IT Outsourcing: Q&A with the Experts in the Field
Buyers, Providers, and Consultants Share a Wise Word with Business
After the wrap-up of the March Meetup on IT Outsourcing in San Francisco, Alex Golod, Meetup Moderator, conducted a quick Q&A session with the panelists.
1. Alex Golod (IT Outsourcing executive, consultant, speaker; VentureShot investor)
Alex is a technology and outsourcing expert with more than 20 years of experience in the field, with particular focus on CEE region. Additionally, Alex is an Active Investor at VentureShot, and Advisor to technology startups in the U.S. and service providers in Ukraine and Belarus.
2. Roman Kaplun (Expedia)
Roman is the Director of Technology Operations for Expedia, who represented the buyer’s point of view at the Meetup. Having more than 18 years of experience in IT management, Roman is knowledgeable about global IT outsourcing landscape.
3. Brian Venneman (Silicon Valley Attorney)
As a legal expert for technology companies, Brian shares his experience in working with CEE locations from the buyer’s point of view.
4. Michael Grebennikov (Digiteum)
Co-founder and managing director of a digital technology agency, Michael represents the provider’s angle. After 20 years in IT and successful launch of 3 independent IT companies, Michael obtained unique expert knowledge on how to build fundamentally strong outsourcing companies and ensure successful outcomes for complex outsourcing projects and engagements.
Q1. What is your connection to technology outsourcing to CEE region?
Roman
While at Hotwire, division of Expedia, I was responsible for managing relationships with the global outsourcing company Luxoft. I was also responsible for managing the company’s engineering team and delivery out of Kiev, Ukraine development center.
Brian
As an entrepreneur and CEO, between 2013 and 2017, I have utilized CEE outsourcing teams on five distinct projects spanning iOS, Android, Web and backend/DB.
Michael
I’ve been in this business since 1995. I have worked as a VP Operations in the international software house with the offices in Chicago, Minsk, and Kharkov. Since 2011, I’ve been running a digital technology consulting agency operating globally across EU and the U.S.
Q 2. In your opinion, what are the main advantages of outsourcing to CEE?
Could you provide a few examples of the benefits and ROI you realized by utilizing technology partners in Eastern Europe?
Roman
Here are the main benefits of working with CEE companies:
- Great talent
- Ability to hire quickly
- Better Time Zone difference compared to India
- Low attrition
- Culture similar to the one in US
- Cost, especially compared to US
Brian
Time and cost efficiency
In developing consumer facing mobile and web services, we had to spend very little time explaining and clarifying the value proposition; this freed us up to focus on execution and development.
This dynamics had two facts:
- CEE firms understood, at the project management level, our business objectives and resource limitations;
- Our individual CEE developers (who were themselves the users of iOS and Android devices) could appreciate our product offerings from the perspective of consumers.
Quality and vision
In contrast to our prior experiences in outsourcing to other regions, the product delivered by our CEE partners matched not only the specs, but also the spirit of the project. There are always gaps in specifications, and how these are addressed can mean the difference between success and failure of a project.
The inevitable gaps represent unspoken assumptions, and the way these gaps are colored in reflects the degree to which the customer and the partner speak the same business/product language (regardless of spoken language). These gaps were consistently filled in in the ways that matched our vision of the projects. In the few occasions where we were surprised by how a gap in the spec was filled, we were generally pleased with the approach taken by our CEE partner.
Michael
Following Roman’s point: great engineering talent lives here. These guys use 100% of their potential challenging any assumptions, asking questions and generating ideas until a technical solution for your project is crystal clear and close t to the perfect one. In fact, CEE brings up excellent problem solving and creative minds with broad technical expertise and, of no small importance, excellent communication skills and English knowledge.
Among the other perks of working with CEE region are: overlapping time zones, visa-free entry for U.S. citizens, no U.S. visa restrictions for CEE citizens, affordable rates. Additionally, the business culture among CEE IT companies matches the western one, so working with this region means doing business as usual.
Q 3. What prevents the outsourcing industry in Eastern Europe from gaining more market share at the expense of other (particularly Asian) destinations?
What would it take for CEE providers to earn more business from large enterprise clients in the US?
Roman
I believe geopolitics play certain, negative role. Neither Lukashenko, nor Putin, nor Poroshenko are viewed favorably. Belarus continues to stay under dictatorship, Russia has a lot of negative publicity in the news, some parts of Ukraine are at war.
Brian
To U.S. entrepreneurs in small and early stage companies, CEE is largely invisible as a potential global sourcing destination. To the extent it is visible at all, CEE is at least subconsciously associated with the former Soviet Union, which creates a largely unfair assumption that CEE enterprises will be unable to grasp business/product expectations, or corrupt to the point of incompetence, or both.
How to bust these myths:
(1) Educate your target audience that CEE is being successfully utilized as a global sourcing destination.
(2) Be explicit about scale and specific competencies (such as “we can do a $xx,000 app in Swift”).
(3) Be candid (e.g. not defensive) about strengths/weaknesses of global sourcing in CEE and other regions.
(4) When you can, showcase wins, the specific significant wins, the type of the new business you would like to generate.
Michael
Geopolitics is the major reason. There’s not much to add, it’s pretty evident and clear.
The second reason will be timing, since CEE region has been going through political and economical upheaval for last few decades.. Indian IT industry started growing in 1991–1993, while ‘90’s for CEE countries were still a turbulent period.
At the same time, government support has just emerged for many CEE locations, but not for all of them. However, today such countries as Poland, Romania, Hungary, Ukraine and Belarus become more and more visible in the international technology scene.
Q 4. What are the main roadblocks and obstacles you had to deal with while working with CEE technology providers?
Roman
Hiring middle and upper management talent is still difficult. Other than that, I can’t think of any.
Brian
The time zone difference can create a moderate obstacle. Occasionally, there’s a lack of robust connection with individual developers, and that is an important consideration for smaller projects.
Michael
Traditionally, CEE education system was aimed to produce developers, not managers. This is still an issue, so I agree with Roman.
However, today the situation changes for better. Of course, it will take time to grow and groom enough project and product managers and team players capable of delivering adequate quality.
Q 5. How do you see global sourcing industry, and CEE region in particular, evolve over next 3–5 years under the new U.S. administration?
Roman
With the reduction of H1B visas, I believe it’ll grow.
Brian
As a customer of CEE resources, nothing in the existing landscape suggests that our outsourcing (or CEE outsourcing, in particular) will be disrupted or burdened by the changes in policy. That being said, in terms of the atmosphere and rhetoric, any business having an international or global component is always one tweet away from coming under harsh scrutiny.
Michael
It depends on what line new U.S. administration will take.
If new administration is really going to cut H1B visas, then all outsourcing locations will get good chances to grow quicker. However, you need to keep in mind that those who work in the U.S. via H1B visas now won’t disappear in future. In case their visa requests are cancelled, revoked or not prolonged they’ll return home and, most probably, continue working for the same companies, but remotely.
Such giants as Microsoft, Google, Facebook and others will have to take strategic decisions on how to recover from these complications. As we all know, giant IT players have harvested most of IT talents available in the U.S. and have been importing IT talents from abroad at large scale. They can’t afford losing this momentum, as everything they do today changes the lives we will have tomorrow. I believe these companies will create more captive development centers in India and China, since these locations traditionally provide the biggest IT talent pools. Eventually, similar centers will appear in some CEE locations.
