Business Plan for Offshore Software Development Center in India

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BUSINESS PLAN FOR SETTING UP AN OFFSHORE SOFTWARE

DEVELOPMENT CENTER IN INDIA

Introduction

Objective

Outsourcing software requirements

Offshore Software Development

Infrastructure

Manpower

Software Projects

Proposal - Your Opportunity to own an International Software Company

How To Go About

Financial Implications

Timeframe

Conclusion & Contact

INTRODUCTION

We are a small firm called INDIA SOFTWARE. We are into international business development for some of

the best software companies in India. In other words, we get software projects for our software associates in

India. By using innovative Internet marketing technologies, we have been able to generate enquiries for

software development from across the world for our software associates. Our project enquiries have come

from U.S., U.K., other European countries, Canada, Australia, Far East, etc. What companies get spending

millions of rupees, we have been able to get the same at a fraction of the cost.

We are a core team of three namely, Rajesh P Iyer (MBA) - Partner, Chandresh S - Partner, Sandeep Shinde

- Commercial Head. All have excellent past records in the management of business both technically and

administratively.

OBJECTIVE

Business Plan for offshore software development center in India http://indiasoftware.tripod.com/business_plan.htm

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The objective of this paper is to provide a brief on the potential software business opportunity in India and

how our alliance could go about setting it up. India, with the world's best software professionals and distinct

cost advantage is all set to become the center of Software Development. India has a competitive edge in the

global software market. Exports are doing extremely well, growing almost at 55% in the last few years. The

Government of India, recognizing the software export business potential, is encouraging its development by

providing various facilities and concessions. This is the reason for the development of 'Software Technology

Parks' (STPs) in various cities of India. These STPs offer all facilities like space on lease with furniture, Air

conditioning, Power, High Speed Data Communication, etc at a very reasonable cost.

Now, what we are looking at is to set up our own development center & process all the enquiries for

software development that we have been getting from all around the world . This is where the opportunity

comes to all those people looking to invest in the right kind of business. It is a known fact that software

exports from India has been rapidly increasing over the years. Countries from across the world have been

looking at India for outsourcing their software development needs. This is because of the simple fact that

India has abundance of manpower resources in terms of software professionals & also with software parks

mushrooming all over the country, infrastructure is also available cheaply. This drastically cuts down the

cost of developing the project. Our firm, having done indepth research in Internet marketing and after

having experience of getting projects for top companies, is looking for individuals or parties from across the

world to invest in this offshore development center. Our firm will merge into it as its business development

team & with the number of enquiries for software development that we manage to generate we will start off

from day one & this shall be a truly international company since we get projects from all parts of the world.

OUTSOURCING SOFTWARE REQUIREMENTS

In the last few years, more and more companies around the world are looking towards India for outsourcing

their software requirements. The changing business environment is demanding new applications. In

particular, the spread of client-server computing in decentralised organisations involves the development of

applications specific to a user's business.

Outsourcing is becoming a strategy for forward thinking IS managers. It is no longer just a means for

reducing costs, but a tool for adding value to business. It enables organisations to concentrate on their core

business, carry out business re-engineering and provide information that is valid, timely and adequate to

assist decision making at the management level and quality and cost control at the middle and lower levels.

As a result, outsourcing has gradually grown beyond the traditional idea of "having a third party running the

data centre". It has come to mean, "any use of an outside contractor to replace or extend in-house resources".


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Outsourcing is closely linked with corporate strategy, since it must support the organisation's major initiative

in using IS. It should enhance and add value to the business. A rule of thumb to start and gain experience is,

"if IS is low cost and of high value addition, keep it within the organisation, i.e. in-source. If IS is high cost

and of low value addition, consider outsourcing". In the past few years, whenever organisations around the

world have outsourced to India, the Indian software companies have substantially helped to cut costs in

software development projects or MIS environments, while maintaining high quality. Moreover, all these

cost and quality advantages are coupled with the use of state-of-the-art technologies.

In 1996-97 more than US$ 500 million worth of software development work was outsourced to India (The

total software exports from India during the year was US$ 1085 million). This was 56% higher than US$

320 million worth of outsourcing orders in 1995-96. In 1997-98, the quantum of outsourcing jumped to US$

900 million and may reach as high as US$ 2 billion by 2000 A.D.

OFFSHORE SOFTWARE DEVELOPMENT

One of the unique methods adopted by Indian software companies for providing competitive advantages to

their clients is through offshore software development. It involves the use of high speed (64 kbps and above)

datacom links. This enables the use of computers situated anywhere in the world to be used by programmers

in India on a real-time and on-line basis. Even if the client is situated 10,000 miles away from a software

company in India, the client is still able to monitor the software development on a minute-by-minute basis,

ensure quality checks, communicate with the programmers as if they were just next door and get efficient

software developed.

The U.S. and India have an average 12-hour time zone difference, but this kind of use of datacom can

provide a virtual 24-hour office to a client in the U.S. Lately, this concept has worked wonders for large

projects and also for projects involving remote software maintenance using video conferencing. Offshore

projects mean immense time and cost savings.

INFRASTRUCTURE


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Advanced infrastructure is essential to any software development activity, a fact that led government of

India to create numerous ''Software Technology Park'' The concept of Software Technology Park (STP)

Scheme initiated by the Department of Electronics has worked very well. There are several STPs in India

spread throughout the length and breadth of the country. Among others, STPs are located at Bangalore,

Calcutta, Hyderabad, Chennai, Pune, Noida, Ahmedabad Indore, Jaipur and Bhubaneswar. India's

government has also encouraged private companies to develop infrastructure and facilities to support

high-tech information technology, telecom and software companies.

MANPOWER

Yet another strength for India is its large manpower pool. Just as the Gulf has its natural resources in crude

oil and South Africa in diamonds, India's natural resource lie in its abundant technically skilled manpower.

More than 320 universities, 32 engineering colleges and 700 private training institutes teach computer

science courses. The output of trained manpower at degree/diploma level has increased from less than 1,000

in 1983 to about 60,505 in 1996. A Nasscom survey in 1996 to understand the manpower requirements

highlighted the following facts :

The number of software professionals had increased to 160,000 in 1996 compared to 1,40,000 in the

preceding year. This includes software professionals in non-commercial organisation as well as software

development units in user organisation. Companies have projected a demand for another 55,000 software

professionals each year between 1997 and 1999. With some 60,000 new IT professionals (with varying

skills) available to the industry, on an annual basis, the job market will remain tight but can ease in later

years (provided adequate measures are taken by Government & Industry at the earliest). But, the supply of

experienced software professionals and specialists will continue to be tight in the near term. However, this

projected demand has been quantified as per a sample survey. The mood in the industry clearly indicates that

even if the current manpower pool can be increased by 10 times, by the turn of the century - they can be

absorbed by the industry. In other words, it is difficult to put a maximum cap on number of professionals

required. It all depends on vision and capability to develop more manpower. Almost 70% of the software

professionals employed in the industry, were in software development, 10% in marketing, 14% in support

and 6% in other activities The overall median age of the software professionals was about 28.4 years. 81%

of software professionals in software companies were men, whereas 19% were women. However, this ratio

is likely to be 70:30 (male : female) by the year 2000 A.D. Overall educational qualification of Indian

software professionals was healthy. About three-fourth had a minimum IT degree. IT diploma holders

comprised 20% of the workforce. Close to about 5% possessed other non-IT degree/diploma 60% of

software professionals possessed 5 years of working experience. There was an average of 21% rise in basic

salary in 1996 over the previous year. In 1996, although the turnover rate came down to 17.2% (from the

earlier turnover rate of 25% in 1992), but it still remained high, fuelled by the 4.5% growth in the Indian

economy and the phenomenal 50% growth in the revenue for the software industry in 1996-97. This caused

the HRD market to tighten considerably. Our software professionals were highly rated by their employers

for their quality. Most gave an average of close to a 9 on a 10 point rating scale, with 1 being the lowest and

10 being outstanding. The skills in demand were in the area of business applications of software

development, Y2K tools, software engineering, Internet, client-networking, OOPS, client-server, BPR, GUI,

Windows, project management, quality assurance, technical writing, telecommunications, networking and

RDBMS.

SOFTWARE PROJECTS


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Although infrastructure and manpower skills are available in India at a very low cost, the important factor

before starting any software exports venture is the business prospect i.e. getting business in form of software

projects. With our expertise and experience in getting software development projects from all over the world

for our software associates, this aspect is taken care of abundantlly. We get software development enquiries

for our associates almost on a daily basis using innovative Internet marketing techniques & once we start

our offshore development center, these enquiries can be processed by our own company.

PROPOSAL

YOUR OPPORTUNITY TO OWN AN INTERNATIONAL SOFTWARE COMPANY

Our team has been actively involved in the ground work in the past few months to set up a Software Export

Venture and for that purpose, we have been scouting for a foreign partner who can make the equity

investment. We have the expertise and the right kind of environment with solid backing of very experienced

software professionals. We are looking for a partner who is ready to study our proposal and grab this unique

opportunity to invest adequate amount for a very successful business plan for mutual benefit.

We invite all the entrepreneurs, financial institutions, venture capital firms or anybody with interest for

financial participation in this offshore software development business. As an invesment, there cannot be a

better business than software since not only in India but in all parts of the world, it is the software stocks that

are doing exceedingly well. Also, from the investment point of view, since manpower and infrastructure is

very cheap in India, the start up cost will be very low. Our firm has set up a few foreign software companies

in India & thus have experience in all the initial procedures, in getting all Govt clearances, getting space in

software parks at a low price, etc. Also, this unit can be started as a 100% export unit, thus getting advantage

of various tax sops by the Govt. for 100% export units. And our confidence in generating flow of software

projects stems from the fact that we have been doing the same thing for the top software companies for quite

some time now & by our innovative Web marketing, we are getting enquiries for software development

regularly.

HOW TO GO ABOUT

For setting up a venture here, initially the required Government and Reserve Bank of India approvals have

to be taken. After this the company can go ahead with its incorporation. Ideally, it would be best to

implement your business in an STP, which can provide the facilities like:


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Single hop satellite links to US.

Nodal support in the US.

64kb data circuits and more if needed.

Noise and Air pollution free environment.

Centrally Air Conditioned, Carpeted and aesthetically pleasing buildings.

If we strike a partnership, our involvement would be in:

Getting Software projects from different parts of the world

Technical expertise - timely execution of projects.

All clearances and liaison with Government Agencies.

Acquistion of space for the office in STP.

Cost benefit analysis of the projects.

Commercial negotiation with the clients.

Getting software professionals.

Day to day management of business affairs in the areas of Finance, Commercial, Human Resources,

Legal and Accounting.

FINANCIAL IMPLICATIONS

It is proposed to form a minimum basic team to make a beginning keeping the initial investment low and

gradually develop into a full fledged software export house. An approximate capital expenditure (in dollars)

for setting up the business is given below:

Manpower

Total number of software professional: 45

Others (incl Marketing, HR, Adm, etc): 8

Particulars Dollars *

Capital Cost * *

Interiors / Carpeting * *

Furniture * *

Air Conditioning * *

Internal Electrification * *

Total of all the above 150,000 *

Designing & Supervising charges 15,000 *

Equipment and machinery - IBM make 75,000 *

Server - Digital 120,000 *

UPS - Kirloskar Make 5,000 *

Generating Sets 100 kva 20,000 *

Deposit - Building on annual rental / lease 7,500 *

64 KBPS Direct Satellite Link 25,000 *

TOTAL CAPITAL COST 417,500 *

* * *

Recurring Cost * *


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Salary 50,000 per month

Overseas Travel (for mktg & onshore Developemnt) 50,000 per month

Electricity 1,000 per month

Transport 1,100 per month

Food 1,000 per month

Travel - Local 1,875 per month

Accomodation 2,500 per month

Entertainment 500 per month

Telephone / FAX 2,500 per month

Courier Charges 375 per month

Housekeeping 625 per month

Building on annual rental / Lease 2,600 per month

Consultancy 2,500 per month

Legal fees 1,250 per month

Advertisement 2,500 per month

Office Expenses 10,000 per month

MONTHLY RECURRING COST 130,325 per month

* * *

Yearly Recurring cost * *

Audit Fees 1,500 per annum

Training 25,000 per annum

Repairs & Maintenance * *

Computers 10,000 per annum

Air Conditioners 1,500 per annum

Electrification 500 per annum

Insurance * *

Computer 2,500 per annum

Air Conditioners 2,500 per annum

Electrification 2,500 per annum

YEARLY RECURRING COST 46,000 per annum

This is just a rough estimate of what would be the obvious costs. Once, the detailed business plans are

chalked out methodically, a more accurate figure can be arrived at.

TIME FRAME

The time frame involved in putting up a shop and starting operations would be three months. This time

would be required basically to get the necessary corporate and Government approvals.

CONCLUSION

Finally, we sincerely invite any party interested in investing in an offshore development center to India and

have a first hand understanding of the above mentioned factors. For more information please contact us &

we shall be glad to respond.


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R. P. Iyer

1-B/88, Piramal Nagar,

S.V.Road, Goregaon (West),

Mumbai - 400 062

INDIA.

Tel: (91) 22 8728086

Email Me


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Business Plan for Offshore Software Development Center in India

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