterprise Associates—venture capital firms based in the US.

Getting ahead with acquisitions

Speaking about OPD as a market opportunity, Harrison says, “The OPD market has evolved dramatically over the years. Today, a large number of companies are going in for OPD as it happens to be a plausible and reasonable alternative. The option brings down the total cost of output, helps boost the bottom-line by availing of the best talent, and saves time for core activities.”

To make faster inroads in the booming OPD market, GlobalLogic is largely looking at acquisitions and partnerships with leading software enterprises. Although the company plans to grow organically, it’s targeting 40 percent of its growth through M&A. After adopting the inorganic growth route earlier this year, GlobalLogic has acquired three companies, the latest acquisition being the New Jersey-based Bonus Technology, a software engineering services company with significant operations in the Ukraine. Harrison explains the rationale: “Bonus not only has a specialised work-force of 300 employees with average experience of 12 years, but its clientele includes the leading OSS technology provider, Telecodia.”

Achieving through Velocity

With 100 percent year-on-year growth, the company has clocked revenues of $50 million this year and aims to double the figure by the end of this fiscal. As the Indian OPD market is expected to touch $8 billion to 10 billion, GlobalLogic hopes to capture 5 percent of it. Trying its hand at embedded OPD, the company will continue to focus on the telecom and mobile verticals as these two revenue generators contribute about 55 percent of the OPD market.

Velocity, the company’s distributed agile product methodology, is used to manage and control the varying product development stages using iterative and incremental practices. The method is a blueprint of the process whereby diverse groups come together to achieve a common goal and apply agile principles across the complete software product life-cycle. The company applies the platform to establish and continuously evolve each team’s work practices to create agile teams that can effectively develop and distribute the product irrespective of physical and cultural distances. As a result, teams using the system achieve greater efficiency and visibility, producing high-quality products without incurring additional overheads.

What differentiates Velocity from other distributed agile methods are features such as team communication planned around short meetings, disciplined tracking of product requirements, and intense, detailed design processes. Comments Rajul Garg, VP, Corporate Development, GlobalLogic, “Combining a proven distributed agile method with state-of-the-art tools, the Velocity platform lets software product companies rapidly create high-quality products using geographically-distributed teams.”

Although the company has followed this practice from its incorporation, the availability of Velocity was formally announced in September 2006. It has enabled the company to achieve 95 percent on-track and timely deliveries. Declares Harrison as he signs-off: “The most important factor in the OPD market which determines a company’s success is the delivery time it takes and the products that it delivers within the promised time.”