The 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 Ė Adarsh Arora is CEO and co-founder of Lisle Technology Partners, an early stage and middle-market technology consulting firm based in Lisle, Ill. The firm has worked with the portfolio companies of numerous Chicago and Silicon Valley venture capital firms.
In part three of a three-part Q&A, international expert Michael Muth sat down with Arora to discuss keys to outsourcing and questions surrounding TiE and the Idealflow Angel Fund.
Michael Muth: What business issues come up in outsourcing assessments?
AA: The key issues, which must come from the top, include whether or not a firm needs to do outsourcing. You canít shove this down peopleís throats. There is the very delicate dance of when it should be done, how it should be done and whether a company is really ready to do it. You just have to bring your people around. If your people arenít sold, itís going to fail.
We also qualify our customers before an engagement. If we think we canít perform within their budget or if we donít have the right expertise, we walk away. Given our model (where our leads are from VCs, which is a small community), failure is not an option for us.
MM commentary: Talk about some tough customersÖ
MM: How are these services provided (as a consultant, part of a project, on a retainer, etc.)?
AA: Time and material. There is no retainer involved.
MM commentary: So long as you can manage the number of hours, this is fine.
MM: How does a typical project roadmap look?
AA: It really is quite similar to a domestic outsourcing roadmap. The key difference is the visibility into whatís happening needs to be at a higher level.
MM: What pieces of work are good candidates for outsourcing?
AA: When working directly with offshore vendors, the work should be defined very well. It most likely wonít go through major revisions. If itís with a company like ours, the project could be in its early stage and we work with the customers here to help them define it more clearly.
MM: How much savings is typically possible?
AA: Depending on the type of the project, between 30 percent and 50 percent.
MM commentary: This is a net figure after productivity and time lost, an intermediaryís portion, etc.
MM: How do you incrementally phase the work to outside parties?
AA: Itís a good idea to start with a project that is reasonably well defined and make sure the proper processes are set up and communication mechanisms have been agreed upon. As the customer builds up more confidence, larger systems can then be outsourced.
MM: Whatís contained in the final report?
AA: Factors to use in selecting vendors, appropriate methodologies and communication guidelines.
MM: How is the final report incorporated into the information technology strategy?
AA: Itís up to the customer how they incorporate our report in their IT strategy.
MM: How do you compete with Tata, InfoSys and Wipro?
AA: Weíre different. They donít build products. They do millions in contract work for banks, insurance companies and the like. Our clients are looking for product-building expertise. Itís apples and oranges.
MM commentary: In other words, all outsourcers are far from being the same.
MM: How did your experience with Peritus provide you with practical insights into building effective teams separated by locations, time differences and cultures?
AA: Peritus was in the Y2K business and those were the fast and furious days. I had centers in Boston, Chicago and Bangalore and it was very important to build as cohesive a team as possible. What I learned was actually quite elementary: Itís very important to build personal connections with the key people and one required ingredient is ďface timeĒ. Thatís why I traveled quite a bit between the three locations.
MM commentary: Just to hammer this home, itís the quality of the relationships that determine success.
MM: Does the Idealflow Angel Fund invest outside the U.S.? Where? How much?
AA: Yes. We have investments in China. We typically invest between $300,000 and $1 million. No investment is less or more. Itís almost all tech based.
MM commentary: Given Aroraís experience, itís interesting their investment is in China rather than India.
MM: Into what kinds of companies does the fund invest?
AA: Always technology companies. In this case, itís a next generation of Exodus. We looked at the plan only in the context of China.
MM commentary: Itís also interesting to note that the investment was made on the basis of the expanding technology market within China and not based on its export potential from there.
MM: Under what terms? Are they different than in the U.S.?
AA: No differences.
MM: Are the returns any different?
MM: Does the Idealflow Angel Fund require an offshore outsourcing component for investment?
AA: We ask the question. Thatís a check-point issue. If it is software that we think can be built offshore, itís reasonable to ask why Iím putting my money into a company thatís not taking care of my money. Thatís one of the things thatís key to success.
MM commentary: Depending on the application, it appears as if an offshore strategy isnít required.
MM: How did Vista Technologies distribute through Marubeni HyTech in Japan and Leda in Europe?
AA: Itís fascinating to build a relationship with a Japanese company. European companies arenít too different. The patience and building the relationship is the important thing. Since you canít write down all possibilities, their approach is that itís better to have a basic contract and then work out issues as they develop.
The size and contents of the actual contracts were dramatically different from the contracts that we had with our OEM partners in the U.S. If I had shown that contract to our attorneys here, Iím sure they would have never advised us to go ahead with it. Still, it worked out very well for us.
MM commentary: One of the most important things Iíve learned living and working internationally is that you can be successful in ways that are not necessarily American. This is a prime example of adapting to the local business culture to get the deal done as opposed to strictly adhering to U.S. means and methods.
MM: Whatís the non-ethnic South Asian percent of members of TiE Midwest?
AA: TiE started in Silicon Valley. The basic idea is to provide mentorship. There are, I think, more than 40 TiE chapters all over the world. There are two types of memberships: a general membership for anyone interested in entrepreneurship and then a ďcharterĒ membership thatís by invitation only.
We invite charter members if they have been successful entrepreneurs or are officers in large corporations. Here in Chicago, we have VCs, the CTO of Motorola and the CEO of Tellabs as charter members. The percentage of non-ethnic South Asians continues to increase. Over time, itís my goal for TiE Chicago to be known as the best place to learn about all aspects of entrepreneurship.
MM commentary: If youíre not familiar with TiE, it originally stood for ďThe Indus EntrepreneursĒ. It has recently morphed to mean ďTalent, Ideas and EnterpriseĒ. TiE has 40 chapters in nine countries (most of which are in the U.S. and India).
MM: Has that organization been helpful in building relationships in India?
AA: Yes. It has also been helpful in the U.S., too. I believe that TiE opens doors to important contacts and networking throughout the IT world. On my recent trip to India, I wanted to meet the president of TiE Bangalore for a business issue. Iím positive that I was able to meet him with short notice because of my involvement in TiE.
MM commentary: Itís great to see networking work on an international level.
MM: How do Indian schools compare with those in America?
AA: I think the U.S. educational system is better at the college level. It educates you rather than just teaching you facts. At the grade and high school levels, my Indian friends have advantages in math and science.
If you defined education as being well rounded, this is the country for you. Youíre now competing with countries where the motivation to succeed is much higher. Iím sure we need to find ways to compete successfully. I recently read the speech that Bill Gates gave regarding our education system at the high school level. He came down pretty hard on it.
MM commentary: Education is one of the key resources that is so hard to manage because youíre dealing with young people and you canít see the results for years. Simply put, our educational system generally works for us, but you couldnít impose it on other parts of the world just as you canít impose other systems here. Regardless, we can still learn from one another.
MM: How much time do you spend in India and elsewhere?
AA: Initially, I had to spend a lot of time there (several months) setting up centers. I now just spend 2.5 weeks per quarter. Over the years, I have also traveled to Japan, England, the Netherlands and Germany for business reasons.
MM commentary: If youíre thinking of making your own connections, do you have this much time to invest?
MM: Have you seen or heard any effects of the tsunami?
AA: I heard that logistics (rather than food or water) were the biggest challenge faced by the Indian government. There is an item in the news that an ancient city was discovered when parts of a beach were washed away.
MM: What other languages do you speak? How do they help you?
AA: I speak Hindi fluently. In India (particularly in Bangalore), we communicate in English because I know the local language and they donít know Hindi. The language in the south isnít Hindi. Thatís in the northern part (in Delhi). Theyíre all very comfortable in English.
MM commentary: Even if you speak the local language, the differences in dialects are sometimes so distinct that itís impossible to communicate in that language.
MM: What do you think of the international business programs at IIT, Northwestern and others?
AA: Kellogg does put on some good events on the latest international trends. IIT really doesnít have any serious program in international business.
MM: What do your Indian colleagues think of Chicago as an international business destination?
AA: They see that there is a lot of outsourcing activity coming from here and itís a prime area in which to do business. They also recognize that itís a very diversified business environment.
Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at firstname.lastname@example.org.
Click here for Muthís full biography.
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