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Evidence of Offshore Product Engineering

Vendors and in-house development centers located primarily in India, Russia, and China are aggressively stepping forward to claim many aspects of software product engineering projects such as platform migration and porting services. From the actions of software companies such as Autodesk, Oracle, and SAP, offshore product engineering appears to be becoming a part of corporate strategy.


Autodesk, maker of the popular AutoCAD software, opened a research and development center in Shanghai, China, in October 2003. The company expects China to become its fastest-growing market, almost doubling its sales there during 2004. The new software development center opened a month before Autodesk announced the details of a planned restructuring that would reduce its workforce by between 550 and 650 employees.

The ads Autodesk has placed on Chinese web sites reveal that the company is hiring for positions such as product designer, software project manager, quality assurance engineer, sales manager, technical writer, programmer, and software engineer of all skill levels. Sample job requirements for a level-three software engineer include a college degree in computer science or engineering; solid analytical and design skills; proficiency in reading, writing, and speaking English and Mandarin; and the ability to coordinate and communicate with remote teams over different geographies and time zones.

Autodesk also has a development facility in India, but employees based there are assigned development work for the company's back office. In a February 2004 interview with the San Francisco Chronicle, Autodesk CEO Carol Bartz stated that the salaries of Indian employees are about 15% or 20% of U.S. salaries, with China being even a little less. She added, "When you can get great talent at 20% of the costs, it isn't about waving the American flag. It's about doing what's right to have a good company."


Since commencing operations in India more than a decade ago, Oracle has grown to be one of the biggest multinational employers in the U.S., with a workforce slated to reach 4,000 in 2004. Approximately 80% of those employees focus on software development in one of Oracle's two captive centers in Hyderabad and Bangalore.


A captive center in where a company sets up their own dedicated operation (as opposed to using a third-party vendor).

Unlike many of its peers in the software business, Oracle views its development teams in India as equivalent to their U.S. counterparts. The centers in India handle new product design; development, technology and feature enhancements, quality engineering, documentation, curricula for training, integration, and support and maintenance of existing products. Offshore team members are said to have contributed in areas such as grid computing, warehouse management systems, security, Java application development, XML, and technology and applications deployment on Linux.


In fact, having software development centers in India has helped Oracle to boost Linux sales there, because the sales and marketing groups can work with the development centers to create solutions tailored to local customers' requirements.


Oracle's competitor SAP AG has adopted a similar strategy through SAP Labs, an organization with the company's research and design unit. SAP Labs is responsible for researching, designing, and delivering software for the mySAP Business Suite. SAP Labs are located in India, China, Bulgaria, Israel, Japan, North America, and France, but we'll limit our brief discussion to India.

In 1998, SAP created a strategic development center in Bangalore, called SAP Labs India. The employees of SAP Labs India focus on software development in areas that include mySAP customer relationship management, solutions for the manufacturing and distribution industries, SAP NetWeaver, and mobile products. SAP has announced that it expects its staff in Bangalore to grow to 1,500 people in 2004.

Like its competitors, SAP was drawn to India with the hopes of cutting its development costs and solidifying its lead in the very competitive enterprise software market.

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