Bangalore: In February, data storage firm Network Appliance Systems India Pvt. Ltd, or NetApp, “bought” 30 engineers from partner Symphony Services Corp. India Pvt. Ltd which builds software products or parts of them for it.
With this, NetApp joined a growing list of companies that includes Dendrite International Inc. and Oracle Corp. which have exercised the transfer option or buying out people from their partners in a so-called build-operate-transfer, or BOT, deal.
Vikram Shah, president of NettApp India, said the takeover was necessary as the work being handled by the team at Symphony became critical to the company’s business. “It was more of a strategic decision when we felt that the application integration project (that was outsourced to Symphony) has become vital for us,” Shah said.
In last two years, cos as Oracle, SAP have bought development teams from outsourced firms
Traditionally, firms such as Dendrite and Oracle sign deals with India-based product development firms which set up dedicated development teams for them, run the operations for a specified period (usually three-five years), and eventually transfer the teams to them. But it’s only now that the T-factor in BOT is gaining momentum. Depending on the terms of the deal, the vendor is compensated for the transfer as it entails loss of revenue and employee resources.
“As outsourcing deals struck some three-four years earlier come up for renewals, we see more such transfers,” said Pari Natarajan, chief executive of Zinnov Management Consulting Pvt. Ltd, a research and consulting firm that advises clients on their product development outsourcing strategy.
In the past 18-24 months, firms such as Dendrite, SAP AG and Oracle have bought development teams from outsourced development partners. In early 2007, Dendrite took over a team of 325 engineers from its development partner Aztec Software Ltd after it decided to set up its captive development centre in Bangalore.
Dendrite was subsequently acquired by French firm Cegedim SA in May 2007.
Following its acquisition by SAP in 2006, Business Objects bought over a team of 300 from Ness Technologies Inc., which runs a 2,700-engineer development operations in India. In 2007, Ness started transferring a team of more than 100 engineers to Oracle after it acquired Portal Software.
Shashank Samant, head of North American operations for Ness, said transfers happen when clients think they are going to save more money by taking over the teams or when they feel they are losing control over core operations. Mergers and acquisitions are another reason for transfers, Samant added. He said Ness has done some six transfers in the past five years, the latest being to Portal Software.