By Prabhat Kumar Tiwary SVP & SBU Head- Industry Verticals(Manufacturing, Logistics, BFS, ISV, Energy)
The global product development industry is undergoing a transformation with Independent Software Vendors (ISVs) looking for newer avenues to generate revenues in the face of growing competition. The situation is further compounded by the need to address technological obsolesce constantly and manage the dynamic digital consumer's requirements.
Products in demand yesterday are likely to become a standard today; and ultimately be out of favour tomorrow. The pace of change is accelerating as technology continues to evolve. The objective behind Outsourced Product Development (OPD) is to enable organizations to collaborate with the experts on bringing in the best quality products to market at reasonable costs. On their part, ISVs need to be cognizant about building a differentiated product that addresses a defined business challenge.
Reading the Current OPD Scenario
The R&D product engineering services market will reach about $66.2 billion in 2017, according to a recent IDC report. The offshore software product development exports from India is expected to generate revenues of $1.7 billion in 2014, says NASSCOM. Over the last few years, I have observed some key trends in the OPD market, which service providers should be aware of:
-SMAC technologies (Social, Mobility, Cloud and Analytics) are redefining product creation (on the part of the ISVs) and product consumption (by the consumer)
-Adoption of software products is now expanding from large enterprises to their medium sized counterparts. It is these Small & Medium Businesses (SMBs) that are emerging as the key Influencers
-The product development duration and release phase is gradually shrinking. The "FMCG mind-set" is now finding prominence in the software product phase, resulting in higher expectations from the OPD players to deliver a quick turnaround time.
-The start-ups and niche OPD players are giving tough completion to the regular OPD players. According to a NASSCOM report, over 300 start-ups have been setup in India offering SMAC over the last five years.
How to Make the Best Use of Technology
Economic viability of the product needs to be identified much ahead in the game. The product must address a pre-defined business challenge. Many companies get this wrong; and any development should be undertaken only after reading the market conditions. In addition, all the aspects of product management including ideation, market study, competition analysis, product development, go-to-market, deployment, refresh and support needs to be thought through.
Product companies should invest heavily in SMAC to address the dynamic requirements of today's digital customers. In this digital age, consumers are demanding flexibility to use a product or service as and when required; ease of access from any device and be connected with the world. Hence, enterprises are demanding data analytics and a cloud hosted model of deployment, in order to stay in control and provide services by using the pay-as-you-go model.
It is essential for OPD players to leverage new development models, methodologies and have accelerators and reusable frameworks to decrease time-to-market. Organizations worldwide are increasingly demanding from their OPD partners to have their frameworks, IP and solution accelerators in place to reduce the development phase and stay a step ahead of competition, leading to tangible business benefits.
At Xchanging, we have built a 6-stage product development framework, based on our years of experience and a strong understanding of the latest software methods such as agile development, Dev Ops, Test Automation, etc. This framework jump starts product development and reduces the development effort.
What the Future Entails
Outsourced Product Development vendors should develop a talented resource pool and domain expertise. With companies demanding reduced time-to-market, OPD players are investing in bringing the best available talent in the market on board. Hence, the key is to have highly skilled architects, developers and testers with a strong understanding of multiple technologies, open-source, non-functional aspects of software development and ability to leverage SMAC.
By unifying the disparate parts in SMAC, one can enable a company get the best out of its talent pool. Vendors want an easy model that harnesses the best of these disruptive technologies and enables OPD to be more scalable. We're moving to a scenario when only marketing is being managed by the parent firm. The development of the product, from scratch, including design and R&D, is being managed end-to-end by OPD experts.
The labor rates in China and some of the eastern European countries are on par with the Indian labor rates. The next logical step is to increase the quality of work we can undertake. Our customers, for example, are asking us for mobile enabled products that bring in efficiency in work-flow. One of our mobile banking customers in the UK expects us to have developers with 8 to 10 years of strong development experience with robust proficiency in multiple technology skills.
The external R&D market in India alone is set to exceed $37 billion annually by 2020, according to a Booz study. While the pie is growing, one should also look at the quality of its ingredients. Getting crucial design work will only enable the nascent 'Made in India' technology scene to understand and learn from global players. In the coming years, we'll learn just how much quality work we can imbibe from the biggies. If current trends are an indication, the market looks ripe.