Vested Development,
Inc. (VDI) is a major international provider of
leading edge software development services, and
you have been operating since the company's founding
in 1997. What was your initial corporate strategy
and how have you positioned yourself in the American
market?
VDI's initial corporate strategy recognized that
the capabilities and capacity of the North American
software industry were being challenged by the combination
of Y2K and the accelerating move of mission critical
business functions to the Internet. VDI believed
at the time - - and continues to believe today -
- that outsourcing of software development and engineering
creates real economic and strategic value by 'compressing'
the three principal barriers to innovation - - time,
risk and price.
From the beginning VDI has been developing innovative
new products and product extensions for the North
American commercial software market. Importantly,
in almost all cases technology migration and reengineering
have been critical to VDI's successful delivery
of these new features and functions. VDI recognizes
that compressing the costs of innovation requires
the engineering to minimize the impact of new
functions on legacy business processes and systems.
A popular comparison to make is between Russian
and Indian IT, outsourcing, their development, advantages
and potential. However, one could also argue against
such a comparison. What is your stance on this issue?
How does VDI fit into this picture?
This question goes to the heart of the question:
What is the business problem that is being outsourced
- - software 'development', or software 'engineering'?
We believe the difference is definitive to the business
model of VDI, and perhaps to the Russian software
industry in general.
Software Development: Information technology,
and especially the software industry are clearly
on the leading edge of international collaborative
development. The language of software has become
an international language. As a result, software
development - - as defined by the writing and
testing of code - - can be sourced almost throughout
the world. Further, quality, already quite high
in India, is improving across the supplier markets.
However, to be successful, the traditional off-shore
development model requires customers know exactly
what they need, want and are asking for. In effect,
software development is the execution of plan
specified by the customer. Projects need detailed
design and functional specifications, work plans
that minimize uncertainty, and deliverables bounded
by visible customer expectations. Such clarity,
in turn, requires solid alignment with, and within
the target customer. If project specifications
(and expectations) are clear, stable and articulate
customers can save some time and cost. When true,
the business problem being outsourced is software
development.
Software Engineering: VDI provides software engineering
- - as defined by the design, development and
delivery of engineered software solutions. Russian
software engineers are by definition problem solvers.
By training, tradition and practical experience,
they understand how to solve problems, often given
acute limitations of time, money and other resources.
Further, they understand that new technologies
and new applications must be designed and built
to minimize their impact on existing, or legacy
business processes and systems. Leveraging the
unique advantages of the Russian engineering culture,
VDI offers a problem solving professional services
model explicitly focused on reducing the time,
risks and costs of deploying innovative, enabling
software.
In simple terms, if the 'architectural blue print'
is clear, complete and fixed, consider sourcing
software development services in India and elsewhere.
On the other hand, if there remain unresolved issues
and decisions - - both technical and business -
- seriously consider sourcing software engineering
talent in Russia.
VDI is a perfect example of mutually beneficial
international cooperation between Russia and America.
Could you elaborate on this success formula?
VDI believes that reducing the time, risk and cost
of innovation is the principal challenge facing
both the users and developers of information technology.
Currently, these costs - - especially time - - prevent,
or slow the adoption of powerful new technologies.
The evident truth is that in all businesses the
pace of change and innovation continues to accelerate.
It is equally clear, however, that the total costs
- - again defined by time, risk and price - - of
successfully employing new software remain far too
high. Given that information technology has become
an international language and currency, the solution
will be better collaboration and cooperation between
advantaged sources of talent and skills, and concentrations
of market demand.
By design VDI is a combined U.S.-Russian company
serving the North American, European and Russian
commercial software and large end-user markets.
The benefits of this collaboration flow in both
directions. On one hand, VDI's North American and
European customers gain access to the technical
and economic benefits of Russian advantaged software
engineering and problem solving expertise. On the
other, VDI's Russian customers gain access to software
engineers deeply experienced in the 'best practices'
of North America and Europe. In effect, the knowledge
and experience of each market is transferred to
the other.
VDI has been profitable since its second month of
operation. How have you been able and how do you
continue to maximize your sales efforts?
VDI's business is the delivery of engineered software
solutions. VDI's success has always been tied to
the success of its customers. This requires that
VDI clearly understand the business problem the
customer needs solved. From the beginning VDI sold
software development, but provided software engineering.
Successful software outsourcing requires VDI align
and deliver three things: 1) What the customer asks
for; 2) What the customer really wants, and; 3)
What the customer actually needs to accomplish its
objectives.
The relationship between VDI and its customers evolves
from a being a vendor to a strategic asset. VDI
first sells project outsourcing. Once the economic
and strategic benefits of software engineering outsourcing
is established, VDI transitions the customer relationship
to provide strategic outsourcing of part, or all
of specified engineering functions. Finally, VDI
sells and provides a 'virtual' software engineering
and development department or facility.
The VDI sales strategy is to build toward a partnership
model where the customer and VDI build on, and
leverage the shared experience and skills of working
together.
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Quality, efficiency
and cost-effectiveness is what your customers demand
from you. Which are VDI's competitive advantages
derived from VDI's on-site management expertise
in the United States and offshore development talent
in Russia?
Answer: In the software industry value is created
in the customers' business - - not the suppliers'
business. VDI provides services to commercial software
developers, their customers, and endusers. Each
of these environments requires real-time translation
and communication of customer specific information,
knowledge and perspectives. This communication flow
is bi-directional - - i.e. both to and from the
customer - - and involves both technical and business
information.
The flow of information to VDI is designed to ensure
that the engineering team develops an effective
understanding of the intersection between customers'
requests, wants and needs. The flow to the customer
is designed to ensure customer confidence that their
needs are being met, and to enable the customer
to use VDI's services effectively and efficiently.
From VDI's perspective, the situational awareness
that results from having an on-site, consultative
engagement management team is the key to our value
proposition of compressing risk, time and costs.
Our view is therefore, you have to be where the
value is created if you are going to create value.
The management of a company are the visionaries
leading the way forward. With this in mind, could
you introduce yourself to our readers, and what
is your corporate strategy and vision for VDI's
operations in America?
Answer: I joined VDI as the direct result of my
experience both as a provider and buyer of information
technologies, outsourcing, and technical and strategy
professional services. Prior to joining VDI I was
a principal in the Telic Group, a Boston based strategy
and business development consulting practice. Before
that I was a senior executive in a U.S. based Indian
software development firm, during which time I acquired
a deep understanding of the Indian software industry.
I was a founder of Gen3 Partners, Inc., an innovative
business development and strategy practice that
was formed out of Treacy & Company, a Boston
based strategy practice. Prior to Treacy & Company
I was a Senior Manager at Braxton Associates, the
strategy practice of Deloitte & Touch Consulting,
Director of Technology of Cowles Media in Minneapolis,
Minnesota. I was also an early member of Integrated
Systems Services Company (ISSC), the IT services
delivery and outsourcing firm that became IBM's
Global Services.
The perspectives gained by these experiences combine
to give me a strong point of view about the nature,
challenges and economics of strategic outsourcing.
More importantly these experiences have given me
a deep understanding of the strategic implications
of the information economy.
By now it is clear that the structure and dynamics
of business relationships are changing, and the
change is dramatic. Power is shifting to customers,
and away from the manufacturers and sellers of virtually
all goods and services. The information revolution
both causes and permits this fundamental shift in
power. The results and implications for buyers and
sellers are profound. Specifically, horizontal collaboration
is replacing vertical integration as the prevailing
business model, and speed and innovation is replacing
scale and efficiency as the key success factors
in almost every business.
Sellers must be able to respond to this structural
change in two ways. First, they must know and communicate
with their customers directly, personally and often.
More importantly, this communication must go both
ways - - that is as a customer learns more about
a seller, the seller must learn more about the customer.
Second, all sellers must innovate their products
and deliver their products to market much faster.
This means that manufacturers need to communicate
and collaborate with their suppliers and distribution
partners, also directly personally and often.
In both cases information technologies - - hardware,
software and communications - - are both the fuel
and the lubricant of these new dynamics. Software
is the technology bottleneck to innovation.
Today, as has always been true, far too many IT
projects and investments fail. Even as orders of
magnitude improvements to hardware and communications
technologies continue, technology projects either
fail outright, or fail to deliver functional, strategic
or financial promises. These failures are not technical.
They are failures of risk management.
Simply stated, VDI reduces the risks of timely,
effective use of information technology to drive
better relationships with customers, suppliers and
distributors of product and services. VDI provides
engineered software solutions that maximize the
utility of contemporary information technology,
minimize its impact on legacy infrastructures and
business processes, and compress time and costs
of completion and implementation.
Red Herring readers are well-educated, essentially
forward-thinking, and interested in business and
IT. What would be your advice to the readers who
are considering offshore software outsourcing to
Russia?
Answer: To successfully outsource one needs to fully
understand what is being outsourced, and why. Of
the two questions, why is often more important than
what to outsource. Seldom do cost savings alone
justify the decision, especially for businesses
that face important changes to their business. Reducing
the costs, but not changing current processes does
not address the challenges of accelerating change.
Simply being more efficient in an ineffective business
relationship or process creates no value. Outsourcing
is best justified when there is either a need, or
an opportunity to change both process and systems.
Designing and successfully deploying innovative
software is an engineering problem. Therefore, the
degree and impact of the change on the organization
should drive the decision as to where, and with
whom a customer should outsource. In VDI's view
- - and experience - - Russia is the advantaged
source of software engineering because of its unique
combination of culture and tradition, education,
and experience. Those attributes allow intelligent
customers to realize the economics benefits of India,
and the technological advantages of engineered solutions
of North America and Europe.
What would be your final message to the
readers of the Moscow report to be published in
Red Herring and World Investment News' website,
who will also be reading this interview, to be published
in its entirety on www.winne.com?
The decision to outsource is a strategic, not tactical
decision. In making the decision to outsource one
enters a partnership relationship where the success
is shared, but where the risks are transferred over
time to the outsourcing provider. From the beginning
of that relationship successful transfer of that
risk depends on clarity of purpose from the client,
matched with commitment of the appropriate and necessary
skills, experience and culture from the outsourcing
provider.
Therefore, the key message to potential outsourcers
is to: 1) Understand the strategic, technical
and financial objectives of the outsourcing; 2)
Carefully examine the nature of the work (i.e.
software development versus software engineering),
and the alternatives to outsourcing - - co-sourcing,
off-shore staff augmentation, in-sourcing, as
examples, and; 3) Choose the outsourcer whose
business and services delivery model most closely
matches the full range of needs.
The interesting paradox is that history clearly
shows that the most successful outsourcing partnerships
are those where the outsourcing client could just
as easily decided to ins-source their project, rather
than outsource it. The decision to outsource a project,
or engineering function when it could have remained
in-house is, by definition, a strategic decision,
and will, therefore, likely result in a solution
that is a strategic asset.
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