Report From India: Specialized Wave Of Global IT - InformationWeek

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2/15/2008
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Chris Murphy
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Report From India: Specialized Wave Of Global IT

At a presentation at the Nasscom conference for the Indian IT industry, Arjun Malhotra, CEO and chairman of the consulting firm Headstrong, offered this advice to small or midsized IT services company in India: "Focus on something, and be the best at it." Here are two examples of companies already trying to pursue that model, GlobalLogic and Photon Infotech.

At a presentation at the Nasscom conference for the Indian IT industry, Arjun Malhotra, CEO and chairman of the consulting firm Headstrong, offered this advice to small or midsized IT services company in India: "Focus on something, and be the best at it." Here are two examples of companies already trying to pursue that model, GlobalLogic and Photon Infotech.GlobalLogic is a 3,000-person company specializing in outsourced product development work from lower-cost countries, specifically India, Ukraine, and China. It recently raised a fresh $30 million in venture capital, bought a 400-person Ukrainian R&D company, Validio Software, and kicked off a strategy to push deeper into companies' product development processes.

Photon is a 1,500-person company in Chennai, India, that helps companies implement what it calls the next generation of Internet technology -- a convergence of open source, Web 2.0 collaboration, software as a service, and service-oriented architecture.

The first wave of the Indian IT boom spawned well-known names such as Infosys Technologies, Tata Consultancy Services, and Wipro Technologies, which used lower-cost programming to become $4 billion-a-year companies across broader, tech-driven services. If a second wave of such IT services companies is to emerge, companies will have to find specialties the giants don't touch. IT pros everywhere in the world need to track these trends, so they can plug their companies in to take advantage of them, and personally so they can position their careers to fit the macro trends.

GlobalLogic has built its opportunity in product development. "We compete for talent with Google and Microsoft, not Infosys and Wipro," says CEO Peter Harrison. GlobalLogic develops software that companies include in their products, both for software companies or for providers of software-enabled products such as Web travel services. So far, its customers are companies with existing products, for which GlobalLogic is called in to add functions.

With its new initiative -- dubbed version 1.0 -- it aims to work with startups that outsource their entire product development operation from day one. "We see a trend where software startups are going 'fabless,'" says Harrison, borrowing jargon from semiconductor companies that have no factories. "There's going to be a lot more of this."

Photon is finding a different niche. By concentrating on emerging Internet technology, it's getting about half its revenue from Fortune 500 companies. "They don't need another outsourcing vendor. They have five," says CEO Srinivas Balasubramanian. "What skill are we bringing that others aren't?"

The other half comes from small businesses, a customer base he says keeps Photon on the cutting edge. "Two years ago, they were onto open source software and Web 2.0," Balasubramanian says.

Among Photon's projects: helping companies pick the right open source software, use Web 2.0 collaboration tools, and integrate software as a service. It's a strong enough business that a public offering is likely in its near future.

Specialists such as these inevitably face pressure from the biggest IT services firms, which home in on this kind of profitable work when the market gets big enough. Patni, a 15,000-employee Indian IT services company, already gets 17% of its revenue from doing product engineering. Any specialist better build up a healthy base before the giants arrive.

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