From sourcing to selection: finding an offshore software services partner. part 3: ikonami technologies tale…
Chris Kruppa from Furtwangen University pointed out that though the last post was informative it did not cover our own set up and experiences. Thank you Chris. So this post is an addendum to the last two posts detailing our own experience of going offshore.
Though the ‘why a software project management consultancy decided to invest in its own offshore development center?’ is a separate series of posts let me touch upon it very briefly here so that you can appreciate where ‘we are coming from’. By 2002 we had worked with over a dozen offshore software service providers in half a dozen locations and had come to the conclusion that there was a gap in the market that we could step into and do a better job than most if not all!
We had also embarked on our own product research and development and were about to invest in our very first product and the inconsistencies of pure offshore providers was not comforting. So we decided that we could not only bring a range of products to market faster and more economically had we our own facility but could tap into the demand for quality software services partners in the UK market for third parties. And we already had a client base for whom we managed multiple software projects offshore. The need was internally and externally driven with a revenue model from day 1: it was a no brainer.
Once decided that we required our own captive offshore development center somewhere in the world the first area of discussion was the model we would use: that in turn would have a major bearing on the location choice and everything else that followed. From the very start we were not in favor of the predominant model of an onshore sales office that funnels everything offshore and adds little value to the engagement onshore. So the model was to have a number of functions that would be exclusively onshore, some would be duplicated onshore and offshore and the offshore set up from the very beginning would be modeled on ‘how we do things here in the UK’ and not how offshore development centers are generally managed.
The model was to duplicate business analysis and R&D at both locations, this duplication has yielded some amazing results for us, our clients and end users over the years. Then client, account, program and project management obviously remain onshore and lastly support is also duplicated onshore and offshore: data support is provided onshore and everything other form of support (1st, 2nd and 3rd line) sits offshore. Getting the balance right is key (innovative service design): the mix is tweaked every now and then based on evolving client, project and product requirements: there is no constant in our world! the skill set mix and functions that are exclusive and/or duplicated between the onshore and offshore keep evolving to give our clients and users the best possible service delivery.
Having had the hands on experience of working with a number of locations the critical factors for us were retention rates, wage inflation, ease of working with the local bureaucracy (red tape), tax benefits for setting up a software shop and other inward investment incentives. Yes political and economic stability too were a factor but if you are going to go offshore you have to face it you are heading towards the developing world and there are some luxuries you will not get to enjoy! having said that the United Kingdom and Belgium haven’t been exactly politically stable either lately! a coalition government in one and lack of one in the other… the ongoing financial crisis has exposed western economies more so than the credit prudent developing economies specially of South Asia. So political and economic stability are not a dead cert anywhere in the global village!
Our choice was Islamabad in Pakistan. We opted for Pakistan as a location due to reasonable infrastructure and resource costs, ease of doing business, availability of skill, better retention rates and personal ties in that order. Some interesting facts for you; Pakistan is the second easiest place to do business in South Asia (according to the doing Business Project), Pakistan has more English speakers than, South Africa, Turkey, Singapore or Malaysia and France. There are just over 1200 IT companies operating in Pakistan with a healthy number operated and owned by international companies. Historically there has been strong domestic demand that has helped to mature the nascent industry. Yes there are on the ground challenges but not if you do it properly and export best practices we have learnt and apply in your own economy, then you will be better received than others and will benefit more from the relationship… off shore technical houses in South Asia are not sweat shops, in many instances they have and follow more standards than many companies do in the developed world.
The set up.
Setting up in Islamabad in Pakistan was unexpectedly simple and straight forward, The British High Commission, the Pakistan Software Export Board and the all Pakistan software association (P@SHA) were exceptionally helpful in assisting us with everything from which law firm to engage, company formation, office set up, required registrations, shortlisting equipment suppliers, recruitment and much more: in fact we had the company, our start up team, a temporary office all set up and operational within a fortnight of landing in Islamabad (we had hired four resources a month before we landed as freelancers and then converted their contracts into full time employees). Though this is not meant to be a sales pitch for Pakistan but that is how it turned out for us. There is of course the reality of terrorism and 2004 was no easy year for terrorism anywhere on the third rock let alone Pakistan a front line state in the war on global terror! but other than the inconvenience of road blocks around certain sensitive neighborhoods like the diplomatic enclave and zero point (near the presidency) and the stories across the front page there was little evidence of it interfering with our work or routine. I shall cover Pakistan as an offshore software services location at length in later posts.
Our offshore operation was operational in a fortnight and effective within a month. Our offshore team delivered release 1.0 of our first product within three months of coming online and by the end of our first quarter we had multiple product development, support and R&D teams delivering tangible value to our UK operations. Within our first year we achieved ISO 9001:2000 and within eighteen months ISO 27001. Our ability to retain staff combined with the competence of the local skill pool has meant our support desk has been astounding, proactive and has been instrumental in uptake and user retention: the proof comes from the number of registered users on our own products and on those we manage for our clients: 1,800,000 users and growing daily.
In terms of ROI we saw the return on our initial investment delivered within the first year and the rest is history.
To date our offshore development center has worked on designing, delivering, maintaining and supporting eight of our own products for the web and multiple mobile platforms, numerous one off projects and over a dozen products for third parties in technologies ranging from .NET, C++, J2EE, Ruby on Rails, PHP, Python and others for web, mobile and digital TV platforms. The offshore arm’s effectiveness has lead to new service development and we now manage a number of teams for third party software companies in the UK and Europe… so the outcome has exceeded our expectations so far! (touch wood!).
Over the years we have developed formidable expertise in a number of languages, platforms and technologies delivering a mix of services from pure builds to hosting teams and partnering with start-ups on innovative journeys into the unknown! and we plan to continue to do so and more! Currently we have our R&D sights firmly set on Natural interaction using Kinect and PrimeSensor™: preparing for the Cambrian explosion of business applications going beyond the restraints of wired or wireless controllers. Our UK arm has been going strong for over eleven years and our offshore arm for over six years.. the future is bright…. what else can I say… other than stay tuned.
And of course if you have specific questions about going offshore, or mixing the onshore and offshore skills mix to your advantage drop us a line.
…Chris I hope this has answered your question!
From sourcing to selection: finding an offshore software services partner. part 2: onshore? off shore? near shore? or Hybrid?
So you have decided to explore the ‘outsourcing’ option…great. You have thought through your objectives and decided on the ‘functions’ or ‘domains’ to outsource partially or outright?… great! so what is it that you are looking for?…. ‘a reliable software development partner’ did you say?…. buona fortuna.
Lets start with what is a reliable/great/good value/super responsive (all adjectives I have heard used to answer the question from my clients) software development partner, and I have worked my way through a fair share of offshore software service providers.
Firstly get it in your mind.. embed it. Your organization is unique, and you must think hard about your best fit provider to gain ‘across the board’ benefits of software outsourcing. You need the right offshore software development partner for YOU: a service provider whose skill sets, creativity, desire for innovation, attitude, passion, principles and values will complement and enhance your own.
It is not black and white it is a freakin’ rainbow! if you want to get the best out of a team… the team must gel….that’s common sense… for outsourcing to succeed your internal teams (be it program management team or the in-house development team) and your external provider’s teams must work as a single geographically dispersed business unit. And though it wont happen over night you can maximize your success rate by being methodological about your partner selection.
At the start of my career as a technology entrepreneur I too made the most common of mistakes that I now see many companies making and have on occasions been called in to parachute their projects out of trouble for. That is jumping the gun on partner selection! you know what functions, projects and roles you want to outsource and you go full throttle looking for a partner without any consideration to the location model you ought to use. Yup… location, location, location as Kirstie Allsopp would say!
Before you think of the partner you need to think what will work best for you: completely onshore? completely offshore? a mix of the two that is called hybrid, right shore, smart shore and a gazillion other things! Each location model has its merits and demerits, some are infinitely better than others but what will work like a charm for one project may not necessarily work the same charm on another. Onshore, near-shore, offshore or a hybrid model? ideally you should not have to choose one or the other, You should have what works for you: the right place for you.
I have a preference for a hybrid model: an onshore and offshore base for me is a must in any software services partner (hence I set about building my own software business on the same model), it mitigates a number of risks automatically from cultural, exchange rate to territorial risks all in one go. How so? Simple… you contract with your selected partner onshore and hence are legally secured in your environment and are not at the mercy of an arbitrator or a court in a far flung land in case the worst does happen.
The most important requirement for me, you, anyone looking to outsource software services is to have the ability to interconnect as many skills and talents as we can and have the support to distribute work or requirements to the right skill sets wherever they may sit in the world. And ideally with an onshore presence of the software services partner. You need to think more along the lines of collaboration rather than making your weakness someone else’s challenge! – which is frequently witnessed in software outsourcing projects – it is not about washing your hands clean it is about building a deliverable together.
So the answer to the question: onshore? off shore? near shore? or Hybrid? is ‘Anyshore’ that works best for you! as I said earlier my preference and acceptable risk exposure meant I set up a hybrid operation with onshore and offshore delivery capabilities. And it has worked out really well for our own products and the projects and products we build and support for our clients. Using such a hybrid model gives you the peace of mind of working with a local partner and the benefit of our offshore arm without risks associated with a pure offshore operation: a perfect collaboration environment.
And what I call your ‘Anyshore’ is what works best for You and Your processes and projects. Having said that a hybrid model though perfect for software services outsourcing may not necessarily be best suited for outsourcing other business processes, for instance it makes little sense to outsource call centers or transaction processing services where an onshore facility may not be as justifiable as is for a software services provider (unless that is your business model). An alternative scenario your software service partner may have an onshore presence and facility but you may not make use of it and concentrate on their offshore capabilities. My own company works with clients on different models: we have clients who prefer to exclusively liaise with our onshore teams and leave the management of delivery by the offshore teams in the hands of our internal onshore project managers and others who have their own internal project management capabilities and choose to manage and liaise with the off shore team themselves whilst account management is handled by our onshore arm.
Ideally you need to have a partner that can offer both onshore and off shore or a mix of services best suited to your projects and processes. With ‘what’ to outsource and ‘which model(s)’ to adopt addressed… the question is to whom? we are getting there folks… closer to defining how to go about partner selection! you guessed it… that’s the next post.