Bangalore: The offshore product development market in India has grown ten fold from $300 million to over $3 billion in five years and would continue to expand dramatically with expansion by global majors and driven by several factors, Forrester Research Inc said on Wednesday.
Unveiling a market overview at a press conference in Bangalore on Wednesday, Sudin Apte, Senior Analyst and Country Head (India), Forrester Research, said that the growth rate in the offshore product development segment has eclipsed the traditional offshore IT services market in India.
In addition to the continuous expansion by pioneers like Cisco, Intel, Motorola, and Texas Instruments, several factors would drive continued growth in the offshore product development space, which has three different segments - R&D and embedded classic engineering and software, Apte said.
These factors are "applicability across a range of products and verticals", a higher percentage of products' value now comes from software/intelligence", "competitive product development pressures", "large engineering talent pools" and "access to emerging markets".
"More than 200 product companies have jumped on the offshore bandwagon and established their presence in India over the last three years - through their own captive operations or outsourcers," he said.
The "unique requirements" of product development – which Forrester believes will emerge as a specialised field, separate from IT services - means that it would develop separately from traditional outsourced IT work.
The research and analyst firm recommended that firms get their internal house in order before going offshore.
"Product development companies need to learn from their peers that have already taken IT work offshore," Apte said.
"This means looking in the mirror and rationalising how they do things inside the organisation before they make the leap offshore."
Among other recommendations, Forrester also gave an "alternative view", striking a note of caution.
Maintaining that India may face a skill shortage, it said that old colonial-based education system in the country now struggles to turn out large numbers of quality engineers.
"This triggers competition amongst vendors for recruiting the best talent. With the kind of political and social turbulence gripping India currently with the impending caste-based quota policy, competition for this scarce resource is only going to become worse over the next two-three years," Apte said.
The firm felt that the education system in India needs revamping quickly or this problem would 'spoil the offshore produce development party'.
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