Business Plan for Offshore Software Development Center in India

Business Plan for offshore software development center in India

http://indiasoftware.tripod.com/business_plan.htm

undefined

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 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 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



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".



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



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



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 s oftware 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 i ts incorporation. Ideally, it would be best to implement your business in an STP, which can provide the facilities like:



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 *

*

*

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 *

Capital Cost

TOTAL CAPITAL COST

* Recurring Cost

* *

417,500 *

*

*

*

*



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

*

*

*

*

Audit Fees

1,500

per annum

Training

25,000 per annum

Yearly Recurring cost

Repairs & Maintenance

*

*

Computers

10,000 per annum

Air Conditioners

1,500

per annum

Electrification

500

per annum

*

*

Computer

2,500

per annum

Air Conditioners

2,500

per annum

Electrification

2,500

per annum

Insurance

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.



R. P. Iyer 1-B/88, Piramal Nagar, S.V.Road, Goregaon (West), Mumbai - 400 062 INDIA. Tel: (91) 22 8728086

Email Me

Business Plan for Offshore Software Development Center in India

Recommend Documents