Parasoft calls 'mini-global companies' to join the offshore revolution

Adam Kolawa, CEO and President of Parasoft Corporation, agreed to speak to Contractor UK last year about Outsourcing in our 'Irreversible damage to Industry' exclusive. Now, after his 2004 tour of India, he explains in close quarters that overseas offloading might just be a blessing in disguise…

CUK: A lot of reports have been written with conflicting views from Parasoft, can I ask you where exactly you stand on the subject of outsourcing?

"I am really in the middle on the subject of outsourcing. Let me answer your question from this direction; I am afraid that if done wrongly, outsourcing can be of major harm and damage but employed correctly using 'focus,' it can be a huge benefit.

"Essentially, companies looking to outsource must think carefully before they choose what part of their business to offshore or outsource."

Outsourcing – the process

"Let me give you an example. When General Motors in the US was in trouble, they decided to outsource part of the building of the cars, so parts were being built by somebody else in Japan.

"They very quickly figured out that they cannot do that- you cannot outsource your main business or your main IT project - but you can outsource everything that is not critical to you. So for instance with GM, you can outsource the production of brakes in the car but you cannot outsource the model itself."

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"In short, outsourcing less essential operations saves company money and this is good because revenue can be put into the core IT product and ongoing growth of the enterprise. If companies make the mistake to outsource their main product, within 10 - 15 years they will find themselves out of business.

"This period is about right because this is how long it takes for enterprise to pick up everything including their core product and really start running with it. No one with 'normal sense' is going to outsource their main IT project - because you outsource yourself out of business and you create your own competition."

Focus and decide

"But if you outsource effectively, companies can benefit from 'focus.' So businesses must say, 'I have limited resources and I need to focus my IT brains on what is critical to my business.' If they do, then everything that is not critical to their business but necessary for running the product - can be outsourced to somebody else thereby creating a sub-contractor.

"Now this goes against the culture of IT because we have a track-record of inventions and developments carried out here. Engineers for instance, always say, 'I am going to develop the product myself domestically because I know how it should be designed,' but industry professional must decide what is going to be built by them and what's going to be worked on by a specialist in the field.

Specialists in the area can focus on the project, and it has enough critical mass to really deliver a quality product for the business and its competitor, so the company choosing to outsource is leveraging from it."

Outsourcing - the pitfalls

"Fatally, many companies fail to have a high enough degree of specification and they don't specify exactly what work they want outsourcers to undertake. Business sometimes wrongly assumes outsourcers will figure it out with their own experience or initiative and this simply doesn't work- until companies build relations or even long –term relations in some cases. A lot of companies fail when it comes to outsourcing because they inadvertently throw the project away by not specifying what their outsourcing strategy actually is and the project dies."

CUK: If one supports outsourcing what happens to and how can you nullify contract losses and knowledge deficits at the original source?

"If companies outsource their main IT they will not leverage off it and it's no good. But outsource everything but your critical part and businesses will offset job losses because as a company you will become more competitive, more focused and your business will grow. The enterprise doing this allows more hiring of contractors for the critical part of their business. Executives and Directors can expect to lose some of the jobs that are less relevant but this is restructuring- these people won't have to reprogram themselves and 'nobody can stay still' in the industry because of this dynamic.

"In my own experience, I have been selling projects to Poland for the last 15 years and Parasoft would never be what it is today if I hadn't opted for this solution. Because of this I hired more people in Europe and I hired more people in Poland. So here I kind of 'mini –globalised,' and we have this concept of 'mini-global companies,' which is happening right now."

Mini-global company

"Companies should become mini global if they want to rise to the competition. I see myself as a mini global- I need to be closer my customers and I need to closer to the culture but I have to be more open to how I am producing things. This approach increases the product everywhere. Being more open though needs great caution, as business will be sorry if they show their rivals something they should not show- so the message is, think before you really open your cards."

Outsourcing you out of business

"Parasoft initially had shaky relations with our sub-contractors in Poland but once I started to trust them as my subsidiary, over time I 'opened my cards' to them. Outsourcing is politicised and it should not be politicised.

"Instead, it should really be looked at primarily as sub-contracting and all sub-contracting is dangerous- regardless of IT because you are creating somebody who is doing something for you and you might create a competitor."

CUK: How long has Parasoft been outsourcing to Poland and Europe and are you today happy with the results?

"You know - that's a great question. For the first six to seven years it was basically a waste of money and I didn't get very much out of it - maybe I got some parts and benefits from it but that's about it.

"Looking back, I can see I was working for the long-term, trying to build up the culture and develop everything piece by piece. Then with the onset of the dotcom boom I couldn't hire people which was a blessing because I could expand easily but I simply couldn't hire enough people. Then with the dot com bust, there was a stabilising period because they were less expensive as I didn't need to lay-off people.

"So, businesses like Parasoft could save on the headache of hiring and laying-off and emerge more stable as a result. I didn't lose any developers during the boom and I didn't have to lay off any body during the bust.

"Yet, even today after fifteen years problems still occur! I get a product from my outsourcers which shows somebody somewhere has misinterpreted something - still!

There is always a weakest link in the network that makes you think; if this operation was from Parasoft headquarters - I would stop this much sooner because I would see it. Even with enhanced communication available today this still drives me nuts as it happens quite a lot."

The Future

"There is one thing that may save software companies if they don't improve their willingness to outsource and take on the challenge of being a mini-global. Very soon, we in the developed world will be again short of resources.

Now, where are IT software companies being given a chance? We are being helped because anything that engineers and professionals are developing or building right now is going to have software.

"Your pen, your refrigerator, enhanced software for bicycles and cars - everything uses software. Demand for writing software will increase again and developers will again be in demand - it's all slowly turning around.

"So, all these resources which are built in India and overseas are going to be our blessing because soon we will not be able to produce enough. Software developers can look forward with optimism, we are just coming out of the bust. Bust was deadly but outsourcing did not create the bust economic factors did. So we blame outsourcing for our problems but outsourcing is the blessing in the end - if it's done right.

"From my recent tour of India I would say a neo-colonization is in place. Western firms are colonizing these countries… willingly. Our companies are becoming stronger and bigger and expanding as 'mini-global companies' - this is a tremendous sign for us."

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