Outsourcing: Alexei Miller, Executive Vice President Of DataArt (Part 5)

Sramana Mitra: So, are you doing quantitative analysis for hedge funds and banks and work like that as part of your offering?

Alexei Miller: Not exactly. We are doing a software system that works with those models. What we found several years ago when we explored that particular market was that this is the kind of work clients are extremely protective of. If we are really talking about quantitative models, for example, pricing processes or trading models at banks or hedge funds and so on, even if they agree to outsource this to anyone, they will ring-fence the group that will do this for them so tightly that the group is for all intents and purposes lost to you as an outsourcing vendor. It is a one-off type of deal. There is very little repeatability; there is you can learn from one experience and carry it over to the other. That in itself is not a very scalable business. So, what we do is we develop those software systems that work with those systems, for example, various modeling services. In order to do this you need to understand the math, you need to understand the models, but you don’t need to be a mathematician yourself to create those models.

SM: So, the actual quant models are being developed by the banks and the hedge funds, and you are creating the systems around them to work with those models?

AM: Correct! I am well aware that there are a few firms in the world out there – and this is a growing trend in the knowledge process outsourcing (KPO) market – that claim to focus on quantitative outsourcing, quantitative process outsourcing specifically. I am very curious, I am watching that trend. Obviously, I am not privy to exactly the kinds of models they do, but if they succeed it would be an interesting signature event, if you will.

SM: Now, to do this kind of work from Russia and Ukraine, what are the language requirements? Do all your speak English? Is that a requirement?

AM: Most of our clients are English speaking, so being able to communicate fluently is an entry requirement to the project. It is not necessarily an entry requirement into DataArt as a company; we can take a talented technologist with the knowledge and the cultural affinity, and we will train them. Someone who does not speak English will not [be able to] make a career at DataArt, that is for sure. But someone who does not speak English may be employed by DataArt, and we would help that person to improve his or her English skills.

SM: How do you do that? Do you use any kind of service provider, or software or technology?

AM: We tried, but it didn’t work for various reasons. We ended up hiring a number of English teachers in-house, and we have a mentorship and apprentice program that integrates our offices in the U.S. and London with the offshore facilities, so that helps. Ultimately, in a funny twist of nature with our being an outsourcing company, we found we were unable to outsource the function of teaching our people English. That particular piece we ended up doing ourselves. It is not a very natural thing to do for an outsourcing company, I understand, but we have tried and in terms of efficiency this was the best option.

SM: Interesting! Let’s talk a bit about the trends in your industries. With 600 people, I think in your original pitch you told us you had about a $25 million revenue run rate right now, right?

AM: That is what we are trying to beat this year, yes. I hope it will be a bit more.

SM: What are the trends that are impacting you? How competitive are Russia and Ukraine right now from a talent point of view?

AM: I believe that Russia and Ukraine are very competitive on the price-to-performance ratio. Just as in the investment process, there is frequently an unspoken but very well understood definition between simple and smart money. Just as in the outsourcing market, there are buyers of services, the smart buyers of services. Smart buyers of services will look at multiple factors aside from costs. They will look at multiple dimensions.

SM: I got that. I was asking you more from your own operation’s point of view about the competition for talent in those regions. How many outsourcing companies operate in those regions, and how do you compete for talent in those places?

AM: Well, it is competitive. Places like St. Petersburg and Kharkiv, for example, have been competitive for most of these past 10 years and it is not necessarily competition among outsourcing companies. Sometimes the local economy is doing well and you are competing against a wider economy, but it has always been like that. It is not necessarily a new trend. When we started in 1998, it was very easy to find extremely talented developers at a very low price, but that changed rather quickly. So at least a few years now we have operated from the reality that we have to be competitive. Because we don’t hire en masse, we don’t hire just anybody, and we do relatively little right-out-of-college hiring. In other words, we mostly compete for talent in the higher-end bracket and that has always been competitive. It is a fact of life.

This segment is part 5 in the series : Outsourcing: Alexei Miller, Executive Vice President Of DataArt
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