I've been writing about outsourcing since 1998 and easily remember when it was remarkable to write about a company deciding to outsource its business process offshore. Over the past few years, that phenomenon has become mainstream and no longer really newsworthy, at least certainly in outsourcing initiatives of American businesses.
What's remarkable now is a U.S. company that can compete with offshore service providers in cost, scalability and flexibility, quality, expertise, and time to market.
Enterprise software development outsourcing provider Ayoka, headquartered in Arlington, Texas, in the middle of the Dallas-Fort Worth Metroplex, has a unique model that makes its solutions scalable, cost-effective, etc., like offshore solutions. And it has the added benefit of a local presence throughout the United States. That's part of what MMI-Internetworking was looking for in a software development provider.
"We hoped we would save money and cycle time. We wanted faster time to market and better quality," says Paul Nichols, MMI's vice president.
"Ayoka is now saving us 35 to 40 percent over in-house cost. And they're very fast," Nichols reports. "We used to do one major and one minor release for our products each year. Now we do minor releases quarterly."
MMI-Internetworking, also based in Texas, creates software solutions for local governments such as cities and counties. "For our market, price point is absolutely critical," Nichols explains. "Ayoka's solution enables us to inexpensively deploy and maintain our products."
"We'd had too many contacts with peers in companies that didn't have good results offshore," states Nichols.
Offshore outsourcing is now an accepted way of doing business to not only lower costs but also increase quality and/or speed time to market. Yet, there are companies that do not achieve these objectives by offshoring, and many that find "hidden" or extra costs of managing such a relationship that they did not anticipate or that they underestimated.
MMI heard of Ayoka through a local networking group a little over two years ago. Nichols recalls his company was very interested in Ayoka's unique model as well as its excellent use of open source technologies and its reputation for being a hardworking and honest company. Most of all, they liked the cultural fit.
"We both have a Fort Worth culture -- where a handshake and your word is your bond. We at MMI do for our customers what we promise, which is to be innovative and cost-effective. We wanted a software developer that would operate that same way."
Eknauth Persaud, CEO, Ayoka, says "being able to talk to someone and look each other in the eye and be hands-on really does matter. The world really isn't becoming flat; it's becoming regionalized."
MMI had been doing all its software development and testing in house and used largely Java-based applications. They started working with Ayoka on a proof of concept six-month project to reengineer one of MMI's main applications on paper and do a prototype, working with MMI internal developers.
"We originally planned to use them for heavy coding and testing. Now we're using them on an ongoing basis. They design and develop all our new products and new features for our products," says Nichols. All of MMI's internal developers and programmers moved to other in-house jobs.
The "made in USA" model
Being hands-on and looking each other in the eye can be problematic in an offshore model. But the lower costs were such a drawing point that many American software developers lost their jobs; Eknauth Persaud was one of them. He recalls that when Siemens laid him off, the talk was: "America can't compete with offshore."
In 2002, he founded Ayoka as an independent consultancy in San Francisco, starting out as a systems architect. In 2003 he relocated the company to Texas when Ayoka won the contract for systems integration for all IT systems at Terminal D at D/FW International Airport.
Ayoka's scalable, flexible, cost-effective model is hinged in part on its University Relations program, through which he says the company "taps into huge overlooked resources of more than 400 U.S. universities with more than 67 of them having large computer science groups." Those resources make the Ayoka solutions quickly scalable nationwide and also provide a local presence for clients.
Persaud says one-half of the company's usual cadre of software developers are graduates with more than 10 or even 25 years of experience. Others have or are working toward M.S. or Ph.D degrees in computer science, and some have won software programming competitions.
Ayoka's University Relations program also benefits America by giving the students the opportunity to transition from an educational institution to a cutting-edge technology business environment.
"Customers today are smarter about software development than they were three or four years ago," says Persaud. "They want a variable cost model -- scalable according to their fluctuating needs. But this is problematic for a service provider, which needs to keep its staff busy. Our flexible model and University Relations program solves that challenge."
Persaud says Ayoka's solutions prove to be as cost-effective as offshore solutions, in part because they enable customers to avoid the hidden or extra costs of the offshore model. He explains, "Offshore application development and maintenance (ADM) works best with -- and really requires -- investment in technical management and relationship management."
He points out that software development moves so quickly that "you have to stay on top of it. If you get off track for even a week, it impacts costs." Further, developing a successful relationship involves such costs as trips to the remote delivery center, conference calls, sending people offshore to do training or bringing offshore resources onshore for training, time and efforts at bridging the cultural gaps, and sometimes keeping an offshore representative onshore to handle communications. Ayoka's onshore model and local presence eliminates these high-cost areas.
Feedback from several of Ayoka's customers, including MMI, reveals that companies like the fact that Ayoka does not just take orders -- simply get a requirements document, provide an estimate, do what the customer ordered, and then submit change orders where the requirements don't work.
"We have dynamic conversations with our clients; we push back and offer alternatives," Persaud states. "When a customer writes a design document, we ask questions about where they really want to go and redesign it at the outset, where necessary."
Persaud points out that, when customers and Ayoka define the work correctly, the developers can make better decisions, which then translates to lower costs because of doing the work correctly the first time.
As an example, an e-commerce customer wanted Ayoka to build a Web 2.0 application. The company selected Ayoka because of its reference e-commerce sites built in Ruby on Rails language (with favorable features for e-commerce) and using open source technologies. This framework made it easier to develop applications and enabled a shorter development cycle and lower cost.
However, Persaud notes that e-commerce tends to change a lot because of competition. The customer really needed the capability to be better able to up-sell by predicting what customers should buy. (Example: Amazon.com's presentation of "people who bought this also bought these.") Ayoka worked up front with its customer "to define how to get to where they wanted to go and how to get there on time and within budget."
Nichols at MMI says, "We work together with Ayoka on our project roadmap and set priorities together. It's also a give-and-take relationship. We might want something early, and they are flexible; but at the same time, they are very careful to push back and make sure that what we've asked for is really what is best for us." MMI's account manager for the relationship is also the project manager for the software projects and meets regularly with Ayoka either on the phone or at each other's offices.
Nichols adds that Ayoka willingly provides extensive code documentation to MMI, so MMI will not be bound to an untenable or negative business-critical situation if something about the relationship were to change in the future. But he doesn't expect that to happen, noting, "Our experience with them has been very favorable."
The American spirit
Ayoka's clients range in size, and its CEO says the customer base is not a niche market. However, the firm does have a "niche type of client." Persaud says the ideal client for Ayoka's services and model is one that is "visionary (entrepreneurial, has the "spirit" that Americans have, and has a culture of pushing back on existing IT presumptions); and wants an advisor for its business, a service provider that will help them see what they don't see (not just performing tasks)."
Ayoka's clients are as interested in the big picture as the software development firm is. Many really appreciate the aspect of the firm's University Relations program, as do the students, the universities and the cities where they are located.
Persaud says the big picture is not just about an ability to compete cost-effectively or to have a local presence, and it's not even just about keeping work in the United States. "It's about strengthening the software industry and model of working, and it's about enabling America to compete and tapping into its huge overlooked resources such as the universities," explains Persaud. "I was in the Marine Corps. I believe in serving a cause greater than myself."
Lessons from the Outsourcing Journal:
- Despite many success stories of companies using an offshore model for their outsourcing initiatives, there are companies that do not achieve their objectives by offshoring; and many that find "hidden" costs of managing such a relationship that they did not anticipate or underestimated.
- Cultural fit is essential in an outsourcing relationship; yet it's often very problematic and costly in the offshore model but is a benefit in the onshore model.
- In its universities, rural communities, and other locations, the United States has huge overlooked resources that can provide effective outsourcing solutions and services as well as a local onshore presence.
- Offshore application development and maintenance (ADM) works best with -- and really requires -- investment in technical management and relationship management.
- Select a software development service provider with a solid track record of dynamic conversations with its clients, pushing back and asking questions and offering alternatives to make sure the project is designed at the outset to ensure it gets the client where it wants to go.
- When customers and application development service providers together define the work correctly up front, the developers can make better decisions, which translates to lower costs because of doing the work correctly the first time.