Offshore guidance

A step-by-step look at how one software developer expanded overseas.

Your company just cleared its first hurdle by deciding to outsource software development, its customer-care call center or financial business processes to an offshore location. Now where do you go? Who do hire? How do you connect from there to here?

None of these questions is easy to answer, but we’ll try at least to point you in the right direction by citing the experiences of software developer Synygy, which has made a significant shift to offshore outsourcing since 2002. The Conshohocken, Pa., maker of enterprise incentive management software now supports about a quarter of its 450 employees in offices in Romania and India.

1. Globetrotting

Synygy choose the countries where it would set up its offshore offices based on employee familiarity with India and Romania.

“It boils down to us having a feeling of comfort with both locations,” says Chetan Shah, executive vice president of technology.

Having acquired a two-person business in Romania, Synygy decided to make the southeastern European country its first offshore outsourcing operation in 2002. Synygy now has 50 employees there.

The company tapped into its European employees’ knowledge of the Romanian language, culture and business customs. Synygy employees paid visits to “force compliance of all Synygy processes,” Shah says.

The company went through a similar process in India a year later where Shah, who is from India, played an instrumental role in setting up the office. Today, Synygy has 70 employees in India and, with its Romania- and U.S.-based employees, can run its software development operation 24 hours a day.

Seventy percent of the money that U.S. businesses spend on offshore outsourcing involves India, says Partha Iyengar, a Gartner vice president and research director in India. But other countries are not standing by idly.

“There are 28 countries that say they are in the position to offer compelling offshore outsourcing services,” Iyengar says. Organizations should do a country-by-country assessment to be sure they are moving the right projects to the right countries, he says. “Exposure to making the wrong call is quite significant. Once invested in a country, it’s hard to disengage.”

Businesses should consider several issues as they choose a country including “rate of wages, supply of new graduates, education, technical skills and broader cultural compatibility,” says Peter Lowes, a practice leader for Deloitte Consulting.

With India, companies have to accept a “limited amount of cultural compatibility,” a huge time difference and language challenges, Lowes says. While many technically skilled people in India speak English, strong accents still can hinder communications.

Companies also “need to understand how business is done in that country,” Iyengar says. “There is nothing wrong in a U.S. setting with an employee four tiers down from the CEO calling him by his first name and striking up a casual conversation. This is unheard of in India, Japan and parts of Europe.”

2. In the city

Selecting a city goes hand in hand with choosing a country. Synygy’s Shah established four main criteria in an effort to find the right city:

• Reasonable cost of living.

• Proximity to a major airport.

• Access to the right talent pool.

• Lack of political unrest.

The four cities that made Synygy’s short list in India were Bangalore, Coimbatore, Mumbai and Pune. Pune won out based on the defined criteria.

Shah concluded that the cost of living was too high in Bangalore and there are not many international flights out of the nearby airport. The engineering talent pool was found lacking in Coimbatore. Shah scratched Mumbai off of his list because political and communal tensions are common and because the cost of living is high.

In Romania, Synygy started off in Iasi, the same city where its two employees were based.

“We did not go through the same city-by-city process as we did in India,” Shah says. “We stuck with Iasi, although it’s a six-hour drive from the airport, it’s an engineering city with a reasonable cost of living.”

3. Office job

Selecting office space in the U.S. can be challenging enough, but doing so overseas adds a layer of complexity.

Synygy’s Shah looked at 50 to 60 office sites in Pune, considering factors such as rent, proximity to the business district, the facilities’ infrastructure and the layout of the space. But because Shah wasn’t familiar with Pune, he turned to a local real estate agent.

Shah wanted an office that was close to other software companies and one that was in an established building, not one under construction.

To ensure the process went smoothly, Shah viewed each office space and ultimately made the selection.

In Romania, Synygy recently moved into a new office in Iasi. The company went through a similar process to find the right space as it did in India, but on a smaller scale. There are not many software companies in Romania for the company to collocate with, so instead, Synygy focused on staying close to the business district.

Local employees narrowed down the selection to a handful of offices. Shah then traveled to Romania and chose one.

4. Picking people

Synygy got bombarded with résumés when it started its hiring process for Pune. For an office that has only 70 employees, Synygy received 1,000 resumes from software developers and engineers.

“The key to hiring the right people is having the right infrastructure in place to handle the hiring,” says Ed Steinberg, Synygy’s vice president of human resources.

The company focused on training its human resources staff in Pune to quickly review résumés and set up interviews with appropriate candidates, Steinberg says. “People are willing to take jobs very quickly [in India], and you’ll lose them if you don’t move fast,” he says.

In an effort to attract the right employees, Synygy launched a branding strategy via newspaper ads and billboards in the Pune area. “We wanted people to know we’re not a mom-and-pop shop and we’re not one of the big behemoths either,” Steinberg says.

Then it turned to one of the largest employment Web sites in India, www.naukri.com, which has proven to be effective. Synygy also has a referral process in place.

In Romania, Synygy relies on word of mouth to staff its office. It took only a year and a half for the office to boom from two to 50 employees. Synygy only employs software developers and engineers in Romania, whereas only half the employees in India fall into those categories. The other half is in client services.

5. Keeping connected

Synygy turned to the top WAN providers in India to connect its office there with its home base, figuring these companies would be best at getting telecom service up and running in a reasonable amount of time.

The company has a dedicated E-1 (2.048M bit/sec) in India to the Internet to support its IP VPN, which keeps Synygy’s critical traffic secure and costs in check. Point-to-point private-line connections from India to the U.S. are prohibitively expensive, Shah says. Using the Internet also lets Synygy more easily switch providers.

The company also has deployed several DSL connections to its office in India for “non-critical traffic,” Shah says. A DSL connection costs about $1,000 annually where an E-1 costs $50,000 to $80,000.

While Shah had a hand in setting up the company’s WAN and LAN, Synygy hired a systems engineer in India to handle most network issues. The engineer manages about 200 ports on the LAN for both voice and data, Shah says. The company also turned to a local telecom company to wire its network in Pune.

In Romania, like India, Synygy has a dedicated E-1 to the Internet to support a secure IP VPN. It also has a DSL connection for videoconferencing. But the company opted not to hire a systems engineer to manage the 25- to 30-port LAN.

Synygy went through a similar process in finding the right telecom vendors in Romania with “the local talent” hiring a service provider there, Shah says.