Monday, 21 April 2008

Offshoring - What's the Skinny 1 Year On?

A little over a year ago I left the tree lined and centrally-heated comfort of Surrey and ventured boldly forth to set up an offshore development center.  I toured the usual suspects (ah expenses, the last true bastion of the free lunch) and eventually settled on Romania via a journey documented by such worthy scribes as, ComputerWeekly and even myself.  While setup was all very exciting, one thing that doesn't seem to happen very often is a bit of a retrospective - once the dust has settled we should ask ourselves; what has it really been like?  Did it live up to expectations?  Did it work out as planned?  What unexpected challenges did we encounter?

Since such follow up stories never seem to emerge naturally I thought I'd take a few minutes to do a "1 year later debrief" in the time honored Clint Eastwood style.  I hope it's useful data for anyone considering setting up an offshore operation in Eastern Europe - I know I would've liked the benefit of a bit more experience before we got started!  So, Romania, what would Mr Eastwood say?

The Good

The first thing to say is the quality of the engineers over there is outstanding, they have truly exceeded our expectations.  As I've said before we have very complex business problems to solve and they can't be addressed with run-of-the-mill-3-tier-java-tomcat-and-a-DB thinking; we need innovation and a real desire to tackle the fundamentals of a problem - not just contort it to fit ruby on rails or [insert your favorite stack here].  The guys are passionate about technology and keen to get to grips with new patterns and techniques which can be a breath of fresh air when you're used to a more pessimistic, risk averse crowd.

Cost is of course the other major advantage of Eastern Europe.  I'd add that Romania isn't the cheapest place to set up, in practice things ended up costing around a third of our UK benchmark; but what it does have in spades is cost effectiveness when you weigh up what you're getting for that third.  If, like us, you've got reasonably unique requirements then you'll need to retain the domain knowledge as you build it up (avoid the low-cost high-churn models) and you'll want more engaged, creative engineers - you can do worse that here.

In general Romania has a friendly atmosphere, a unique (but hard to find) culture and almost everybody you need to deal with speaks excellent English.  I spend the majority of my time with the team there and really enjoy the buzz in the office - it's an environment conducive to solving tough problems with new technology.

The Bad

The main things I've found frustrating about Romania have largely been administrative.  From the very outset there is little central support for new businesses or companies looking to open offices.  A little light reading would suggest I'm wrong here (there are a lot of schemes publicised, particularly since EU ascension in January 07) but the reality on the ground is a little different - and what is available is inconsistent and [mostly] retrospective.  Another aspect of administration is paperwork and I can tell you, Romania scares a lot of trees!  Many everyday processes (payroll, taxes, registration and even utility bills) are manual and require the ferrying of individual pieces of paper between different buildings all over town to be stamped and signed by different human beings.  Then you get to ferry said paperwork back so the first set of human beings can stamp it again to verify the next set had stamped it after them.  Keeps the admin staff fit at least.

Another small gripe I have is the difficulty in finding reliable suppliers.  This goes for everything from computers to office furniture to shipping.  I haven't come across any of the base dishonesty a lot of those global risk management reports would have you believe is de rigueur, simply a lot of companies so desperate for your business that they make promises they can't keep.  Yes, we guarantee all your desks will be here by Tuesday.  Yes, we can assure you we have those servers in stock.  No, you clearly couldn't and I would much rather have known about it up front.

Finally an issue you wouldn't expect in such an administration-happy country; getting a consistent answer.  This is a such a big issue it even constituted a formal finding in the preparedness for EU membership report, recorded as unifying the interpretation and application of the law and progress here is slow.  For example, when trying to ascertain your obligations with respect to taxes, reporting and employment law there are as many different answers as people you are prepared to ask - and very little in the way of public records and other reference material available online.

The Ugly

There are a number of cultural differences between the UK and Romania and if you're not careful they can bite you.  An example of something we learned the hard way is the approach to public holidays (referred to as free days in Romania).  In the UK we pretty much view said holidays as bonus time off regardless of any historical significance so when a project is running behind and we need to pull some extra hours that's usually OK (as long as we get the time off later!).  Not so in Romania - generalising to the same degree we just did about London; people here tend to be quite religious and do have an attachment to taking the break on the formal occasion rather than some later, arbitrary time that better suits the company schedule.

Another thing that can be tough to get to grips with is the idea that everything is a continuous negotiation.  Initially it's a refreshing challenge - there's quite a lightweight legal framework for the more common operations (like leasing and real estate transactions) and most organizations have very few standard terms (compared to the volumes of contractual nitpicking you're used to wading through) so it means you've got a lot of scope to come to a highly tailored agreement.  Agreement being the key word here; quite often suppliers turn up every couple of months to negotiate new terms to a 2 year deal.  On the upside they do tend to have a sense of fairness (it is not always about gouging you some more) but sometimes you'd rather just have something sorted for 24 months, be able to depend on it and just get on with other things.

Perhaps it's an artifact born of sudden freedom after so many years of zero tolerance and no flexibility but, come on, a deal is a deal.

The Summary [caution: not strictly a Clint metric]

I still stand behind the decision to start our offshore development center in Romania and we'll be here for the long run.  Overall the benefits stacked up much as we predicted and we're getting great results and favorable economics.  It's cold in winter, hot in summer and they put on some excellent women and wine.  It isn't without it's challenges but the tradeoffs are good.  That said, if everything in Romania worked as smoothly as it does in London then it would be London and, well, we could have stayed at home.

I was going to include in this post a rundown of the trends I'm seeing on the ground here and my predictions for the future but it's gone on way too long already (well done if you made it this far).  So for the sake of your eyes and my fingertips I'll post something separate in a couple of days.

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