Orange County’s second largest software maker is sending work to India and China and cutting its development costs along the way.
Costa Mesa-based FileNet Corp. started sending work to Asia back in 2003, or possibly earlier, and is boosting the effort, according to filings with the Securities and Exchange Commission.
FileNet develops software used by businesses to organize data and files.
The company didn’t reveal the number of jobs it outsourced in 2005. In 2004, FileNet said it had 93 contract workers in India, up about 80% from the prior year.
A separate report from an outsourcing company this month said FileNet had increased the number of contractors in China tenfold in the past couple of years, but didn’t give specific numbers.
The reward: Research and development costs declined from 21% of sales in 2003 to about 18% last year. The percentage is likely to fall further, according to filings.
FileNet didn’t comment for this story.
“To help manage costs, we have contracted with third-party software development companies overseas, particularly in India and China, where labor costs are lower, to perform a portion of our software development of specific products and software localization work,” the company said in a filing.
FileNet is one of a growing list of OC businesses that have sent work to India or China, or both.
Aliso Viejo-based QLogic Corp., which makes gear for storage area networks, has outsourced about 100 jobs to India in the past 18 months, according to Chief Executive H.K. Desai.
Newport Beach-based chipmaker Conexant Systems Inc. has been among the most aggressive, hiring more than 500 people at its India operations in the past year.
In 2004, FileNet spent $1 million more on research and development, even though its overall development expense as a portion of sales fell by more than a percentage point.
The company said it spent $3.2 million on development in India and saved $1.7 million in compensation for North American workers in 2004.
That year, the number of company engineers dropped 12% to 400 people.
In 2005, FileNet saw a big payoff.
Spending on research and development declined by $2.1 million in 2005, or to about 18% of sales. The company credited lower wages due to “timing and mix of headcount fluctuations” and less depreciation.
FileNet added more than 40 people in research and development for a total of 443. At least some of the new hires came from its acquisition of Canada’s Yaletown Technology Group Inc.
FileNet didn’t identify the contractors or types of projects it outsourced in regulatory filings.
Outsourcing firm SymbioSys Inc. of Rockville, Md., identified FileNet as a customer in a case study and said it upped the number of jobs with FileNet tenfold in the past two years.
The software maker saved 35% to 50% by shifting work to SymbioSys from FileNet’s Ireland operations, the case study said.
After that, FileNet called on SymbioSys for more advanced work, moving a portion of the core code testing from “internal teams” to a development center in Beijing. SymbioSys also was called on to help with localizing software for Chinese users.
