Product Development Service Companies

Venture Blog India has a nice article on the rise of product development service companies. These companies differentiate themselves from pure consultancy services by developing surrounding modules of a core product.

Typically, when any company starts to develop a software product, it would have a unique differentiator or core of the product. That core generally accounts for 15 per cent of the development work of the product. This would invariably be developed in-house. But the product would also have a lot of other modules. These are essential, but they are not big differentiators. This is where product development services companies step in - they develop these non-core modules.

Billing rates of such companies can be quite high but on the other hand the model here is not as scalable as in the IT services sector.

Any success stories to talk about?



US-based Stata Labs, founded by Raymie Stata (Ray Stata's son) had outsourced the entire development of its email software product "Bloomba" to iSoftTech.



Yahoo! recently acquired Stata Labs along with the 20 iSoftTech engineers working for Stata Labs. Yahoo! now plans to use Bloomba to take on Microsoft's Outlook and Google's Gmail.

Complete story is available here.