Destination India for small IT firms

Washington: Although the past trend in outsourcing was confined to larger technological firms shifting research and development resources overseas, the phenomenon is now catching up on the small and mid-sized software companies moving into India.

Additionally, it has been pointed out that by getting into India, where resources are still available at a fraction of American prices, the smaller start-ups are able to catch the attention of larger firms looking to make promising investments, The Washington Post noted.

The report also pointed to the fact that many Washington DC metro-based firms were fanning out to different parts of India, including Chennai, Pune and Bangalore.

The first example cited is that of when WebMethods looked at tiny California technology firm Infravio Inc as an acquisition candidate, the Fairfax company knew that Infravio's product would be a perfect fit for its software suite.

But the "real head-turner" about the 65-person start-up was the location of its employees – 50 software developers in Chennai.

What is being pointed out is that WebMethods paid $38 million as a premium price for a small company that made less than $1 million in 2005 but that in the longer-term perspective the purchase plays into the cost-cutting strategy WebMethods has adopted.

"Two years ago, WebMethods opened its 58-person India Development Centre in Bangalore and chopped millions of dollars from its budget as a result. The Infravio purchase nearly doubles the company presence in India," The Post said.

WebMethods, has 840 employees around the world and is into software that lets different applications in a computer system work together.

Since opening its Bangalore centre in 2004, WebMethods saved USD 5 million in research and development expenses, which totaled USD 40.2 million for the year ended March 31, according to the company's annual report cited by The Post.

Other Washington metro area companies were also turning into the overseas talent pool with business and government information technology provider IMC Inc of Reston employing 120 developers in its subsidiary in Pune.

The Vienna (Virginia) based Indus Corporation opening a subsidiary in Bangalore four years ago with six developers rising to 30 and planning more than 200 in the next two years, the paper said.