Matt KendallGlobal IT services provider Endava has snapped up Nearshore software development firm Velocity Partners as part of a strategy to attack the American market.
The acquisition gives Endava access to Velocity’s team of 550 people at Nearshore delivery centers in Medellin, Colombia; Caracas, Venezuela; Montevideo, Uruguay; and Rosario, Parana, and Buenos Aires in Argentina.
“Our delivery model is all about close time zone delivery,” said John Cotterell, CEO at Endava, in an interview with Nearshore Americas. “We operate very much in the agile space, which means daily scrums between the team and our clients, so if the time zone isn’t sufficiently overlapping that becomes difficult.”
The bulk of the company’s presence is in Romania, Moldova, Bulgaria, Serbia, and Macedonia, with the purchase ramping its headcount up to 4,600 globally. Cotterell explained that while delivering to east coast US clients was possible from Europe, it was more difficult to service the west coast.
“We were looking for an opportunity to extend our reach in the US and Latin America, so, after setting up an initial delivery center in Bogota, we started considering the acquisition route,” said Cotterell, explaining that an integral cultural fit and previous collaboration between the two companies made Velocity an ideal choice.
Engaging with the Nearshore Mentality
Prior to the acquisition, 95% of Velocity Partners’ business was in software development and testing. “Endava brings continuous delivery, a front-end UI/UX group, architecture people, and some DevOps that we don’t have, so they will give us a chance to provide these services in the US,” said Peter Stroeve, Managing Partner at Velocity Partners.
When asked about why Velocity Partners went ahead with the merger, Stroeve said it just felt like the right fit.
“Part of it is employee culture: they care about their employees and customers, which is something I liked about them,” he said. “Secondly, they have a broad range of services and customers where we don’t, and vice versa. They’ve been trying to grow in the Americas for a while, so we certainly filled a void for them — the blending of the two was ideal.”
According to Cotterell, the big step forward for Endava is the centers in Uruguay and Argentina, which present the company with a unique but surmountable challenge.
“Previous acquisitions have prepared us for absorbing new countries, aligning cultures across the business, and understanding the different ways of operating, but it’s still vital to do this properly,” he said. “The experience that Velocity has with operating in those countries is something that will enable us to accelerate much faster than if we tried to do it organically by ourselves.”
Culturally, Cotterell says there is more similarity with Romania and many parts of Latin America than there is between Romania and Serbia, so doesn’t anticipate a huge challenge in merging the teams.
Client Impacts
With Endava taking on a number of new US clients, the company made sure that the largest customers were involved in the negotiation process. Some of Velocity’s clients are multinational corporate entities that have been hesitant to work with them on larger projects, but now see those projects as viable following the Endava takeover.
“We used to work with Microsoft a few years back, but we weren’t quite large enough to make a huge impression,” said Stroeve. “Now we are part of a bigger company, companies like Microsoft and Amazon are starting to take notice, which is very exciting.”
For both companies, the customers that operate in both Europe and the US have been positive about the news, as it gives them a chance to shrink down their vendor lists and use more services in both locations. However, US clients still have a few concerns, according to Stroeve.
“For those that are only in the US, their main concerns are if their teams, processes, or pricing models will change, but Endava is looking to grow in the US, so wouldn’t risk pushing these customers away. The process of merging is planned to take around a year, so they won’t see much change for some time.”
Velocity has already been tagged as part of the Endava Group and will be fully branded under the Endava name within six months, according to Cotterell.
Team Building and Employee Impacts
Cotterell expects the teams on each continent to eventually work hand in hand, with distributed teams aligning across locations on larger projects.
“With projects that require 50 to 100 people, the scrum teams won’t necessarily all be in one location and we can do that across continents, depending on where the client is located and how multinational they are – for clients with presence on both sides of the pond, distribution becomes much more natural,” he said. “If it’s a smaller project and we only need 10 people, then we see no need to pull other locations into the mix.”
With a specific focus on Colombia, Stroeve sees an immediate opportunity to utilize Endava’s resources in its Bogota office, and vice versa for Endava with Velocity’s presence in Medellin, but he still sees challenges in the country’s talent shortage, particularly with time it can take to build a team.
“It used to take around took four weeks to build a team but can now take six in some cases,” he said. “To get around this, we tell our clients that the more upfront notice they can give us, the better things will be and the bigger window of opportunity we have to work with.”
Velocity Partners has 12 full-time recruiters that are recruiting for all Latin American locations, but still faces the challenges of hiring more senior developers and people with high levels of English for improved agile and scrum client interfacing.
The company’s reputation has helped alleviate this challenge, something that Endava hopes to leverage in the region, along with its own strategy of becoming an employer of choice in Latin America over time.
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