Web 2.0 created a dilemma for Intronis, a provider of online data back-up systems based in Boston. Its buyers had expanded their interactions with their customers and the volume of data ballooned. In addition, the buyers needed the software to back up this data faster.
The proprietary software that Intronis provided, eSureIT, was increasingly unable to accommodate its clients' needs. It urgently needed updating, but the work was beyond the capacity of the internal staff. They were pinned down servicing new customers and working on other development projects. The company didn't have time to hire additional internal staff to address this mission-critical need.
Outsourcing was the solution. But Intronis had a challenge. Sam Gutmann, Intronis CEO, couldn't select just any supplier. "We didn't think we could provide specs that were detailed and accurate enough to actually get a useful product," he says.
Outsourcing produces rapid improvement
A colleague recommended Exigen Services of San Francisco to Gutmann. Exigen Services has development centers in Belarus, Latvia, Lithuania, Russia, Ukraine, and China. In February 2008 the two parties agreed to undertake a six-month pilot project.
"We felt we could work as a team to come up with the specs with a Central/Eastern European provider using the Agile development style," observes Gutmann. "If we gave them something that was blatantly incorrect that our customers wouldn't want, they would provide a solution to give us what really worked."
"An approach in shaping requirements and moving towards results is more productive and efficient," says Nick Puntikov, president, Eastern Europe, for Exigen Services. He was not concerned about Intronis providing specifications. "They are good at thinking about the future of the product and understanding the market. But they are a bit lost when it comes to developing specifications. So it was easier to do it ourselves."
The Exigen team quickly recognized it didn't need to redesign the application to achieve the desired goals. They uncovered an algorithm they could modify to produce the requisite results. The updated algorithm cut the time to complete an archive scan from almost four hours to less than two minutes. The improved software effectively lowers the storage cost for Intronis customers by up to 50 percent.
The success of the pilot program led to a two-year contract in September 2008 for continuous improvement of eSureIT applications. Outsourcing has enabled Intronis to meet growing customer demands into the future in a difficult economy. h3>Rapid competitive advantage with cost savings
Intronis can now offer its customers one of the fastest automated back-up utilities on the market today. By teaming with Exigen Services, Gutmann can adapt to changing customer needs. "You cannot accurately predict what your customers will want two years out," he says.
Intronis was able to get its product to market months faster by outsourcing, adds Gutmann. "We would have had to hire staff and then get them up to speed. Who knows how long that would have taken?" he says. By outsourcing, the company "got a topnotch team that was ready to go in 30 days, which is extremely fast."
Intronis is also realizing savings of over 30 percent though cost savings was not the driver for outsourcing. In a recession, that's a good number.
The CEO says "we wouldn't have the software we have today if it weren't for them. We would not even be anywhere close to the position we are in now in our market without this Agile approach."
Why Eastern European suppliers are a good fit
Pure-play cost-cutting should not be the sole objective when outsourcing, according to Gartner research vice president Allie Young. "Cost-based decision making is dominant in this economy. A cost-focused approach where an organization wants the provider to always take out more costs is more detrimental than jointly working with a provider to develop solutions to drive revenue growth, efficiencies and cost take-outs. "
Like Intronis, many buyers in highly specialized niches have unique needs in their dynamic markets. Young sees a cornucopia of choices for these buyers. "In the context of hyper competition in the global marketplace, buyers have more choices than they probably know. They need to constantly watch the marketplace to see how the competition changes. They need to use service providers in different geographies strategically for the most critical needs."
Providers in Eastern Europe are worthy of consideration, she says. "Eastern Europe is not as competitive on cost as certain parts of the world, yet its cost for value is competitive. Part of their DNA is scientific, and they are very deep in processes. Having those skills is a great foundation for IT," she explains.
Central/Eastern European providers tend to be much more proactive in participating in the endeavor as opposed to being a body shop doing contract work. They are often much more involved in project management as an active part of a collaborative team with an overall partnership attitude, says Gutmann. "In the communications and project management style, they are extremely fast. In the beginning, they could work much faster than we could," he adds.
Lessons from the Outsourcing Journal:
- Cost savings alone is not a good reason to outsource if a company wants to thrive in the long run. Developing solutions jointly is a better path to success.
- If a buyer is not good at providing software specs, it needs to hire a supplier with the specialized background to develop software by completing the specs itself.
- Central/Eastern European software developers are known for adopting a partnering, collaborative attitude.