Software Product Engineering Outsourcing

There are two types of IT outsourcing:

• Application Development and maintenance - focuses on internal or custom software development and maintenance
• Product engineering -- focuses on accelerating the new product development, customization and product management life cycles for product companies.

Product engineering is emerging as a distinct offshore outsourcing category given the skillset required to successfully execute.

The new trend is offshore outsourcing of product engineering. For instance, Oracle, Microsoft, Intel have setup development centers in India that are growing rapidly. In constrast to those who are setting up dedicated centers, companies like PeopleSoft are setting up partnership with Indian vendors like Hexaware. Others like Broadvision and Manugistics are outsourcing to companies like Symphony Services that have a sizable presence in India.

Even medium and small product firms are getting into act. Consider the case of Embarcadero Technologies, located in San Francisco, a leading provider of database and application lifecycle management solutions. Embarcadero used a development team within Aztec Software to work on a growing number of products - from development to maintenance to professional services - of a new ETL-based integration product, Embarcadero DT/Studio.

Aztec's contribution to the DT/Studio tool helped Embarcadero more quickly establish a competitive market position in that area. According to Stephen Aikins, product manager at Embarcadero, "Aztec's quality is top notch…they've definitely helped us reach the market faster. In fact, they saved us at least a month, and perhaps as much as three months." Three months in the competitive software market is a significant advantage.

The skillset required for managing product engineering is different from the more traditional application development and maintenance. It is a lot more innovative and engineering new products skillset than coding.

The bottom-line: software vendors are being asked to create new features and functionality, but at a low price. To achieve a profitable innovation-to-cost ratio, they must have an offshore strategy.