Welcome

Welcome to the new IBA Group blog. I’m Mark Kobayashi-Hillary, a writer and blogger based in London, UK, and I’m going to explore some themes related to the global IT services industry on this blog. You can find out more about me and my books and blogs on my website.

Let’s start by exploring the idea of Central and Eastern Europe (CEE) as an outsourcing destination. It’s only natural to ask if the region is still attractive? IBA Group is headquartered in Prague, but they have most of their resource in Belarus, so they do have experience of several CEE markets and therefore some insights into the benefits of working in this region.

But naturally, one of the first questions asked with IT outsourcing is around the cost. And places like the Czech Republic or Belarus can’t compete with the low cost resource available in markets such as China, but then outsourcing your IT is about a blend of attributes, value, not just cost. The countries where IBA operates can compete at around a similar price to India, so that’s a good benchmark to start with, and being in Europe the resource remains local to European companies.

There are some other factors that make this blend of EU and non-EU delivery attractive. Resource in Belarus costs less than in the Czech Republic, but the Czech facilities are covered by international legislation such as the EU Data Protection Directive – essential if you want your team to handle any customer-sensitive data. And having the ability to blend EU and non-EU teams by allowing the EU-based team to anonymise data gives a real cost advantage, with the security of European legislation.

Belarus is not a regular holiday destination for many western Europeans; in fact it remains a bit of a mystery to many. But this can be countered by thinking back a few years to how Eastern Europe has opened up to people from all parts of Europe in general, since liberalisation two decades ago. The Czech Republic is now a common destination for tourists from across Western Europe, making it a comfortable and familiar European city. It’s only a matter of time, and perhaps a budget airline route, before Minsk enjoys the same popularity.

In fact, Belarus offers some of the best technology scientists in the world. The former Soviet Computer Research Institute and Computer Production Association founded the IBA Group (in 1993, after the end of the Soviet Union), and though the Soviet empire has long crumbled, there remains a legacy of gurus and expertise in areas such as IBM mainframes – the classic legacy technologies still used by banks and insurance companies the world over. Many of the gurus from the Soviet research institutes came to work at IBA.

This blog is published by IBA Group, but if it were just a regular advert for the company then it’s unlikely you would return to read the second one. The aim is to engage and educate, to offer some new opinions on IT services and outsourcing, and in particular on the eastern European market. It’s clear from just thinking about what to enter in this first blog that there is still a lot to learn from the CEE region.

What are your questions? Let’s start a debate…

10 thoughts on “Welcome”

  1. Mark, Thank you for your consent to lead our blog. I hope that your writing style and experience in technology and outsourcing will make the blog interesting for our readers.

  2. I really like this initiative. It’s one of the few forums where I expect that there will be sharing of knowledge and opionions about outsourcing to CEE countries.
    The reasons for outsourcing to those countries are – like you already mentionned – based on multiple criteria.
    I strongly believe that the focused education and the inherit motivation of young ICT people in those countries can have a strong influence on the success of outsourcing to countries like Belarus. I am interested to see what discussions will raise on this blog… And I am sure to visit it quite often in the coming weeks.

  3. Hi Mark,

    I would be interested to know what your opinion (and the opinion of the readers of this blog) is regarding a topic that many IT managers and CIO’s are confronted with when they are investigating the possibilities to outsource to foreign countries.
    One major topic is the question to what extent we can expect that the required business know-how (and the cultural – linguistic aspects linked to it) can be shared with companies that are focusing on more technical skills.
    We know that outsourcing is not successful if it is considered as throwing specification documents over the fence and hoping the other party will come back with a solution which overwhelms the expectations. The experience I had in the past with Indian companies was that quality is high if the specifications are very clear but not when you expect to have those companies really getting involved in your business strategy.
    This is different with outsourcing to East-European countries.
    Nevetheless, there is still a long way to go and a lot of lessons to learn about how to setup a project with an outsourcing partner in CEE in such a way that the success rate is certain.
    I am really interested in best practices how to organize projects in the best way and which type of collaboration best suits for this.
    Is it better to go for fixed price projects or should the collaboration model be more based on selecting the best resources and keep a solid dedicated team on the project? Are we sure about keeping budgets under control when working on time and material and using scrum methodology? What is the experience of other companies that worked together with CEE companies? Does it make sense to have a local partner organizing everything for you?

    Hope to see some reactions on this in the coming days,
    Geert

  4. Geert, I’m expecting some IBA people to respond further to some of your specific operational questions here, but just to pick up on some of the things you mention: I think it’s dangerous to assume that one country is better than another with regards to outsourcing. Outsourcing itself can be an immense change in process and operations for a firm, so the cultural relationship between the two companies in terms of business culture is probably more important than anything related to national culture.

    I’m interested in why you would consider agile to be only related to T&M though. Is that how you have used it before?

  5. Hi Geert and Mark,

    I have been working at the IBA’s Marketing & Sales department since 2002, and I am also playing account and project manager roles. I started at IBA as a developer and further as a team lead in 1999. I can see some things at IBA from inside and can share my knowledge here.
    We at IBA had and have many projects with different levels of control from a customer side. They are fixed price or T&M projects. Approaches (scrum or RUP etc.) are different as well, it depends on customer requirements. Well, what kind of projects do we prefer? Rather T&M. In case of a proper level of control from a customer this kind of projects is more effective for both sides. The weaknesses of a fixed-price project are not well-defined requirements and not so well-defined scope of work. It results in wrong expectations and may be painful for both sides in terms of time and budget.

  6. To contracts. Not sure, that T&M contracts are effective for both sides. This type – is easy to create, invoice goes out according to actual work effort and rate, if plan needs additional resources you add and the amount in the invoice increases. Everything is visible and clear. But for the forecasting – it’s too difficult to generate the revenue flow. It’s mostly effective for the customer.
    Fix price contracts. “not well-defined requirements” – not sure about it. In the fix price contract (if f.e. we are talking about outsourcing companies) you actually have to show more details than in T&M. So your requirements are better defined than in T&M. Cause you put in the project plan, estimated work effort, payment plan. If you are not the first day in such business – you can actually earn more on FIX. (you have only the scope of work and it’s schedule and fix amount – no matter how many people are working).
    Your ideas?

  7. VM,
    Whether do you think that the fixed price project case is a negotiation between two sides only? This is usually a tender, a competition between several suppliers. If you provide an unrealistic estimation, then you will not win this bid. Yes, of course there is a kind of “uplift” which is included in the estimation, but this is mostly a risk uplift, contingency, based on assumptions and third-party dependencies. And usually the higher uncertainty, the higher this uplift is. A customer interest is to see this uplift as low as possible. This means that it has to reduce a level of uncertainty, and this means that it has to provide as detailed requirements as possible. Creation of detailed requirements up to creation of detailed use-cases is a separate big piece of work which has to be done by the customer before the project start, even before the project estimate.

    So, inefficiency of the fixed-price project for a customer is a necessity to create detailed requirements usually by its own high-cost workforce (sometimes not-well qualified for this). And these requirements may change rapidly as a business and a technical environment may change rapidly and this is another point of wasting time and money. Don’t you agree?

    Planning of business in our business means planning of workload. For both T&M and fixed price, this is not easy. This may be more or less achieved by an amount of bids you take part (fixed price) in or by amount of service contracts signed (T&M).

  8. Hi Pavel.
    To FP. Mostly i’ve faced two-side-negotiation contracts (and sometimes it happens that two managers of 2 companies after cup of coffee deside to create a FP contract – you understand what im talking about). To tenders: what do you mean when talking about FP? There are two types: FP based on milestones (where for billing you needa customer’s acceptance) and general T&M (just wid a fixed budget, for billing you needa actual work effort and rates).

    To inefficiency. I’ve faced mostly short-term FP (for 3 month in general). You describe the scope of work, milestones and payment schedule. So can’t agree that it’s difficult to create it. The efficiency depends on the term of the contract!!! I’m not sure (just can’t remember) i saw FP for a year or even more. Only T&M with fix budget.
    No troubles if you exceed the Fix amount (it just lead to creation of amendment to SOW, or generating additional PO).

    For small projects FP is really simple. The only trouble is to create the contract and organize billing according to US GAAP.

    One question i wonna ask you. How you generate FP contract, actually the price (how you define it?).
    I’ve faced such situation, when FP’s just a result of negotiations between customer and supplier. You give estimate for hours (you have rates). What % you add to this amount??

  9. Hi VM,
    When I say about a tender, I say about a case when there is one customer and several competing suppliers – generally. In case of FP this is a limited scope of work which has to be done in a limited time & budget frame.
    We work with different FP projects – from short-term (1 month) to long-term (lasting months and even years) with an involvement of a big number of people (up to several tens) and a serious budget. And this is usually not a case of a cup of coffee.
    When we generate an FC proposal the price usually depends on our expenses plus extra amount covering contingency risks (assumptions, third-party dependencies etc.). This extra amount(in %, right) may be different and depends on our estimation of risks. When a level of contingency is high then we propose to start with the T&M phase, where we can resolve as much contingency risks as possible and proceed with FP further. If contingency persists then T&M approach looks to be preferable for the whole project.

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