Computerwoche, a famous German IT magazine, has just published a very interesting article on the nearshore outsourcing policy of the NHS doctors’ Union in the Land of Bavaria (”Kassenärtzliche Vereinigung Bayerns”), an organization with more than 2,500 employees and 22,000 members. The Romanian service provider mentioned in this article is Pentalog! A team of four members with a German-speaking team leader, all based in Sibiu, have been working for this client for a couple of months already.

Here is an unofficial summarized translation of the article…

Nearshoring : KVB has found help in Eastern Europe

It’s been 6 months since KVB decided to outsource part of its developments to Romania and Poland. The CIO explains this as a reaction to the need of improving their flexibility and agility. “Our needs are two times bigger than what our internal competences allow us to accomplish. In the past, we have appealed to German partners to help us surpass this problem. But we had to cut down costs”. KVB was looking for a solution that would not only lead them to make savings, but also allow their employees to focus on high-level tasks in their core business.

Nearshoring rather than Offshoring

The possibility of an offshore solution was quickly put aside, because it seemed very difficult to work with people from another continent, given the branch specificity and terminology. “The time difference might have been a problem, which could have lead to an increase in our overhead costs”.

The situation is Europe is different. The geographical and cultural proximity greatly eases communication, but the linguistic barrier remains. In order to avoid mis-interpretations, we have decided to use only German within the project. “This may sound a bit unusual, but it is the only satisfactory solution for us”, the development manager explains .
The terms of the German health system are very specific, the legal texts are nationally “customized”, and they only exist in German language, concerning only professionals working in Germany. “It was obvious that communication in English would have driven to many errors and approximations. Certain words would have been impossible to translate”.

However, German-speaking collaborators are not easy to find, not even in Eastern Europe. The market is highly competitive, we have to fight against multinational companies that employ all engineers on the spot.

In order to limit the risks, KVB has decided to split the projects between two countries: one service provider in Romania and one in Poland. “A polish IT engineer costs us EUR 50/hour, but we expect him to speak German and to bring an expertise in architecture. In Romania he costs us EUR 25/hour, so we are less demanding. For now only the team leader speaks German and the rest of the team communicates in English. This is enough for the technical part of the project. The team leader translates wherever necessary and this works fine.”

Finding the right partners

The size of the company was a main criterion when choosing the service providers. “It is important to communicate with our partners on the same level; the company has to be able to support our growth. Having the opportunity to act on the choice of team members, by conducting together individual meetings, was also decisive. This way we would make sure the service provider allocates us the most suited persons. ”

For the CIO of KVB, long-term project planning and building partner and worker loyalty play an important role. At the beginning of the project, KVB has invited the Romanian and Polish teams to Germany for one or two weeks, so that they integrate with the team in Munich and become acquainted with the necessary project-related information. “We have thought about keeping one nearshore team member at our location throughout the entire project, but travel and accommodation expenses would have nibbled away our outsourcing savings. Still this would not have been very useful in the end, as communication between Germany and the nearshore premises works really well.

Internal tensions

“At the beginning our employees were really skeptical. To them the foreign workforce seemed threatening for the success of the project. But at the same time they were aware that we needed additional resources”, recalls the development manager. KVB based its strategy on an open internal communication that would dispel these fears.

The importance of communication

“Project managers were afraid that communication with the virtual team might not work. These fears were well-founded, considering the high agility level we require. Their perceptions were then swept away: deliveries came on time and the nearshore members came up with new impulses in the projects. The German personnel is very pleased with the results; they even demand the participation of the nearshore teams in other projects”, says the development manager. “This is an opportunity for them to acquire the necessary knowledge in the context of globalization”. Managing relationships with multiple service providers develops additional competences. “A nearshore project does not mean less work; on the contrary it implies higher demands. The new tasks are more diversified and bring about more responsibilities.” This is what motivates the personnel.

Positive results

KVB has now gained some experience and even though there are certain adjustments to be made, the results are encouraging. “We can already see the positive effects of this collaboration and we will probably reach the nearshore objectives set for the end of 2009”, highlights the DSI. In the upcoming months, Romanian and Polish specialists must intervene in other domains, such as datawarehouse development and the teams should reach a number of 10 members in each country. The CIO concludes: “We believe that the current projects will lead to a long-term collaboration”.

This question comes to my mind from time to time. Why do we put online the CVs of ALL our members? Moreover, why do we identify them by publishing their CVs? I see a couple of answers. First, it is a marketing choice because IT consulting companies (offshore or not) only exist thanks to their team. We prove that Pentalog is a human, social and personal reality. I personally hate smooth corporate images that can be seen on our competitors’ websites, showing “united-colors-type” faces that only exist in Hollywood. It is irritating, how alike their websites look! However, no software activity is possible without the gathering of individuals.

But it is even worse in the offshore business. I know dozens of companies that employ less than 10 persons, using the same photo galleries as big-sized companies’ websites and thus end up resembling them. They are kind of cheating. I love the Minsk or Bengalore-type company websites showing a tall, dark-skinned, female consultant, next to an Asian IT manager and two Wall Street bankers… Eventually this emphasizes that we are different and shows the reality of our forces, either to potential clients or to our employees. Especially in the offshore business, companies have to prove their human and social reality. Also, it is a means to give all our potential clients the possibility of building a real offshore team. The videos, when available, may also help. Finally, I am considering the idea to organize some sort of Pentalog social network, made of all the personal CVs of our team members, linked with each others by practical case studies, and to find this network among the most accurate public social networks, as a group of skills. We are not far from this now.

Despite the worrying global economic situation Pentalog will report an 80 % growth for the fourth quarter. This performance is due to the 2 recently created branches of Pentalog Romania, Iasi and Sibiu, each employing now over 30 people and working at their full capacity. During this quarter Pentalog has reached a level of more than 300 employees. The 9% bench time rate at the beginning of the quarter fell under 6% in November and December.

Business has been going well. A series of new deals have been signed: in Germany with LHS, belonging to the 5 biggest German software editors and number one on the global mobile phone invoicing market, and in France with NG Travel in the tourism industry and finally with Mousset in the logistic sector.

Following these quarterly results, the annual growth will be of about 60% with a sales figure of EUR 8, 5 - 9 M, whereas the annual growth objective was 30%, which means the group achieved twice the expected results.
Pentalog has also been granted a “Deloitte Technology Fast 50″ 2008 prize.

The Vietnamese branch may not have a significant contribution to the turnover until the second quarter of 2009.