Nearshore Americas

Offshore Development Helps Minneapolis Software Firm “Weather the Recession”

SOURCE: StarTribune

Combining local leadership with offshore development has helped Minneapolis-based Coherent Solutions Inc. partner with clients and weather recession.

By TODD NELSON, Special to the Star Tribune

Software developer Coherent Solutions Inc., like many companies, believes a close working relationship with customers is critical to its success.

Few companies, however, go to the lengths that Coherent Solutions does to create a sense of teamwork and close integration with clients. In a twist on software development offshoring, most of its developers work in Minsk, the capital city of Belarus, in eastern Europe, some 4,800 miles and eight hours’ time ahead of the Twin Cities.

Minsk was a natural choice for Coherent Solutions’ founder and president Igor Epshteyn, a native of Belarus who moved to this country in 1992 with family to escape the turmoil that prevailed after the collapse of the former Soviet Union.

One key advantage, Epshteyn said, is that Coherent Solutions’ clients here can communicate in real time with developers in Minsk without having to get up in the middle of the night, which they would have to do to reach developers in offshoring giant India. The eight-hour time difference between Minneapolis and Minsk provides a three- or four-hour window each morning, until 11 a.m. central, when clients here can communicate directly with developers in Minsk by phone, e-mail or Skype.

“One of the strong differentiating factors we have is our ability to establish the right level of teamwork and team cooperation between our distributed teams in Minsk and in Minneapolis with our customers,” Epshteyn said. “The most successful projects are the ones where we can establish a true partnership with a customer by understanding what they’re trying to accomplish.”

Coherent Solutions, founded in 1995, builds custom business software for companies in health care and other industries and for small and medium-sized software product companies outsourcing some aspects of their product development. The company has 25 employees in its Minneapolis headquarters, in management, sales, finance, project management and solution architecture. In Minsk there are 135 software developers and testers and 15 in administration and support.

Revenue has grown modestly this year and last, totaling about $6 million in 2009. Epshteyn projects 2010 sales will be up about 5 percent.

While much smaller than outsourcing giant India and competing with offshoring locales such as China and Latin America, eastern Europe has emerged as a leading software development center in its own right, with Minsk as one of its major hubs. Minsk, with a population of 1.8 million, has a dozen major technical and science universities, and is home to hundreds of outsourcing companies, including some of the largest in Europe.

While the opportunity to collaborate in real time with developers in Minsk opens some prospective clients’ doors, Epshteyn said Coherent Solutions’ clients also benefit from what he believes is a cultural difference. Unlike those in some other offshoring sites, those in Minsk are much more likely to ask questions, challenge assumptions and question design decisions while working on a project — avoiding the “throw-it-over-the-wall” problem that occurs when outsourcing vendors quietly spend months developing a finished but ultimately unworkable product.

The company’s U.S. presence is another strength, enabling it to tackle more complex work because it has higher-level people here to support communication between clients and offshore developers, Coherent Solutions Chief Operating Officer Robert Duff said.

‘Important stuff’

“They’re using us for important stuff, not some side project that could get killed if things turn bad,” Duff said. “The majority of [clients] have embedded us into their core development teams. They use us as a lower unit-cost extension to their development teams. It’s rewarding for us to really be making a difference and makes for higher morale for the guys in Minsk, too. They can tell when people care about what they’re doing.”

Barrs Lewis, CEO of TimeManagement Corp., said the combination of local leadership and offshore development has made Coherent Solutions a productive partner for the past six years. The company works with TimeManagement on the labor forecasting and scheduling optimization software product that the client company sells to 7,000 restaurants and other customers nationally.

“One of the keys to the success … at least for us, has been that they combine very strong local project management and account management with the resources of the Minsk development team,” Lewis said. “It’s invaluable to have a local person who you have face-to-face contact with. He’s able to expedite things as needed and keep the service on a very personal level. And the engineering quality is great.”

Epshteyn, who earned an electrical engineering degree in Belarus and an MBA from the University of Minnesota’s Carlson School of Management, worked as a software developer for a large corporation on the East Coast and for a start-up on the West Coast before moving to Minneapolis.

A client interested in taking some of its development offshore prompted Epshteyn to return to Minsk in 2002, to acquire a small software company that has grown into today’s development center.

Coherent Solutions grew rapidly for several years until it felt the early rumblings of the recession in 2007. The company’s offshore software development center and a number of complex, long-term projects helped limit the effects of the slowdown.

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Epshteyn said the company is considering opening sales and development offices in other cities, linked to its team in Minsk.

The expert says: P.J. Voysey, a business management and turnaround expert who formerly headed a Twin Cities-based information technology company, said Coherent Solutions’ “focus on project management and teamwork is a very smart move for any service company but especially for an offshore software developer.”

With the increase in distributed workforces and offshoring, project management becomes more complex and achieving the teamwork and close integration takes a lot of planning.

“Becoming part of their clients’ core development teams will almost guarantee recurring revenue,” Voysey said. “The more they can leverage this to be considered a strategic partner, the more secure their client relationships will become. The focus on client experience is a huge step in the right direction.”

Opening offices in other U.S. cities might prove more challenging to manage than the company’s offshore operation, Voysey said. With project management and client interaction critically important to the quality of the client experience, Epshteyn needs to replicate the core aspects of the company’s business model that have brought it success here, Voysey said.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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