instinctools EE Labs: Who could be saved from the Titanic of IT business?
Delegating non-core functions to professionals remains the most efficient way of managing a company. Chief Executive Officer speaks to Alexej Spas, CEO of instinctools EE Labs, about finding the right partner and the strength of Belarus and Eastern Europe in the outsourcing market.
The media likes to talk about successful IT projects, start-ups and new technology IPOs, but are the majority of projects actually successful?
Alexej Spas: According to polls in the IT industry, only 10% of companies are getting return on investment with their products and actually reaching financial goals. This is a disappointing statistic. Every day, a huge number of innovations are happening in this area, but the economic success of these is questionable. This reminds me of Titanic: it looks promising, but in the depths we discover some deadly holes. The vast majority of IT products are doomed to share the fate of the Titanic.
Why do you think this is?
The key here is specialisation. Product launch, development and promotion are a set of complex tasks. Successful execution requires expertise in many areas - from marketing through to the development of the product and customer support. Not many companies have all these competencies at a sufficient level. As a result of trying to do everything themselves, companies end up drowning in the details and missing the targets.
Focusing on perfecting strengths and strategies in the areas of a company's competitive advantage is crucial. To name a few: understanding customer and market needs, getting the product focus and launch right, and having strong market communication and customer support. The non-core functions can, and should, be delegated to professionals who perform this function more efficiently.
Do you think it's enough just to give non-core functions to external contractors and believe everything will be fine?
Delegating does not mean excluding yourself. My experience with companies of all sizes, ranging from SME to Daimler and SAP, shows that the product or project becomes successful only with the active participation of specialists from the subject matter domain on the customer side, as well as the presence of open partnerships between the customer and supplier.
Are there any other reasons that contribute towards these failures?
Yes. One of them is slow time to market. The market for IT products is usually very competitive. Today's innovations and leaders can be swept away tomorrow by new competitors. We see how companies are trying hard to be the first to market with their products. But, for this, they often do not have enough of their own resources. Domestic resources are either missing or expensive. And this leads to losing market position.
So, companies are looking for resources elsewhere; the latest outsourcing reports show that 50% of companies developing their IT solutions in-house reported plans to start outsourcing their IT/development in 2013-14.
Your company has a remarkably low project failure rate. How is this possible?
When working with our customers on outsourcing projects, we follow several important rules, and can recommend those for others:
- Focus on what we do best. As Bruce Lee said, "Dangerous is not the fighter who knows a thousand kicks, but the one who uses only one, but with perfection". We have invested 14 years in improving our production processes, focusing on optimisation, and now we can offer this approach to our customers. In this way, we help customers avoid typical mistakes in this area.
- Look for a partner that is two to three time zones away. You'll save a lot of valuable time.
- Pay attention to good reputation and references of your partner.
- Search for solutions together with your partner. Explain the context of the problem. Include them as much as possible in critical product or project decisions. In our experience, this approach repeatedly helped clients to save thousands of dollars.
- Find a partner from your league, as well as one that is similar in size and possibilities.
Why is choosing a partner of similar size important?
Do not be fooled by the giant size of some outsourcing companies. With a ship like that, you do not set the course - you are just the passenger.
Part of our strategy is to find clients of a similar size. In this way, we can better understand each other's problems and easily find a common language. Because of this, we see primarily medium and small companies as our customers, and, in this area, there is still great potential for development.
Overall, the results of the UK Development Survey 2012 suggest that ITO is yet to be discovered by more small to mid-sized UK organisations in the near future
But, your list of clients includes such giants as Daimler, Fujitsu and SAP. How does this fit into your recommendation of selecting a partner of similar size?
When dealing with these companies, we work with specific departments within them. They are like a smaller company inside of the larger one. So, we solve tasks within these specific departments where our rule around size applies perfectly.
You mentioned the similar time zones. Many of our readers don't work with an IT company from Belarus. What are the benefits in working with a company from this region?
This question is answered well by one of Gartner's reports published in October 2011: "A strong education system and cost-competitive salaries, together with a reasonably strong workforce, have enabled Belarus to develop a mature IT outsourcing industry, supporting the country as an alternative destination for offshore activities, especially software development".
Other facts include:
- developed education system: 55 universities, 16,000 IT graduates annually
- high-quality IT professionals: 50 years of software industry
- cultural proximity: mentality of specialists is close to "European standards"
- competitive rates: reasonable price, high quality
- geographical location: only two hours by air from most European capitals
- strong governmental support: laws to promote software industry and minimised taxes.
The mentality, quality and work approach of the country is on a European level, but prices are much lower. This is confirmed by our customers and positively differentiates Eastern Europe form typical offshore locations such as Asia.
How else could you advise our readers with regard to finding outsourcing partners and avoiding getting on the Titanic?
It sounds trivial, but I want to emphasise getting offers from multiple vendors - many companies neglect this. Compare them in terms of price, depth of requirement analysis, quality and the level of communication. This approach will not just give you the opportunity to choose, but it can also become a rich source of project expertise.
Professional ITO companies offer the possibility of a preliminary or detailed estimation of your project, as well as running pilot projects. For example, on our company website, you can order an estimation of your project directly through an online form. By comparing estimates from different vendors, you can identify the risky parts of your project and focus on these from the start of the project.
Companies need to concentrate on their strengths, and find reliable partners that can help them get to where they need to go. In the context of IT outsourcing, take a closer look at Belarus and Eastern Europe in general. Ask for a second opinion. In this way, you can easily benchmark your existing ITO partner. And, of course, we will be happy to be your winning ship, if you chose to step on it.