When Deutsche Bank was looking for an offshore partner to grow a cutting-edge customer relationship management...
(CRM) system, its first inclination was to go to India, where the global banking company already had major outsourcing operations.
"Our sense was that India was the right option, because that was the word you heard in this space over and over," said Daniel Marovitz, managing director and COO of technology at Deutsche's Global Bank. "But every time we went over there and we tried to get things going and do a little pilot, we found it difficult to get traction."
The problem was complex. A major reorganization at Deutsche had combined two operations, Global Corporate Finance and Global Banking. The aim was to get two large salesforces on the same page and give senior management a window into their client relationships -- who was seeing whom, when and what happened. This was no mean task. Some of the bank's relationships with big multinational companies, like a General Electric or a Siemens, could span 15 countries and involve numerous products, Marovitz said. And because the two newly joined banking operations were regulated differently, it was also important that the CRM system be built with the appropriate Chinese walls to ensure that confidentiality was not breached.
Deutsche did not commit the first cardinal sin of outsourcing: Trying to outsource its "mess for less." The bank had actually started the project in-house and built a system it could rely on. And only then was it ready to outsource. The plan was to start small -- outsourcing 15 people to a project.
Deutsche spent time knocking around India at all the big companies, including Wipro Technologies and Infosys Technologies Ltd. "It was hard to get them to focus on something that would be pretty cutting edge and where you didn't have a good roadmap," Marovitz said. Because the project would also be small to start with, the overhead costs -- travel, communications, and what Marovitz called the "typical nine-month Indian ramp up,"-- threatened to gobble up the cost savings the company was seeking by exporting the work.
Deutsche ended up going to Luxoft, a Russian software company. Founded in 2000 by Dmitry Loschinin, a software engineer with work experience at various multinational companies, including IBM, the young company has grown quickly to more than 1,000 employees. Clients include Boeing Co., Dell Inc., IBM and Caterpillar Inc. One way Luxoft has managed to attract top talent and keep labor costs low is by building close relationships with the country's top universities. The company sponsors training programs for talented computer science undergraduates, plugging them into real-life projects.
In contrast to India, which Marovitz describes as ideally structured to maintain legacy system software and less likely to make a move without explicit consent from the onshore employer, Russia tends to foster a more iconoclastic -- or maybe prickly -- IT professional.
Marovitz singled out one engineer, in his 20s. "He's absolutely brilliant. He'll call us up and just say, 'You're complete idiots.' He's thought about it and come up with a much more intelligent way to do it, and nine times out of 10, he's right," Marovitz said. In turn, the engineer enjoys access to Deutsche operations, attending the bank's annual meetings on offshore projects, where he casts a vote "that counts as much as anybody who works here."
In a small-scale innovative project, having people who "can think on their feet" has been useful, Marovitz said. "In India, if you send over a piece of work and they hit a bottleneck and don't know whether to go left or right, they send you an e-mail. If you don't respond to the e-mail, three weeks can go by. They won't chase you, they won't scream at you, the work will just stop. And when you inquire, you'll be reminded that you were sent an e-mail on the 23rd of March at precisely 9:26 a.m. and, because you didn't respond, they stopped," he said.
Not that the Russian tendency to keep moving does not hold any dangers. "At Luxoft, when you get around to calling, they might say, 'Well, look, I sent you an e-mail and you didn't respond, but in the interim we developed a new mechanism for using microwave ovens to track cosmic background radiation and help determine within a picosecond when the Big Bang occurred.' And you say, well OK, that's brilliant. I wasn't very interested in background radiation, but maybe there is some applicability here."
Deutsche now employs about 160 Luxoft developers and engineers, working on a variety of projects, including the Deutsche's "Client First" CRM system that aggregates data from many external sources into one centralized system. The company estimates it has saved 30% to 40% of what it would cost to do the project onshore.
Another critical ingredient to the project's success is the back and forth between London and Moscow offices. The three-and-half hour flight from London means that Deutsche managers are in Russia every 60 to 90 days, for three or four days at a time, and members of the Luxoft team often visit the bank, where they are treated as Deutsche employees, Marovitz said. "When I sit down with people, I don't talk technology. I try to give them business context for what they're doing," he said.