Chris Kruppa from Furtwangen University pointed out that though
the last post was informative it did not cover my own experience of setting up an offshore development centre in detail. Thank you Chris. So this post is an addendum to the last two posts detailing my 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 ‘I am coming from’. By 2002 I 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, an opportunity to do a better job than most if not all!
With my venture at the time I had set my eyes upon an opportunity was about to invest in my very first SAAS product, and the inconsistencies of pure offshore providers was not comforting. It was an easy decision, we could bring a range of products to market faster and more economically had we our own facility and we could tap into the demand for quality software services partners in the UK for third parties as well. 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 my venture 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 setup from the very beginning would be modeled on ‘how we do things here in the UK’ and not how offshore development centers generally do things.
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!