3Com's Commworks tries new outsourcing approach

CommWorks, a supplier of equipment and services for IP (Internet protocol) networks, is trying out an unusual model for doing product development in India. While other multinational technology companies have set up wholly-owned development subsidiaries in India, or simply outsource product development projects to Indian companies, CommWorks, a wholly-owned subsidiary of California-based 3Com, has come up with a hybrid concept: It has contracted the setting up and running of its product development center to Chennai, India-based software services company, Mascon Global.

"Maybe we could have come to India and built a center all by ourselves, but the fact is we didn't have any experience doing it," said Irfan Ali, president of CommWorks. "This is our first effort at doing outsourced R&D."

Although the Bangalore-based development center is called the CommWorks Asia-Pacific Technology Center, and the staff at the center will carry CommWorks' business cards for interactions with CommWorks' customers, the center is actually owned by Mascon, and the staff will be on Mascon's payroll, according to Ali. The product management at the center will however be done from CommWorks' headquarters in Illinois. Starting with product development, the center will also offer professional services to CommWork's customers in Asia. By having a center in India, CommWorks expects to offer its customers in Asia faster custom development, and cost-effective, optimized solutions because of a better understanding of local conditions, added Ali.

Outsourcing the setting up of the development center also made good business sense for CommWorks, as it did not involve large up-front investment by the company, without having any immediate business to justify it.

"We now have the flexibility to build up the center as the business develops," Ali added.

CommWorks explored the option of outsourcing product development to local companies, but it did not meet CommWorks' requirement, as Indian product development companies usually take up projects for product development with fixed specifications and milestones for delivery.

"What happens if after milestone number one, the customer requirements have changed ?" said Ali. " In our business, customers are changing their minds all the time, and we have to accommodate them all the time."

To start with, the Bangalore center will develop gateways and other products in the 2G (second-generation) wireless area, network management products, and voice-over-IP gateways. Most of the current work at the center in 2G is for customers in China. CommWorks plans to spend US$12 million over the next three years on the center, which will include investment in equipment as well as payment to Mascon for running the operation.

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