mission of Going Global is to educate and inform Midwest technology
companies on what local technology companies are doing internationally
so other firms can learn from the successes of like-minded peers.
CHICAGO – ePrairie international columnist Michael Muth debuts Going Global,
a new ePrairie Q&A column bringing global perspective to the
Midwest and the Midwest to the global scene, by interviewing FastRoot
CEO Terry Howerton.
FastRoot is a technology
provider with headquarters and a hosting center in Chicago and a
software lab in Kiev, Ukraine. FastRoot built its global team over the
past four years and uses a blended approach to support entrepreneurs,
bring new ventures to market and deliver dedicated support solutions
for a variety of mid-market clients.
Michael Muth: How did you get into offshore outsourcing?
FastRoot was born out of the experience I had during the end of the
technology boom with working to get a product to market before the
limited capital ran out. To have any chance of winning that race, we
had to cut our staff (most Java developers could command $100,000
salaries at the time) and outsource. After a brief stint with some of
the high-priced hired guns of the consulting world, I turned overseas.
At the time, it was all about
finding cheap labor that would stop the hemorrhaging. I worked with
probably 20 different vendors in at least a dozen different countries
including South Africa, Israel, India, Canada and really anywhere I
could find a low-cost alternative to send very small parts of my
projects with hopes for success.
Nearly all those projects could
be judged a failure, and while the budgets were mostly small (about
$2,500), the process took far longer than expected and had a definite
opportunity cost. These projects were failing for lots of reasons:
trust and communication problems, lack of discipline and documentation,
the cohesion of the “team,” failure to understand the underlying
business goals of the project and mostly just my impatience.
I wanted – and the product
needed – immediate results. It didn’t take long for me to realize we
had to find a small partner overseas and grow up together if we were to
be successful in this effort. That would give us a chance to instill
our own business culture and build really trusted relationships.
In the end, the most valuable
byproduct of my efforts wasn’t the product we were developing but the
process that resulted. After a couple years of building relationships,
putting processes into place and finally having some success, it was
clear to me that process had real value.
Though we set out to find cheap labor, what we discovered was something far more valuable.
We built an affordable, scalable
team with an advantage even our largest competitors couldn’t claim: we
now had the ability to carry a large team “on the bench” and spend that
downtime to perfect internal process. We were able to leverage that
into building FastRoot into a top-notch firm that could compete with
the best providers in town.
MM: How much time do you spend abroad? How active are you in managing the organization there?
originally thought I’d have to go over there monthly, but with constant
communication, we have built strong friendships and working
relationships that have resulted in a pretty tight team. We run two
shifts overseas and there’s a good deal of overlap in our schedules.
MM commentary: I saw
this in action for myself, as during our interview, Howerton had to
take a moment to confer the Kiev lab’s lead manager via instant
messenger. The manager usually works a schedule that mirrors Howerton
and they were having an end-of-the-day chat about the need to add some
depth to the Kiev team’s PeopleSoft expertise for an upcoming project.
I was there last year during the 10-year anniversary of the break up of
the Soviet Union, which was really surreal for me. Before September 11,
2001, the fall of the U.S.S.R. was the big historical event of my
lifetime and had always fascinated me. Now I was there working with
MM: How much have you invested in your Ukrainian operations? How much risk do you feel attached to that investment?
TH: From the
ground up and in our fourth year, we’ve invested between 25 percent and
30 percent in building our team there. We’ve only lost two out of 18
team members there over the past four years.
In many ways, Ukraine is still
the wild wild west. Parts of the government are still very corrupt and
the legal and banking structure can be interesting. Even so, we’re
mostly unaffected by all of that as our team is made up of the first
real generation of free-market entrepreneurs there.
Our safety net is that we’ve
built a “blended” team between Kiev and Chicago instead of too much
reliance on any one location. That safety net has also proven to be one
of our competitive advantages.
MM commentary: The
U.S. Department of Commerce says: “The legal basis for corporate
governance is weak and minority shareholders have almost no legal
ability to protect their interests. Allegations of unfair rulings or
poor enforcement of decisions in commercial cases are common. Dispute
settlement in Ukraine can prove difficult, expensive, time consuming
and ultimately unfair to investors. Foreign investors express little
confidence in the Ukrainian court system.”
I agree with Howerton that
it’s the strength of the relationship that should carry the day. Still,
it’s easy to minimize the risk if you don’t see and touch it daily. I’m
not saying don’t work there because it’s too risky. I’m simply saying
be aware of all the risks, know how to deal with them and have a good
lawyer there if you need one.
MM: What’s different about working with Ukrainian developers?
TH: Nothing at all.
MM: What are their qualifications?
TH: My team
stuns me with their creativity each day. The truth is that an average
developer overseas is the same as an average developer in Chicago.
Likewise, an awesome developer is the same regardless of his or her
location. We try to recruit only the awesome teammates.
In the beginning, we found
ourselves documenting everything like crazy, which takes a lot of time.
After years of building a working relationship, we’ve finally broken
through that barrier. Our guys just “get it” now. It has made
accomplishing tasks together much easier.
Most of the team in Kiev has
college degrees (we’ve even had people with doctorates in artificial
intelligence working on projects) and all of them speak and write
MM commentary: Though
Howerton may see nothing different about working with his team in the
Ukraine and technologists may work more similarly worldwide than
workers in other industries, there are differences you should know
I spent seven months in
Poland (just west of the Ukraine) and they definitely work differently
than we do. The Ukrainians he works with might not start the work day
with shots of vodka as some of the Poles I worked with did but working
in a newly free-market country is not the same as working in Chicago.
MM: Are there specific technologies where Ukrainians are or are not qualified?
TH: Not realty. In the beginning, there were things we just couldn’t do remotely, but those barriers are mostly all gone now.
MM: How much do you pay them?
TH: They earn
a nice living in the Ukraine that’s well above average for the country.
A number of the teammates are sending money home to help support their
MM: How long have you been working there? How has the Ukraine changed since you started working there?
TH: In the last four years, a lot has changed. Wages are up and the standard of living has really gone up.
The city has changed (especially
consumer goods). On my last trip over, I discovered that Coke was now
the strongest brand and there’s a McDonald’s on nearly every corner.
The U.S. is doing well selling into the Ukraine. We pay their wages and
they buy our products, which spurs our growth.
MM: What’s beyond Kiev?
TH: We’re focused on building a good team there from the ground up. It’s the only way you can succeed overseas.
MM: How is Kiev’s technology infrastructure?
TH: It was
poor at first but has improved significantly. We now have a broadband
wide-area network. The prices for broadband and some infrastructure are
actually higher there than here because of the lack of competition.
Tune in next Tuesday for part two of Muth’s Q&A with
FastRoot CEO Terry Howerton for a glimpse into bribes in Kiev,
foreign due diligence and the virtues of being based in Chicago.
Michael Muth is managing
director of Gata, an international business development consultancy
that helps technology companies build international partnerships. He
can be reached at email@example.com.
Click here for Muth’s full biography.
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