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offshoring.
The most dif¬cult discussions are with those managers who are not committed to
offshoring. These prospective clients are usually found within companies in Stage 1 of
the Offshore Stage Model, labeled as the “Offshore Bystanders.” These ¬rms, which
are the majority of the companies in the industrialized countries, do not have any off-
shore projects yet, and may be reluctant to use offshore providers. Managers in these
companies are aware of offshoring, but tend to see mainly the negatives. The common
objections in this group include:
— “The communication will be dif¬cult.”

— “Your project management skills are weak.”

— “I™m worried about my Intellectual Property.”

Be ready for these objections. Be ready in more than just words by having established
the management and legal processes in place to address them. Some prospective clients
may not voice all of their objections openly: they have negative views regarding cer-
tain offshore nations, or they may be insecure about their own lack of experience with
international projects, or they may be sensitive to internal resistance and backlash.
Make them feel comfortable with offshoring by using a goal of starting with one low-
risk pilot project. Take your time to supply managers of these companies with suf¬cient
information, such as case studies or white papers. It helps if some documentation is
available in the local language. You might invite them for a visit to your facilities, so they
can have discussions with your management and staff, and have a better understanding
234 Other stakeholders


of your capabilities. Add some tourist excursions and you will make an impression
they will never forget.
Other companies have transitioned to the second of the offshore stages: the
“Experimental Stage.” These organizations, the Experimenters, are already offshoring
some of their work and there is little doubt that they have some offshore champions.
However, they have not structured their provider relationships. The Experimenter™s
approach to provider selection may be ad hoc and it may have several offshore providers
that churn, or are otherwise not well-established inside the ¬rm. Even if the Experimenter
has designated “preferred suppliers,” it is often open to new services and locations,
perhaps as a diversi¬cation strategy. All of these openings present an opportunity.
The Experimenters require different marketing efforts. The challenge is to increase their
use of offshore resources. To achieve this, the offshore provider must help these clients in
achieving on-time and on-budget projects, and share best practices with them. Problems in
dealing with different cultures can occur and vendors should take a lead in proposing inter-
cultural training: they should not wait for the client to address this issue. Vendors should
publish newsletters and organize “customer days”, seminars or advanced workshops on
various topics, such as best practices, international project management, and on other off-
shore opportunities, such as ITES. User groups should be invited to the offshore facilities.
Remember that your client base represents your best clients and repeat business is
easier than chasing new clients. A golden rule for sales and marketing functions seek-
ing to ¬nd foreign clients is that long-term relationships are crucial. Stable growth
comes from repeat business; repeat business comes from relationships. A survey by
Forrester noticed that “One of the most important areas of differentiation lies in the
vendor™s engagement and relationship management philosophy, and overall relation-
ship management skills.”12 Some providers have relationship managers, who act as an
intermediary between the client and the offshore development teams. They help their
clients in their efforts to get a larger percentage of work offshore.


Knowing your clients™ cultures
We have already devoted an entire chapter to the impact of cultural differences on how we
communicate (Chapter 9). The emphasis in that chapter was on communication during
the project life. Of course, these cross cultural communication differences also affect
the way business discussions are conducted between a sales representative from an off-
shore provider and the prospective client. One of the marks of maturity of the Indian
Tier-1 ¬rms is that they are increasingly hiring locals for client relations: Germans in
Germany, Americans in the USA. Such marketing choices reduce cultural differences.
For those offshore providers which choose to send one of their citizens to conduct busi-
ness development, consider training that deals with the speci¬c European (business)
cultures. We noticed that providers™ marketing and sales managers, with business expe-
rience in the USA, expect that marketing in Europe will be the same. This is not the
case, and European markets are fragmented across borders. From a cultural point of
235 Marketing of offshore services: the provider perspective


view, the European markets can roughly be divided between a “Northern” and a
“Southern” part, divided by a border which runs across Belgium. And even inside
these two distinct parts, cultural differences exist.
For instance in The Netherlands, hierarchy is not easily visible and people appear to
be easy-going during business meetings, which always begin with informal talk.
Managers from the offshore vendor are misled by this casual attitude and expect a busi-
ness agreement after having had a pleasant meeting. However, this is rarely the case.
Also typical for the Dutch business culture is the long time to arrive at a decision,
which is only made if all relevant people and departments agree. In Germany, which
also belongs culturally to the “Northern” part of Europe, organizations are more hier-
archical, and the people appear more formal and distant than the Dutch. In meetings,
they will get straight down to business. Issues of quality are extremely important and
sales staff should be well prepared on this subject. In the “Southern” countries of
Europe, such as Belgium, France, Italy or Spain, business is hardly possible without
good personal contacts. The business culture is less formal. Here, too, business deci-
sions can take a long time, although unlike the Dutch who need to build internal con-
sensus, the time is required in order to build trust with the offshore provider.


Ethics and trust
Like many sales people before them, over-eager offshore representatives have been
known to claim capabilities and expertise which they do not actually have. Boasting
“we can do everything” is risky. If the contract is signed, the chances of failure are
high. This will hurt your ¬rm™s future options. There is a saying: “trust comes on foot,
and leaves by horse”, meaning that the reputation of your company can be damaged
quickly. Intellect, the British Information Technology Telecommunications and
Electronics Association, has a code of conduct for its members that are offering off-
shore services.13 The code gives guidelines on presenting true information on capabil-
ities and staff. It also deals with issues such as respecting local immigration rules,
protection of intellectual property rights (IPR), and con¬dentiality of clients.
On the other hand, providers also need to be cautious about their prospective clients.
The provider should be slightly suspicious of requests for proposals (RFPs), especially
if they require great effort. Sometimes, the client has already found an offshore part-
ner, and only requested the participation in the proposal because it needs data for nego-
tiations with the preferred ¬rm. An Indian sales manager recalls:

“Over a longer period of time, we had regular meetings with a potential Dutch
client. Since it was a large company, we had no hesitation in traveling from our
of¬ce in the UK to The Netherlands. Afterwards, we found out that they had no
interest to work with us, since they already had identi¬ed another Indian vendor.
They only had discussions with us to learn from our experiences and to check on
prices. They used this information to negotiate with the other Indian company.”
236 Other stakeholders


The customer is certainly allowed to conduct due diligence on your ¬rm, but you are
allowed to do this as well: Is the client competent enough to provide you with good and
stable speci¬cations? Will the client keep changing the requirements? Is it possible that
the client will blame you when the project fails as a result? A client may cause damage
even if your ¬rm has acted reasonably and professionally.



Country branding “ marketing your country

Tell me what country you are from and I will tell you how easy it will be for you
to do business here.
If your company is not from India “ and particularly if it is from a small nation “ then
your ¬rst concern is often to “market your country.” So, let™s brie¬‚y examine the case
of India and draw some lessons from its success at country branding in IT.
In 1995, most business people knew nothing of India™s IT capabilities. The country
was known as a large, poor, and hot country, with images of elephants and snake
charmers giving it an exotic aura. This view has changed dramatically and today,
Western IT professionals know India as a potential high-tech destination. Offshore
outsourcing and India have become almost synonymous. This new image has had an
important positive impact on the business development activities of Indian providers.
For example, most Dutch companies, when deliberating on selecting an offshore part-
ner, limit their selection process to Indian ¬rms.
On every level, from government, to state, through industry coalitions, to individual
firms, India has carried out a successful national marketing effort to build its image and its
brand as a leader in information technology. The enormously successful major Indian
providers have all helped build the image through substantial ¬nancial investment. The
glittering campus of Infosys not only helped Infosys but also helped the India brand. The
many activities of the national government and its ministries have aided the branding.
Even Indian states have their own promotion policies: Andhra Pradesh (home of
Hyderabad) and Karnataka (home of Bangalore) can be found at trade exhibitions abroad.
Of particular note within India™s strong branding efforts is its aggressive national soft-
ware industry association, National Association of Software and Service Companies
(NASSCOM). It is perhaps the most in¬‚uential technology association in the world.
Founded in 1988 with only 38 members, it has grown into a large organization with a
variety of activities. The combined revenues of its 850 member companies constitute
almost 95% of the total revenue of the Indian software industry.
From its early days, one of its aims has always been to strengthen the branding of India
as a premier global sourcing destination. It welcomes foreign delegations and sends out
Indian IT missions abroad on a regular basis. Its website is a rich and reliable source of
information. Lastly, the association has been successful at facilitating favorable studies
237 Marketing of offshore services: the provider perspective


about the Indian industry. An example is the 500 page World Bank funded study of
1992, which compared India with seven other countries.14 Indian companies and
organizations communicated the positive ¬ndings of the report extensively in subse-
quent years. In 1999, NASSCOM began working together with McKinsey, a well-
known strategic consulting ¬rm. This relationship has proven especially fruitful as
McKinsey regularly publishes favorable research reports on India™s IT industry.
NASSCOM™s leadership has been instrumental in its success. Dewang Mehta headed
the association from 1991“2001 and became a legend. It was his belief that software
and IT services export was to India what oil was to the Middle East. He was creative in
building NASSCOM into a professional organization and was personally very active in
promoting the Indian IT sector. He gave countless interviews to local and foreign mag-
azines and newspapers, and participated in a large number of seminars and trade fairs
abroad. He died in 2001 during a business mission to Australia. The Indian Ministry of
Information Technology instituted an award for IT innovation to honor his memory.
India™s country branding stands in contrast to the image of many other competing
nations. The image of most developing countries is often negative (e.g. poor, unedu-
cated, with a bad infrastructure). For example, Bangladesh appears at the top of cor-
ruption surveys.15 Although corruption has little impact on its offshore projects (as
foreign users will admit), it is obviously negative from a marketing point of view.
Some Central and Eastern European nations suffer from a poor image as well. Other
nations are better known because they are holiday destinations (e.g. Malta, Jamaica,
Cuba, Egypt, and Indonesia), but their IT capabilities are invisible.
Since the end of the 1990s some offshore countries began promoting their countries
as IT destinations. Nepal is famous for its tall mountains, but hardly anybody is aware
of its IT offerings. Designco and World Distribution Nepal, offshore providers from
Kathmandu, are now using the slogan “software from the top of the world”.
Another example of a country branding strategy is the Baltic nation of Lithuania. It
aspires to become the “Sunrise Valley of Europe” by 2015 in information and communi-
cation technologies, laser technology and biotechnology.16 Like most Eastern European
nations it tries to emphasize its cultural closeness to its potential European customers
in order to distinguish its industry from the “alien” cultures of India and China. In
order to achieve its goals, Lithuania has to project its strengths and capabilities.
In creating such a brand, Lithuania operationalized its branding strategy in the fol-
lowing ways:
— Use aggressive communication in order to be heard over all the competing and

non-competing messages being sent out by other countries.
— Use a broad-based campaign, where CEOs of local companies would focus on

addressing events and using media. Strong public relation ¬rms should be used to
promote success stories of Lithuanian companies.
— The local IT association, Infobalt, and the Lithuanian Development Agency should

work together to focus on the mission “Lithuania as the Sunrise Valley of Europe.”
238 Other stakeholders


Demonstrate successful implementation of niche areas both domestically and


abroad. This would lead to assurance that Lithuania is able to deliver quality
projects and products.
This example of Lithuania and its Infobalt association demonstrates the subtle role that
the national association plays in building the country branding to compete with the
India brand. Industry associations have formed in most offshore countries, such as
Camtic (Costa Rica), Fedesoft (Colombia), Pasha (Pakistan), Basis (Bangladesh), CAN
(Nepal), Intaj (Jordan), PIIT (Poland), Asocpor (Czech Republic), BAIT (Bulgaria),
Litta (Latvia), Russoft (Russia) and IT Ukraine. Some of these are also members of
international associations.17 But, unlike India™s association, few of these industry asso-
ciations are visible outside their home nations. Some associations suffer from internal
weaknesses, and in some countries, such as Romania and Russia, there has been rivalry
between or within industry associations.
An association also has responsibility to promote high standards of professionalism
and ethics among its members. A large ¬rm from Ukraine attended an offshore confer-
ence in The Netherlands, but it never paid entrance fees. Its representatives also used
the copy machine extensively to make additional company brochures, without paying.
Bad news travels fast, and such a negative incident damages the image of an entire
country™s industry.
Associations can offer their member ¬rms tangible bene¬ts. They can organize
member participation in conferences and exhibitions in foreign markets. They can
organize training (e.g. on export marketing, software quality, or project management).
They can be a useful source of business intelligence. Some industry associations host
exhibitions on a regular basis, which present the country™s IT capabilities in a good light.
Examples of annual events are Infobalt (Vilnius, Lithuania), Software Outsourcing
Summit (St. Petersburg, Russia), ITCN Asia (Karachi, Pakistan), and the Jordan ICT
Forum (Amman, Jordan). While these events attract few buyers, they attract in¬‚uential
foreigners, such as consultants, who help spread the word.



External assistance with market entry

A surprisingly large number of outsiders are eager to help offshore providers from
developing countries (and transition economies of the former Soviet Union) to make the
important and expensive ¬rst steps in exporting their services. Support can be sought
from governments of wealthy nations and international agencies. Governments from
several offshore countries are operating trade promotion organizations in foreign mar-
kets. They sometimes fund trade missions, seminars, mailings, and support national
booths at trade fairs.
Several Western European governments operate export promotion projects. An
example is the German-sponsored Indo-German Export Promotion (IGEP) Project.
239 Marketing of offshore services: the provider perspective


This is a joint trade promotion program of the Indian Ministry of Commerce and the
German Ministry of Economic Cooperation and Development. It provides support to
Indian offshore providers in establishing contacts with German and European enter-
prises, and assists them to organize trade exhibitions and seminars. The REACH pro-
gram of Jordan receives support from Switzerland. The Dutch have CBI, the Centre for
the Promotion of Imports from Developing Countries, which has assisted offshore ¬rms
from India, Jamaica, Nepal, and Bangladesh to take part in foreign IT exhibitions. It
also offers training, disseminates information, and produces a European Market Survey.
The European Commission has assisted a number of ¬rms from developing coun-
tries in gaining access to European markets. One such program was 3SE (Software
Services Support and Education Centre), which was a joint initiative of the European
Commission and the Government of India, with of¬ces in Bangalore (India) and
Brussels (Belgium). Its aim was to promote cooperation between the European Union
and India in the ¬eld of IT. From 1999 to 2003, 3SE offered matchmaking services to
help European companies ¬nd the right partners in India for software services and
products. Seminars and matchmaking events were organized, both in India and
Europe. It also helped to distribute European software products in India.
European-funded promotional projects have taken place in many countries. In India,
the industry association, NASSCOM, initiated the NASSCOM™s India“Europe Software
Alliance (NIESA) project in 1999 to increase strategic alliances, joint ventures, and
partnerships between companies in India and Europe. This was followed up in 2000,
with the NASSCOM™s India Japan Software Alliance (NINJAS). Another example is
the European IT Service Center (EITSC) established to increase the software exports from
the Philippines. Yet another program, called New Adonis, was created to support the soft-
ware industries of Armenia, Russia, and Ukraine by searching for clients in Europe.
American governmental agencies have also been assisting offshore providers. For
example, the US Chamber of Commerce has been helping software and IT ¬rms from
Thailand seek American clients. The various bilateral partnerships of the US Chamber,
such as the US ASEAN Association or the US Indonesian Trade Association, have
provided marketing assistance to visitors from the countries they support. The US
State Department has sponsored a CIS forum of software companies including Russia,
Armenia, Georgia, and others.
USAID is involved in a variety of activities with the IT sectors of many countries, in
order to promote foreign investments and to attract new clients. It hosts delegations, it
funds ¬rms participating in foreign IT exhibitions and helps to attract venture capital.
It gives assistance in developing business plans, and offers training to strengthen mar-
keting skills (e.g. with developing marketing plans and preparing elevator pitches).18
USAID also supports various local IT associations, including those of Palestine and
Jordan. It supported the efforts of several Arab ¬rms to develop software for the lucrative
Arabian Gulf markets, by providing seed money to translate standard software pack-
ages into Arabic.
240 Other stakeholders


Finally, various international organizations have helped companies in developing
nations: the United Nations Development Programme (UNDP), United Nations Industrial
Development Organization (UNIDO), the International Trade Centre UNCTAD/WTO
(ITC), and the infoDev program of the World Bank. Regional development banks such
as the Inter-American Development Bank (IDB), Asian Development Bank (ADB)
and the European Bank for Reconstruction and Development (EBRD) have all provided
technical assistance to ¬rms in their regions.




Concluding lessons

Providers should not give up too easily. The international marketing of offshore services is


complex and time consuming. For most markets, expect 2“3 years before signi¬cant
business will be generated.
Proximity to markets is key. It is dif¬cult to ¬nd clients if you are located thousands of


kilometers away. It is important to invest in a sales of¬ce in your target country or to use a
local representative. In addition, seek a business relationship with a local IT services
company, and establish contacts with local consultancies and research ¬rms.
The power of the diaspora is often underestimated. Capitalize on your network of


expatriates working in potential target ¬rms (such as, for example, a Filipino provider
targeting a Filipino tech manager at a Canadian health care organization).
Finding customers is a “numbers game”: the larger your number of relevant business


contacts is, the easier it will be to ¬nd the ¬rst client. Many different types of marketing
activities are needed to generate name recognition and client interactions: references,
networking, direct marketing, trade fairs, seminars, and public relations.
For non-Indian providers country branding is critical. Individual ¬rms, government


ministries, and IT associations need to actively work together in conducting country
marketing efforts.
Seek support from one of the many programs funded by governments from wealthy nations


or from international agencies.
12 Offshore politics


Backlash:
A sudden violent backward movement or reaction;
A strong adverse reaction (as to a recent political or social development).


Offshoring has become one of the most important social issues of the early 2000s.
While there were muted political discussions in the 1990s, the catalyst to the backlash
was the Forrester report of November 2002 in which this American research organiza-
tion forecast that the US would lose 3.3 million IT and of¬ce jobs to offshore destina-
tions by 2015.1
For the ¬rst time, jobs that were migrating offshore were not in factories, or assem-
bly lines, farming, or mining, but those of white collar, highly-educated professionals.
This was new and quite unsettling. We have not seen this before.
Across the US and Western Europe programmers were losing jobs. Labor unions
were responding to outsourcing with strikes or strike threats, such as those of the IT
departments of the Bank of Ireland and of Swansea County Council in Wales (although
in both cases no offshoring was involved). UK-based ¬nancial giant HSBC did face a
strike due to offshoring IT-enabled services (ITES) positions in customer services. The
American edition of Computerworld published a photo of a protesting programmer,
with a sign reading “Will Code for Food.” Forrester followed-up its famous American
report with a forecast that the UK would lose 750,000 jobs to offshoring by 2015, of
which 150,000 would be IT jobs. In Australia offshoring was forecast to cost 40,000
computer jobs by 2015.2 The issue of offshoring became a crisis. In America, TV com-
mentator Lou Dobbs, of CNN, relentlessly attacked companies that were offshoring.
Outsourcing had become a dirty word.


The immediate policy issue: job loss and wage decline

The estimates of job losses that began emerging were troubling. Prominent in high-
lighting the crisis was Ron Hira, of the IEEE-USA, an association of engineers, who
pointed out that in the 30 years that the US government has been collecting such data,
the years 2001“2003 were the ¬rst in which electrical and computer engineers had
higher unemployment rates than the rates for all workers.3 Another study found that
242 Other stakeholders


within 1 year of the peak of the tech boom, US employment in IT industries declined
20%.4 Yet another study found that unemployment rates for US programmers reached
6.4% in 2003.5 IBM announced in late 2003 that it would replace 3000 US employees
due to offshoring, although it later reduced this number due to bad publicity. Britain-
based telecommunications services provider Colt Telecom announced that it would
transfer some 300 jobs in Germany to India by the end of 2005. The company announced
that it would offer 20 of its top managers the opportunity to shift to New Delhi (although
at Indian wage levels).
Globally, Deloitte Consulting predicted a loss of 2 million jobs offshore over the next
5 years in the ¬eld of ¬nancial services.6 Even Finland™s miracle company, Nokia, laid
off workers in 2003, as the company offshored to Estonia, India, and China.

In late 2003, Business Week created a stir when it told the story of a small
Boston-based ¬rm that was deliberating whether to hire four offshore programmers
for a fast project. The ¬rm™s director was torn between business reasons and
“moral” issues. Finally, he thought of a compromise. He would place an ad in
the leading local newspaper, the Boston Globe, advertising for a US-based

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