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From China to the US: World-Class Software Outsour

From China to the US: World-Class Software Outsourcing Services

--Interview with Objectiva China GM Tan Yiping

Overview: Objectiva Software Solutions is a unique company among all the software outsourcing companies I have interviewed. It was established in the US and is run like a US-based company in every aspect, notwithstanding that all development teams are in China.

    Objectiva’s four co-founders have an extensive background in the software industry. They formulated the idea in 2001 and embarked on the adventure of software outsourcing to China when they realized that the industry had been extremely successful in India.  After the usual tribulations of a start up, Objectiva has grown from strength to strength in the last decade.

    Unlike most other services companies, Objectiva was acquired and returned to independence a couple of times before ultimately choosing to develop along the original path of organic growth.  This not only shows the company’s cohesiveness and enthusiasm for software outsourcing, but also demonstrates a mature business environment in the US. In commercial business activities, companies can choose freely to either merge or develop independently according to their internal motivation and to market conditions and opportunities. A mature market environment and sound business concept undoubtedly provide enterprises and individuals with more vitality and operational freedom.

    Due to its origins and strong internal culture, Objectiva is distinct from most software outsourcing companies in China. Staying true to its unique style, Objectiva hopes to achieve significant success in large-scale development of the software outsourcing industry in China.

Editor: Objectiva has achieved admirable success in the software outsourcing field in China. Could you please review the history of the company from founding to the present time?

Tan Yiping:  Objectiva was established by four partners in the US -- two overseas Chinese and two American entrepreneurs. Back in 2000, the four of us were working at the same global software outsourcing company, ONEWORLD Software Solutions, which was headquartered in Boston and had development centers in the Middle East. The four of us were involved in expanding the reach of ONEWORLD to California and building a development center in China using local knowledge.    Unfortunately shortly after this new exciting expansion materialized, the dot.com bubble burst in the IT industry and ONEWORLD saw more than half of its revenue disappear virtually overnight, leading to the decision to close down the West Coast operations and China development center in early 2001. Faced with that decision, the four founders decided instead to establish Objectiva Software Solutions from the ashes of ONEWORLD, focusing initially on the West Coast of the US for sales.  Our decision to establish Objectiva in 2001 in spite of the difficult market conditions was driven by our conviction that the outsourcing trend was here to stay, especially after observing the phenomenal success Indian software outsourcing companies achieved in the US.

    Our proof of the trend came fairly quickly in the form of a great opportunity to partner with a public software company based in Southern California called Document Sciences (NASDAQ: DOCX, Delisted after Acquisition). Document Sciences is a provider of customer communications software to hundreds of companies, including Fortune 100 and 500 companies, especially in the financial services sector. Document Sciences was anxious to upgrade its software technology because it was facing fierce competition. Objectiva had the technical skills and the managerial capability to help Document Sciences modernize quickly. Subsequently we forged a strategic partnership, which helped to accelerate the growth of Objectiva.

    Following this extensive cooperation over several years, Objectiva was acquired by Document Sciences in July of 2004.  In a relatively short period of time, Document Sciences was itself then acquired by EMC Corporation, a multi-billion international enterprise. As a part of Document Sciences, Objectiva became a division under EMC. However, EMC did not view software outsourcing as part of their business, and so, shortly after integrating Document Sciences into EMC’s operations, they decided to spin off Objectiva in 2009. Coincidentally, the market conditions were pretty bad, just as they were back in 2000/2001. We again saw the opportunity and decided to buy Objectiva back and develop independently - though we still maintain a strong business relationship with EMC. Again, our conviction that software outsourcing is here to stay led us to want to take Objectiva to the next level.

    In around a decade of our history, Objectiva has focused on software development outsourcing in the US market primarily and the European market secondarily. Thus far, Objectiva has grown from a small company with 20 employees 2001 to a mature software outsourcing firm with more than 400 employees in 2010.  

Editor: Could you please talk about the current state of Objectiva’s development and your outsourcing business in China, as well as Objectiva’s development goals and future plans in the Chinese market?

Tan Yiping: Objectiva's business primarily provides software R & D services to companies in the USA, mostly independent software vendors (ISVs) and financial services companies (insurers, banks, etc.). In the course of project implementation, we are able to provide services on a global scale and send technical service teams onsite for clients. Software R & D work is mainly done in China. A number of Objectiva’s clients are long-term partners, which is the nature of the projects in which we have engaged. Both the software products and R & D projects we offer to our customers involve a long life cycle - some continue for more than a decade. These software projects require constant maintenance, updates and upgrades, which necessitate that we maintain long-term stable cooperative relations with our customers.

    In China, Objectiva’s key endeavor is to continuously recruit and train high-level technical and management staff in order to expand the R & D team. The US and European software markets are large and highly mature, but are now facing the dilemma of a shortage of skilled labor. Although China's software market is not yet mature, it does have a large pool of software and technical resources. China's technical staff can provide software development services for European and US markets and also cultivate and improve their own abilities. Building a perfect combination of the mature US market and China's excellent technical talent is the thrust of our work.

    In the past ten years, the technical capabilities and market experience Objectiva has accumulated are based on the US software and services market demands - this includes the methodology and philosophy of our employees. This is where the core competitiveness of our enterprise lies. In the domestic Chinese market, we have not yet formed a complete service capability, but we are optimistic about the long-term development of the Chinese market. It is definitely an opportunity which will be looked at in the future.

Editor: While providing outsourcing services, how did Objectiva form its own technological capabilities and solutions in the financial, telecommunications, transportation and other fields?

Tan Yiping: From the outset, Objectiva positioned itself as a technology-oriented enterprise, providing high-end software development services. We have been focusing on software technology and product development methodology, accumulating experience and knowledge. Gradually we formed our own technology and service capabilities based on our experience.  Objectiva's technical capability and strength is concentrated in the field of advanced software development technologies and processes; we then combine our technical expertise with our clients’ domain knowledge to form a strong team.

    In the West, it is critical to protect intellectual property stringently, and so software outsourcing companies like us must adhere to international standards to protect the clients’ IP; otherwise they cannot survive in this market. As a software service company, we do not develop our own independent software products and so we never compete with our clients, which is a common practice within the software service industry in the West.

Editor: Would you mind elaborating a little more on the operational model of “Hybrid Captive Center” created by Objectiva, as well as the “Onsite Collaboration” model?

Tan Yiping: The idea of establishing Hybrid Captive Centers come from some clients’ desire to establish their own R&D centers in China. But since they lack the local expertise on the ground, they outsource the operational aspects to us. Objectiva provides the premises, qualified technical resources, IT infrastructure, and operations management, while the client provides business and project management.

    The foundation of this operation model is that Objectiva and its customers have a solid and long-term cooperative partnership. The real value of outsourcing software development is to work on long-term software products, where the benefits of outsourcing are realized. The long-term nature of software products favors a long-term partnership between the client and the service provider. Throughout the cooperation we forge a deeper understanding of our client's business model and R&D needs. Importantly, the confidence of our customers in Objectiva’s technical capabilities and service quality grows, which in many occasions results in establishing offshore development centers for our clients. Other clients continue to favor the project-based approach. 

    With regards to the onsite collaboration model, we believe that the best value we can offer our clients often involve having a mix of onsite resources, meaning Objectiva engineers working in our clients’ offices, and offshore resources. Onsite resources play a crucial role particularly with new clients or new projects in the initial stage. There are both communication issues and time differences between China and the US, which can be bridged by having onsite resources that shoulder the burden of communicating with the offshore team so that our clients’ resources don’t have to. We also find that it is essential to have our team work onsite with the customers so as to achieve better understanding of the customer’s requirements and to solve problems in a timely manner. Of course as time goes by, the project steadily moves into a more stable phase, and onsite service employees can be gradually withdrawn.

Editor: Does Objectiva have any measures or thoughts on helping customers cut expenditure? Will Objectiva cooperate with other Chinese software outsourcing companies?

Tan Yiping: R&D is a long-term investment for enterprises. Objectiva provides customers with extended software development outsourcing services. Considering our long-term service strategy, short-term changes in the economy have a relatively contained effect on our business. Objectiva brings software R&D from the West to China, which already offers substantial cost savings for our customers. To ensure delivery quality, we never sub contract any projects to other service providers which in any case can not significantly increase our profit margin.

    While providing outsourcing service, if Objectiva lacks a specific technical capability, then we will look for software companies with the specialized technology. As yet we have not had much cooperation with other domestic enterprises.

Editor: What is the organizational structure of Objectiva’s technical team and how do you evaluate your experience in establishing and managing a global team?

Tan Yiping: Objectiva’s headquarters are in the US together with the marketing, sales and service departments. We set up our delivery team in China, and currently 90% of the Chinese staff are technical. It is extremely demanding to be a software or quality engineer at Objectiva; we need them to have not only the right technical skills, but also adequate analytical competence, understanding of requirements and the ability to use English as a working language among others.

    The expansion of the US outsourcing market is due to a lack of local technical staff with knowledge of new technologies. To meet the demand in the US, we need Chinese software engineers who meet international standards. Our employees are all professional engineers, equal to their European and US colleagues in both technical ability and process maturity; they also are sufficiently fluent in English.

    To further evolve our software development business, Objectiva needs to pursue excellence by continually improving our technical capabilities and process maturity to provide high-quality products services. We also need to strengthen our marketing communications and enhance our familiarity with international commercial regulations and norms. Our company has a specialized department responsible for tracking new trends in software development technologies and management methodology. They are tasked with introducing new technology and innovations to the company to guarantee that Objectiva will always hold a leading position in this field.

Editor: As a manager of a US outsourcing company, what is your judgment regarding the future development of China’s outsourcing industry and how China outsourcing can make a greater breakthrough?

Tan Yiping: I think China has a great advantage in human resources and education infrastructure compared to most other countries.  However, the software product industry in China is far from mature. Thus, software outsourcing may be a necessary step in pursuing a more mature software industry.

    At present, China has more than enough supply of high-level software engineers. Furthermore, China has invested in cultivating skilled people on a huge scale, which far exceeds India – millions of students graduate from university every year. It seems to me that Chinese graduates have two important qualities: they are eager to learn new technologies, and they demonstrate an excellent ability to work independently and solve problems, possibly due to years and years of in-depth trainings in sciences and mathematics.

   India’s software outsourcing industry developed very quickly over the past two decades. The rapid expansion, coupled with the lack of sufficient skilled resources, resulted in a bottleneck that was solved by diluting the quality of technical talents. My estimate is that the software outsourcing industry in India is reaching its limits, whereas China’s software outsourcing industry is still in its early phases and can achieve faster development to catch up with India very soon.

    Looking at our history at Objectiva , we have not had a rapid expansion rate because we chose not to; however, it has been a robust growth. We feel we are much more equipped now to grow more rapidly while maintaining our high standards. It is because of our experience that I think that software outsourcing is a promising business model in China. Objectiva’s business matches both the development desires of our staff and fits the customers’ demands. As a manager, I am fully confident about the future of our company and our industry. I hope that Objectiva and our Chinese counterparts can put aside their imprudent attitudes towards super fast growth and work, instead, on improving the standards to be able to delivery high-quality software development outsourcing.