PRODUCT ENGINEERING SERVICES      

 

As India became a favored destination for offshore development, most software product companies set up a development presence here -- either their own development facility or through some outsourcing provider. The key rationale behind setting up Product Engineering captives on the Indian soils was to ensure IP protection as well as greater cost savings. A captive center is believed to deliver better cost efficiencies in the long run, provided it achieves scale of operations, and process and management efficiencies.

 

As they attempt to scale up their India presence, some of these captive units get beset by some serious challenges, such as:

 

	Scalability : Some of the smaller Product Engineering captives in India have found it difficult to scale up as per the initial plans, due to a highly competitive labour market and lack of recruiting bandwidth
	Productivity : Surveys by independent analyst firms have revealed that the productivity of the Indian captive unit(s) is almost 30% lower than that of their US-based parent companies, owing to lower experience levels and lack of domain knowledge
	Escalation : There have been concerns regarding cost escalation, especially in smaller captives. Cost escalation is higher in smaller captive centers due to difficulties in resource optimization
	Attrition : The rate of attrition is found to be higher at all levels in a captive unit than that of Outsourced Product Development firms, since the latter are able to provide faster growth and onsite opportunities to their employees. Also, the impact of attrition on captive units is higher as compared to that on service firms since the level of buffer resources is lower in captive units

 

One of the most common strategies adopted by captive units, especially the larger, established players, is to have a hybrid strategy -- with service providers complementing their operations. The objective of this strategy is aggressive and flexible ramp-up, and access to specialized skills. Some of the smaller captive units (with less than 150-200 staff), which constitute around 60% of the overall segment, are not able to realize the cost benefits that were envisioned when they were set up and hence, explore the possibility of transferring their operations to service providers. Sonata has flexible engagement models that meet the objectives of large as well as small captive centers : 

 

Captive units wishing to work as per the Hybrid Model can avail of Sonata's wide array of services and technical breadth to gain flexible, rapid ramp-up and ramp-down capabilities as well as access to specialized skill sets, thereby achieving critical mass. Some typical services offered by an OPD vendor like Sonata are:

 

 

 

 

For product companies facing challenges in scaling up and considering the option of a provider-managed setup, Sonata offers an attractive engagement option -- the TBO Model. Highlights of the TBO Model are as given below: