Up against competition for markets and for hiring staff, Indian software outsourcers are focusing on building reusable software that automates specific business processes. These software components can in turn be used across a number of clients, saving costs, and time.

Top Indian outsourcers such as Infosys Technologies and HCL Technologies for example, have developed a variety of components including an RFID (radio frequency ID) component for supply chain applications, according to Forrester Research senior analyst Sudin Apte.

Currently, outsourcers' business models are largely based on a cost-plus model where they add more staff to a project to get more revenue. "They are trying to break out of this linearity and dependence on low-cost staff alone," Apte said.

Midsize outsourcers are also investing in creating reusable components, consisting of business applications or middleware. "If you look at the applications we develop, about 30 to 35 percent are common across various applications, so there is an opportunity to make them reusable," said Bala Variyam, vice president for IT delivery at iGate Global Solutions, an outsourcing company in Bangalore.

The company develops prebuilt components that can be used across a variety of industries, as well as business components for banking and financial services that are quickly configured and deployed for customers, Variyam said.

Besides developing components in-house, iGate is also looking at open-source components. "We are looking, for example, at an open-source trading platform that can be used for capital markets and investment banking applications," Variyam said.

Among multinational services companies, IBM, for example, set up last year in India a Global Business Solutions Center as the company's global hub for the management and creation of reusable software components. IBM also set up last year development centers in Beijing, China, and Pune, India, that focus on developing industry-specific SOA (service-oriented architecture) services that are reusable across various customers.

In the short term, this strategy will require Indian companies to invest in top quality staff to understand the business problem and the technology and develop the software.

Most Indian companies like Infosys and HCL that are developing reusable components have large teams that are not immediately billable, so they don't earn direct revenue for their companies, Apte said.

In the long term, though, these companies could probably have less demand for new staff as they reuse software across a large number of customers, according to Apte.

IGate is already seeing dramatic time savings of up to 30 percent on applications development, though time taken on the design and testing phases does not change, Variyam said.