Outsourcing: Josh Lieberman, Co-Founder of KMS Technology, Atlanta and Ho Chi Minh City (Part 3)

Sramana Mitra: That’s the real winning story.

Josh Lieberman: Absolutely.

SM: In India, no matter where you are … in the big cities, you’re looking at 30% attrition. In the smaller cities, you’re looking at 20% attrition. That’s the real problem. If you’re looking at below 5% attrition, that is the real winning story.

JL: Absolutely. It’s funny, I’ve been formulating in my mind that I haven’t built the model yet, but I think there’s a model that needs to be built that factors in the true cost of attrition in an outsourcing relationship. There is a real cost there. I think the other things that we do that are important are first, not only do we not have attrition in the company, but also within an account, we’re ethical and loyal people. We build deep relationships with our clients. And when we have people on an account, we don’t do bait and switch. We don’t move people around. Our people build long-standing relationships both from a personal standpoint and from a technical depth standpoint with our clients. They remain engaged with our clients for years on end.

SM: You can only do that with a low-attrition scenario. With a high-attrition scenario, that’s just not viable.

JL: Exactly.

SM: How many clients do you have that add up to the $10 million in revenue?

JL: We have 17 clients right now.

SM: On average, how big are the teams that each client is using on your end?

JL: I categorize our clients into three tiers. We work with a handful of venture-backed early stage companies. I usually have a handful of people on the team – three, five, six people, very small. Our sweet spot is between 10 and 30 people. Those are ISVs doing between $10 million and $100 million a year in revenue. Then we have a handful of clients where we have 50 people or more working as well.

SM: Are you at liberty to discuss some of the specific clients and the kinds of products you’re building?

JL: Yes, certainly.

SM: Why don’t you talk about some example clients so that you can discuss what kinds of products you’re building in Vietnam?

JL: I’ll give you three different examples. One is a client out of Petaluma, California, by the name of Market Lives. Market Lives was working with an Indian firm and heard that their CEO met, through one of the CEO roundtables, the CEO of one of our other clients. We got a call from the CEO of Market Lives, and he said, “Hey, I heard you guys do good work, and you’re cheaper than my current provider out of India. I’d like to talk with you.” We talked with him and he gave us a shot at a small project. Market Lives is actually our largest client. I believe we have around 60 people working for that client right now. We own the majority of Market Lives’ support function. We do product development and R&D work for Market Lives as well.

SM: What does the company do?

JL: Market Lives is an e-commerce platform company. So, Armani Exchange, Warner Brothers, and a lot of other retailers use Market Lives’ platform or software to private label it, put their SKUs in and connect with Amazon, sell products online, and so on. We came in and blew out every productivity metric, every quality metric from the other company that Market Lives was working with, and the team has grown rapidly over the past couple of years. That’s one example of a client. We do a lot of different things for Market Lives.

Another example of a client is a company called Invivo Data out of Pittsburgh, Pennsylvania. This company announced in July 2012 that had been bought by a private equity group. Invivo Data provides handheld devices for people during clinical trials for a pharmaceutical company. As somebody’s going through a clinical trial with a pharmaceutical company, he puts his results in the Invivo Data handheld device, which Invivo aggregates and sends back to the pharmaceutical company. Invivo Data was working with another offshore company, heard about us, asked us to come in and talk about how we could do better what the other offshore company was doing. In this case, it’s a pure QA outsourcing deal. So, Invivo has outsourced its QC function to us. We’ve got a team of 30 or so people in Vietnam. We own Invivo’s entire QC function in this particular case. Once again, we were able to dramatically improve [things] and help Invivo Data to be more successful with its clients.

A third client is a company called Geronimo.com. Geronimo is a company out of Atlanta, Georgia, that was founded by a guy who sold a company he had founded to Comcast. It was called Last-Minute Tee Times. He had done very well for himself. It was about having excess capacity on golf courses and making that available to golfers. In this case, what he’s done is for people who have vacation homes. How do we take those vacation homes and unleash the excess capacity to support charitable organizations? I can donate my home, and certain proceeds of that rental period go to a charity. We believed in what he was doing because we’re an altruistic company. We do a lot of charitable work in addition to what we’re doing for him. We’ve partnered with him and taken an equity stake in the company as well as donated services to him. We have, I believe, five people in Vietnam who work directly with the founder in an agile model and have built and launched that company successfully with him.

The other thing I would comment on that is unique about us is if I look at Market Lives, I think we have three or four people on site and around 60 offshore. With Invivo Data, we have two onsite, two onshore and 30 offshore. For the blend of onshore to offshore, the industry standard, I believe, is somewhere between 20% and 30%. Ours is significantly lower than that in most cases. A core reason for that is when we founded the company, we tried to ensure we had the talent in place in Vietnam who could own relationships with clients in a consultative manner. We didn’t need that overhead in the United States to help be the buffer and manage things for the clients.

This segment is part 3 in the series : Outsourcing: Josh Lieberman, Co-Founder of KMS Technology, Atlanta and Ho Chi Minh City
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