Outsourcing: Sanjay Dhawan, CEO of Symphony Services (Part 3)

Sramana Mitra: Do you sometimes do product development work for smaller companies for equity?

Sanjay Dhawan: We did … not for equity per se, but it would be more from a risk and reward standpoint. We structure the engagement model where a portion of the payments are tied to either achieving certain outcomes or a portion of the payment is revenue share, that type of stuff.

SM: Switching to your 4,000-people operation, is that all in India? Is the development team largely or entirely in India?

SD: Yes. The development team is largely in India, although we do have about 300, 400 people in the U.S. as well, about 10% in the U.S. But, yes, the majority, about 80% to 85% of our R&D team is in India.

SM: How is the dynamic? I’m seeing a lot of new regions coming up right now, like there’s a company that I’m sure you’re familiar with called Globant,  in Argentina, that’s doing well in your space. They’re doing specialized expertise in mobile and social development. They follow your business model to a large extent.

SD: I’m very familiar with Globant. Globant is majority owned by my former boss, Michael Marks, who runs the fund which has an investment in Globant. I don’t know if you looked at my background, but I was president and CEO of Aricent, which was a company about two or three times our size at Symphony, also in the communication, R&D services space, and Michael Marks was involved with that company. So, yes, I’m very familiar with that company.

SM: The question that I was getting to is given that trend – that is definitely a trend right now. On this Outsourcing series that you’re going to be on, we have companies that are being built [with a] similar model in China, in Eastern Europe, Russia, Latin America, all over the place. How do you see that trend developing? How are you viewing that trend?

SD: We also have small operations in China right now. We’re also looking at what’s in our global strategy, including how Eastern Europe and some of the Eastern European locations and/or certain South American locations will play a role. One thing is for sure, India offers the most mature software industry practices and availability of talent. India still remains undisputed number one. Having said that, with the demand and supply imbalance and what else is happening around the whole labor cost fees and so on and so forth, all the companies like us are also evaluating our global delivery strategies. And then we’re also looking at that from Symphony Services’ standpoint. There are a few things in the works that I can’t really talk about, yet. [But] you’ll see some further expansion plans from us.

SM: On the topic of India, how the workforce is shaping up , and the dynamics of rising cost structures and attrition, what is your perspective?

SD: A couple of things. As I said, clearly, there is a demand and supply imbalance right now that exists, which is causing attrition rates to go up. Although we are running at lower than the industry numbers that you hear about – and that’s because, again, we’re very specialized. Many employees who want to have careers in product development would want to stick with companies like us. Having said that, yes, there is an attrition that runs up in high teens for us as well. Labor cost fees as well, the trend is going upward. But to deliver to our customers value and productivity improvements, we look at how do we move up the food chain, and how do we come up with increasing productivity on a per employee basis or ultimately, what the customer sees?

For example, there is a testing that can be done in a conventional way, where you keep scaling your test plans and test execution by adding people to it. Or there is testing that can be scaled by automation and by building custom testing harnesses and frameworks, which would improve productivity per employee and, hence be able to deliver higher value to our customers. We are focused on the latter part. We look at ways of innovating. We spend a portion of our revenue on our own R&D, which builds these frameworks. I call it middleware software, which helps to improve productivity and delivers more value to our customers for their dollars.

This segment is part 3 in the series : Outsourcing: Sanjay Dhawan, CEO of Symphony Services
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