Business product development and market strategy

Business Product

The company I am part of as a business development director is a consolidated, medium - sized software company, with a staff of over 100 employees comprising developers, testers, writers and management individuals. It has been operating in the software business for over 20 years, first as a business consultant, then by using different software products to improve the consulting process.

At this point, the suite that the product is developing covers all stages of the project portfolio management process, starting with the creation of the portfolio of projects, continuing with the selection, management and tracking of the portfolio of projects. Up to this point, the entire business activated in the United States. However, the challenges of increasing costs, especially in terms of labor costs, as well as the increased competitiveness on the market, brought to our attention the possibility of outsourcing the developing process in a country where costs would be lower.

Overview

The company has been a successful player in the consulting industry, notably in the project portfolio management segment, for over 20 years. The role of the company is to help other organizations properly define and manage a portfolio of projects that they develop or need within their organization.

The objectives of the company started with a very simple observation: because of limited resources, an organization would most likely be limited in the amount of projects it would be able to complete and cover from its budget. The scope would be to develop those projects that bring added value to the business. Our company helps with the selection process, but also with the complete management and tracking functions, after the portfolio is defined. Our consultants still use the software products as essential tools in their consulting work.

However, as mentioned, the challenges of being able to successfully compete given the high production and labor costs are too great. Our team has decided that outsourcing would be a good idea. Central and Eastern Europe was targeted as a place where developers have a good technical background and where labor costs still tend to vary around $1,000 per head of employee. We have picked Romania among the region as the country where our regional office would first start off, but we do consider eventual expansion, if necessary, into other countries in the region.

Description of the labor market in Romania

After the collapse of the Communist regime in 1989, Romania has set its main objective as being the accession to the European Union and NATO, both completed, the former in 2007 and the latter in 2004. The country's inclusion in the European and Euro - Atlantic institution meant that the economy was able to develop within a stable framework, this also reflected on the labor market. The current EU labor legislation has been fully implemented.

The professionals in Romania are extremely well prepared, mainly due to a very well developed educational system that has penetrated throughout all levels of the population in the country. The strong and solid theoretical background of these professionals, as well as their full access to means of information (the Internet, specialty magazines) ensure the fact that these individuals are an asset to any company.

Additionally, as mentioned, the labor costs are still relatively low. The average salary in Romania is somewhere around 500 euros or $750, although the software developers are part of the better paid segment of the population. Wages for this category of employees range from $1,000 to $1,500, but may go higher if we are talking about a project manager, for example. Students could be a very strong source of potential employees, although the extensive training that they need to have before working on the project may increase the initially low costs.

A country like Romania will be selected over a market like India because the human resources are better prepared and because the organizational and structural issues make us believe that strategically this will be a better option in the long run. Despite lower hourly costs, the Indian companies and employees are not always reliable and it is better to pay something extra than to discover at delivery date that the product is not ready. This type of process can be more reliably developed in a country where the European norms have begun to penetrate in the last decades.

Profile candidate

Our candidate for employment is going to be between 20 and 35 years old. He or she does not need to have his studies completed, but, if he does not, he will need to be following the courses at one of the local universities in Bucharest. A good theoretical background and practical programming skills are highly encouraged, as is an open, can do attitude and communication skills for a better integration in the team.

General administrative issues

The project we propose has two potential means of action: (1) buying a company already operating in Romania in the software development industry or (2) starting anew by developing everything on our own. Given the fact that we want to implement all our working procedures and organizational culture, we are proposing the latter of the two options.

However, this will mean developing the necessary infrastructure for the company to be able to operate. This will include registering the company with the Romanian authorities (the company will most likely function as a local branch of the U.S. company), renting a location for the headquarters, hiring the support personnel (accountant, logistics person etc.) and so on. The company will be set up in Bucharest, as the easiest access hub in the country and the city with the highest population, where it is likely to find the necessary human resource.

Recruitment and selection

Obviously, the most important part of our project is the recruitment and selection process. The scope of the project is to identify and recruit the best prepared individuals in the capital, use the appropriate selection tools, as well as the right training process in order to have them perfectly capable and ready to be integrated in our team and develop successfully our software projects.

For the recruitment process, we will be proposing several methodologies. First of all, the universities and colleges in Bucharest are a first and important source of potential future employees. We can organize recruitment campaigns in these universities, which can be accompanied by a presentation of our organization, a description of what we do and of the benefits that we are able to offer. The seminars could also include a testing session where we will be able to better evaluate the intellectual and professional capacity of the potential future employee.

These seminars can be advertised at the local university notice board, where we can also advertise for interviews and testing over at the company headquarters. This will give us a chance to skip the presentation in the university phase and be able to dialogue directly with the potential candidates and save some time and additional costs involved with the presentation.

Our second method of recruitment will include advertising in the local newspapers, as well as via the Internet and online media and other sources of communication (blogs, forums etc.).

Finally, an important instrument of recruitment, especially after we start our office and get some of our first employees, is going to be recommendations from the current employees. This is an important recruitment tool we can use, because by recommending someone you also vouch for him, which will tend to increase the chances of him being a good performer.

The selection process is going to include several aspects. First of all, we are targeting both the intellectual and professional development of the individual and his capacity to integrate well in a team and to communicate with the other employees at the company. In order to test the intellectual capacity and programming skills of the individuals that have been recruited, we aim to conduct practical tests that will include programming small modules of a certain part of the application (creating a button, linking a process to a chart etc.). A theoretical test will also be completed, just so that we can make sure that the theoretical basis is in place.

The communication and integration skills are probably more difficult to evaluate, although there are tests in this area as well. What we plan to do is simply have several discussions and informal meetings with the potential candidates during which we can draw a relevant conclusion on whether or not he or she is going to be a suitable member of our team.

An important mention on the project managers: in the beginning, in order to better supervise the implementation of the developing process in Romania, the project managers will be expats from the United States, but once the project starts gaining ground in Romania, we are likely to start passing on more responsibility to Romanian project managers. These will probably be recruited from individuals with a 3 to 5 years of experience both as managers and as developers.

Training

The training part has two very important components and directions: (1) training the intellectual and professional abilities of the selected employees and (2) training the organization culture aspects, presenting what the company values are, what the processes within the organization are etc. Both are equally important. For the first, we will have company specialists describing the software development tools we used, as well as the mechanisms that are included in the development of a new module or product within the suite.

On the other hand, presenting and implementing the organizational culture of the company is equally important. Besides promoting this in day-to-day operational activities, we will also have, from time to time, people from the company upper management visiting Bucharest and presenting the mechanisms and values that the company uses.

Potential competition

The labor market for software developers in Romania is one where the competition is quite challenging, especially since it comes both from internal and external forces. Internally, we are dealing with small to medium software developing companies, generally operating for larger companies abroad or working with a bigger international client. These are generally companies that have 30-50 employees and who tend to have an annual turnover ranging around $500,000. For these companies, it is usually the students that make a good start in their recruitment and selection capabilities, mainly because of the lower salaries that they need to pay.

However, given the fact that the labor market is quite volatile, some of the employees at this type of companies can also be a good target for our own company. With word of mouth and spreading the ideas and values of our company around the market, we might have some of these employees being interested in changing their workplace.

The external competition is much stronger and generally comes from companies very similar to our own: companies that want to reduce their costs and diversify their workforce capacities and who chose a country like Romania because of the stable political, economical and legislative framework in which the company can successfully operate. In order to compete with these companies, we need to offer the appropriate motivational incentives that will help us retain employees over any other potential offer from third parties. It is obviously not easy to do this, but we will address this issue in the chapter on motivation (below).

Motivational instruments

Following Maslow's pyramid of needs, we can identify several levels where are employees can be motivated. In my opinion, employees in Romania will probably tend to be somewhere around the fourth and fifth steps, which means that instruments such as those that manifest appreciation for the employee will be successful tools. Money is obviously a strong motivational incentive, especially in a country like Romania that is only recently joining the more prosperous states. However, we need to emphasize that it is definitely not the only area of motivation that should be targeted.

As such, training sessions and seminars can be perceived as motivational tools, because the employee will have the correct impression of his career potentially improving in the future and his portfolio as a software development growing in terms of his knowledge and experience. Additionally, motivational tools can include regular visits to the company headquarters in the United States, which can also play an important role as an integrating instrument with our organization.

Timeline reasonable timeline would be:

week 1-3: general administrative and logistical issues, registering the company;

week 4-8: marketing campaign, getting the company known in the local media and throughout the recruitment places (universities):

week 9-15: full recruitment campaign;

week 11-18: selection campaign and testing;

week 12-20: training and start of operational activities.

Forecast and vision potential problem that could arise in the future is the constantly ascending trend line of the labor and production costs. Indeed, we need to acknowledge the fact that, at a certain point, the Romanian software developers will no longer be satisfied with the salary they receive and, especially with free access to the European market, will try to find other markets where they can receive higher compensation.

For our company, there will most likely be an upper limit up to which we can actually raise the salaries. Once the requirements are over that respective limit, we are going to have to give up on those respective employees. If this becomes a dominant trend in the company, we will also have to move to another country where we can obtained a better balanced cost - effect ratio and where we would be able to remain more competitive in the long run. Again, other countries in Central and Eastern Europe may not be a good solution because of similarities with the Romanian market. We would probably be expecting similar trends in these countries as well.

The most important cost of this scenario is related to the fact that we would have invested a significant sum in making our employees loyal and, at the same time, in the training processes. However, we can also consider that the company would have most likely recuperated most of this investment given the result of the employees work.

Conclusions

Expanding our working resources to Romania in an attempt to penetrate the local labor market and develop a team of highly skilled programmers and developers, reasonably priced, is our main objective. We expect to be able to operate in the country anywhere from 3 to 5 years, because we consider that, after this period of time, the changes on the labor market will no longer make it a viable option for us in the long run.

The challenges we have identified include competition from other companies, both internally and externally, in terms of human resources, as well as potential initial problems in our recruitment and selection mechanisms (we might identify a potential employee that has great technical skills, but is not adaptable and does not have any social and communicative skills, for example). Additionally, there is also the risk of losing employees after investing time and money in getting them trained for the job.