Reasons for Going Offshore

For YadaYada.com president Raj Gupta, offshore development isn’t strictly about the bottom line. The New York-based wireless Internet company recently signed a partnership deal with Infosys Technologies, Ltd., that will establish a team of over 100 programming consultants in the U.S., Europe, and Bangalore, India, to develop the company’s end-to-end wireless solutions.

Gupta’s company operates under a 24-hour development cycle. "We really believe in providing a livable working environment for our employees. Instead of asking them to work 16 hours a day, we would much rather have them work 10 or 12 hours, and at the end of the day, hand over the work to the programmers in India, where quality people can do the work and send it back over to us in the morning."

Offshore development firms can also do more than handle everyday programming projects. Take EGAR Technology, for example, a New York- based offshore firm that specializes in software development for the financial services industry. Ravi Jain, the president and acting CEO of the firm, says that the company began as a "business experiment" in 1998 when Gena Ioffe, EGAR Tech’s other co-founder, witnessed the collapse of Russia’s financial industry.

"There were a lot of talented people who worked in the banks and in the financial industry who were out of work," Jain says. "Ioffe felt it was a good opportunity to start this business because these people not only had the financial industry skills, but also excellent programming skills." All programmers hold either master’s degrees or Ph.D.s.

Today, EGAR Tech employs 52 IT professionals in its Moscow office, along with eight administrative workers. Besides enjoying an undisclosed salary 10 to 20 percent above what Microsoft pays its Russian workers, according to EGAR Tech, employees also get yearly cash performance bonuses, free English lessons, and company-paid lunches. There’s low turnover (Jain says he’s lost only two employees in six months) and clients are happy with the setup.

"The reliability of network telecom has gone up so dramatically that working with a team of programmers in Moscow is no different than working with a team of programmers in San Francisco," says Jain.

Building a Dream

It was a Chinese connection that drove the development of American-based ChinaSoft Corp. in 1998. David Lu left his native northeast China in the late 1980s for graduate school at Tufts University. After graduation, he worked in the U.S. as an engineer and quickly became entranced with the American way of doing business. In 1993, he formed his own e-commerce consulting company, General Applied Technologies Corp. (GAT), in Chelmsford, Mass.

In the late 1990s, he noticed how difficult it was to hire qualified programmers, a complaint echoed by his clients. Through travel to China and research, he discovered throngs of highly educated Chinese programmers eager to work for American companies, so he launched ChinaSoft Corp. with dreams of bridging his homeland and his adopted country.

Lu, who is chairman and CEO of the offshore development company, believes he solves a tough labor issue for his clients while delivering American-style job opportunities for skilled workers in his homeland. These "full-time equivalent" software engineers, or FTEs, enjoy salaries that are comparable to those paid to highly skilled American workers (described as those making $100 to $125 an hour), and American-style benefits, such as health insurance, paid holidays, and free lunches.

"They live like kings," Lu says with obvious pride in his voice, making the U.S. equivalent of $20 to $50 U.S. dollars an hour. ChinaSoft’s clients, on the other hand, save anywhere from 40 to 60 percent on development costs when they send work to Lu’s development teams in Tianjin and Tangshan. ChinaSoft’s developers are highly educated (all FTEs must have master’s degrees or Ph.D.s), fluent in English, and trained in the American way of doing business.

For example, Lu created a "basic rule" that FTEs must communicate with their American clients at least once a day by e-mail, though there are other reporting tools available to both parties. FTEs can also pick an English first name to use with clients, which helps bridge the culture gap, according to Lu.

There are other controls in place to ensure a high level of customer service, from the training program that new hires must follow, to the custom software programs he has developed to improve client relations. It also helps that Lu, a naturalized U.S. citizen, can use his Chinese background to smooth out any communication and cultural gaps that remain between his clients and his offshore developers.

A New Business Model

New companies that take advantage of the Web’s global reach are cropping up daily. One such company, neoIT (www. neoit.com), headquartered in San Ramon, Calif., touts itself as an open market for buyers and sellers of IT services and brings them together through its Web site.

CEO and co-founder Atul Vashistha got the idea for neoIT during his stint as a senior vice president for Cardinal Health, where he fretted about the shortage of skilled IT professionals. One of his friends, a director of research and development for Nortel Networks in India, told him that he met Nortel’s staffing needs by tapping into the labor pool in Europe and Asia. Three weeks later, with a small staff in place, the dot-com was up and running.

That was June of 1999. Today, the company has 2,000 IT providers from all over the world in its database, representing 225,000 IT professionals in North America, Europe, and Asia. Buyers can post an RFP on the site, and neoIT acts as "chaperone," matching job specs to sellers’ qualifications. Sellers "meet" the buyer through online chats, telephone, or e-mail, and then prepare a proposal for the work if they’re interested. Once a proposal is accepted, the work completed, and the seller paid, neoIT gets 10 percent of the total bill to the client.

But the relationship doesn’t end there. To ensure that both buyer and seller are clear on the goals and expectations of the project, neoIT set up a Web-based project management tool called neoCollab that displays agreed-upon project and quality milestones. "The buyer can see what’s happening with the project," says Vashistha. "They can ask questions or assign a task, so if your development team is in Ireland, when they wake up in the morning, they can just log on and all the questions and assignments are right there."

Diana Burrell is a freelance writer based in Westford, Mass.