Spotlight

Surfing the offshoring wave

The offshore delivery model has helped Symphony Services’ clients move from labour arbitrage to value arbitrage, says Vinutha V.

Symphony Services addresses the demands of global enterprises in the product development space—including analytics as well as market and support services. The company’s offshore development centre in Bangalore and the sales & marketing unit in the US were set up simultaneously in 2002. Symphony’s domain expertise comes from the core team of the erstwhile Aspect Development (founded by Romesh Wadhwani who sold it to i2 Technologies for $9.3 billion in 1999) which had a strong, offshore-based model. The company brushed aside the belief of the US and European markets that India can only service IT activities, i.e. non-core functions. According to Ajay Kela, President, Symphony Services, India, “We wanted to offer services that are ‘crown jewels’ to our customers. We were able to create a direct revenue impact through an operations model (offshore model) that differed from that of traditional IT services companies.” The product development process offered by Symphony is aligned with the customer’s process.

The right time

We were able to create a direct revenue impact through an operations model that differed from that of traditional IT services companies Ajay Kela President Symphony Services, India

After setting up offshore development facilities in Bangalore, Symphony has grown rapidly taking its customer count to 40 and including the likes of Autodesk, Siebel, Hyperion, Mimosa Systems, Information Resources, Inc, and GERS Retail Systems. Kela states that the company started operations at the right time when the Indian IT software services firms had earned the trust of global customers in quality. The opportunity arose when independent software vendors (ISVs) in the US were facing cost pressures during the economic downturn in 2000. Symphony discovered that ISVs would come to India for offshoring capabilities and the underlying potential for Symphony to be present here was born.

Initially, it started operating the Commercial Software Solutions group that caters to enterprise packaged software products such as ERP, CRM and SCM. After six months, Symphony started Market Analytics Solutions, a division serving commercial packaged goods. It also started a Spend Management Solutions (SMS) division, which helps customers manage and minimise indirect spend such as in telecom and IT. Because the SMS division’s work is IP-based, it has turned out to be more profitable than the other two groups.

Opportunities from start-ups

Of the total clients that the company has, six are billion-dollar companies, while the rest range from start-ups to medium-sized firms. About 70 percent of a start-up client’s innovation is being done out of Symphony, India. Typically, larger companies pump 20 percent of the revenue into R&D and half of it would be offshored (the lion’s share going to their captive units). Silicon Valley start-up companies spend the maximum—about 60 percent of their revenue—on R&D. Since such companies cannot afford to have their own captive units in a low-cost country such as India, Symphony’s model suits them to a T. So far, Silicon Valley venture capitalists have invested about $60 billion. Nasscom has predicted that $8 billion to $11 billion worth of R&D and software product development would be done in India. Going by the huge potential, Symphony is aiming to capture 35 to 40 percent of the market for this kind of work by 2008.

Competing with captive units

Although captive units pose competition, Symphony sees this as an opportunity. Development for software product companies is dynamic and the time to market is the main parameter. “Over the last two years, there has been a rush to set up captive units in India. We predict that these units will suffer, as launching operations, and recruiting and retaining people are becoming major concerns for them. Companies are failing to get returns from these units, the time to market has increased, and the scalability is always an issue. Over the next one to two years, most of the captive units will fold,” reveals Kela. On the other hand, Symphony has the experience, talent and processes in place. In the last quarter (AMJ 05), it signed with four new captive units (customers) based out of India. Symphony, India is also setting up parallel separate global operating centres for its customers.

The company has gained customer confidence by offering certain flexibility—it works on a Build-Operate-Transfer model. Simply put, at any time, a client can acquire the operations including the team working on the project. “It is like an insurance policy for our clients, and such flexibility is needed as the work is important and IP-related,” comments Kela.

Currently, Symphony’s larger accounts are being serviced from its Bangalore centre, while the start-ups are serviced out of the Pune centre. The Mumbai office offers part of the product lifecycle work—professional services and support. It is also aiming to expand overseas, especially in China. The expansion is driven by its clients, as most of them intend to sell their products in China. It plans to establish a foothold in China through an acquisition that is expected to happen within a year.

To the end-customer

Kela remarks, “Our aim is to help our clients move up their business value chain. They should move from ‘labour arbitrage to value arbitrage.’ Customers should not only demand body shoppers from us, but come to us for technology and to increase their productivity.” The company plans to come out with an IPO in the US early next year.

vinutha@expresscomputeronline.com