Application development costs and speed to market are critical for a startup with a new concept. The mission for SmartShopIt.com was to focus on helping people eat healthier and shop smarter for groceries and sundries. Visitors would be able to search by zip code for prices and information on over 100,000 name brand products and 13,000 retailers in the database.
"As a startup company with a destination site in an unproven market, we wanted to prove the concept and didn't want to spend a lot of capital," remembers Trent Wong, CEO and founder of SmartShopIt.com. The budget did not allow him to hire U.S. developers.
Supplier selection criteria
Four elements were critical in selecting a provider:
- The ability to convert ideas into working software
- The ability to use Agile development
- Good English-speaking resources
- A reliable partner to establish a long-term relationship
In October 2007 Wong looked into developers in India, Central America, Eastern Europe, and China. "As we went to various organizations, I felt most comfortable with China. It also helped that our product manager spoke Chinese, so it made dealing with language and cultural barriers much easier."
According to Frances Karamouzis, Vice President of Research for Gartner, "The Chinese government and a collective group of vendors are trying to replicate the Indian success story. They want buyers to view China as an equal or better option. We think it will be a longer road to hoe due to the involvement of government and more competition from other locations. From a technical perspective, the Chinese suppliers are as good as their counterparts in India or other places, especially in embedded software."
One challenge for Chinese suppliers is their country's fast growth. The Gartner analyst says domestic companies in China are using IT labor resources that would be available for exporting. "Those companies are growing so fast and the economy is growing so quickly it is unclear if they will have enough resources for both the domestic market and the external market," Karamouzis continues.
SmartShopIt.com evaluated three providers with Chinese resources and selected Venus Software International headquartered in San Francisco. "We decided that Venus would be a more secure partner," Wong says.
Remi Vespa, CEO for Venus, points out the company is the U.S. arm of Venus Software of China (VSC), which was established 20 years ago in Shanghai. The project manager is fluent in English and graduated from a university in North America.
Another key factor for the selection involved Venus taking on risks, according to Vespa. He says Venus agreed to take the risk to work for a fixed price during the initial phases of the project, although SmartShopIt had no detailed specifications. The tight budget necessitated a fixed-price model in the early phases for Wong. "This ability to commit has been a major criterion in the SmartShopIt decision to select Venus."
The proof of concept work lasted four months. Venus assembled the team "in a matter of days and started the design and development almost immediately," Vespa says. "The Venus executive from China came over here to meet with us early in the project, which made us comfortable," Wong adds. The proof of concept was successful.
The path to launch
SmartShopIT did the project management and site design, looking to Venus to be the development team and technical resource. "We consulted with them on how difficult certain design requirements would be and how long they would take to get done," Wong says.
SmartShopIt.com initially engaged some people with Venus to do the quality assurance work but brought it back in-house. "It is difficult to find good QA people offshore for an application built for domestic consumption. It is a different culture and they look at things completely differently," Wong says. For example, Chinese users typically navigate through the Internet through portals as opposed to using search engines. "They are not familiar with the American approach," he says.
Communication by e-mail or phone calls helped keep costs down. Wong says he was impressed with the ability of the Chinese staff to speak English. "I speak very little Chinese and was able to conduct meetings by myself over the phone without my project manager online. Having someone on our staff who speaks Chinese helped to address or clarify any issues that would come up," he explains.
Initially SmartShopIt.com had a Venus project manager in China. Communications were so good between the teams that there was no need for Wong to retain him. "About six months down the path, we found we could get things done quicker by taking out the middleman and working directly with their developers. Venus was open to that, as they understood we had the ability to communicate directly with the developers without any issues," he says.
A successful deployment with cost savings
The SmartShopIt.com application went live in August 2008 with a second release in October 2009. Since initially going live, Venus steadily added features and functionality to the application including a richer database, coupons, nationwide stores, and access from mobile platforms. The buyer has been continuously extending the contract.
"I've developed products for the last 15 years. This is probably one of the better ones. We saved 50 to 60 percent in cost over using local talent," says Wong.SmartShopIt.com was able to meet its objectives in quality at an attractive price point.
Lessons from the Outsourcing Journal:
- Good bilingual communication abilities between both parties can reduce provider project management head count.
- A provider willing to share risks creates more trust for the buyer.
- Quality Assurance for a domestic product is best done domestically due to cultural differences.