A Cut Around the Clock

By Julian Bajkowski
Wednesday, 02 August 2006
MIS Magazine

A foreign financial services company has found Australia has competitive advantages in applications development over international rivals, Julian Bajkowski writes,

Domestic harmony
For all the brouhaha surrounding offshoring IT work from Australia, Bryan Luke, chief executive of Lifetime Online Solutions (LOS) not only insists it is possible to attract lucrative application development work to Australia, but has 100 local developer staff and a large overseas client to prove it.

Wholly owned by British banking, financial services and insurance giant Norwich Union, LOS germinated out of a series of mergers and acquisitions in Australia about four years ago to become the offshore developer for the bank’s insurance and wealth management brand, Lifetime. What is different is that Luke’s business develops, tests and supplies an integrated web-based platform for a highly competitive financial services framework known as a wrap and then sells it back to the same company he works for in Britain.
As a combination of a leading-edge internal developer and a cost-cutting offshore service provider competing against Indian powerhouses, Luke is, for all intents and purposes, an offshored CIO, although himself an Australian – possibly the ultimate expat manoeuvre.

“It’s the overarching umbrella controlling your investment. It’s a reporting and administration regime,” he says of the web-based juggernaut he heads. “It goes through all the compliance issues for advisers to help them service their clients. It consolidates your investments, does tax positions, rebalances, does trading and tracks regular contributions if you have it in a [superannuation] pension product.”
In an intriguing twist of regulatory roulette, a substantial part of Norwich Union’s motivation to shift development of its wrap application down under was that Australia already had both the maturity of experience and the capability to tackle the very IT issues that the rapidly deregulating Britain would produce.

Even so, Luke is quick to caution that the sheer scale of the British financial services market and the large volume of products that it generates presents a scaleability challenge in its own right. “In Australia, you don’t have as much choice [in products]. You really have to have a lot of money to get offered more than 200 to 300 funds … but in the UK, our base offering has over 1200 investment funds [in addition to] the UK equities market. The UK funds management market is in trillions – it’s hard even to guess how big it is,” Luke says. The difference is so pronounced that one former UK-based fund manager working in Australia told MIS that although Norwich invests in IT here, Australia remains unviable in terms of financial product sales.
Luke declines to comment on whether Lifetime will move into the Australian market or resell its IT services to other organisations.
“The UK is going through a massive revolution at the moment,” he says. “We’re trying to develop functionality as rapidly as we can to stay ahead of the game. At the moment we’re doing something in the order of 500 days a week development. We really don’t have the capacity to be offering our services to anybody else.”

Lost in translation
One contentious area that Luke is prepared to offer a view on is the hard-as-nails numbers game that provides much of the impetus for the offshoring decision. While many analysts, and even vendors, are prepared to speak publicly on pricing ratios only, Luke is one of the few who will offer real dollar values on his experience so far with sending work to India.

“We found that while Indian groups generally appear to be cheaper on a unit rate of work basis – I won’t mention any names but I’ll use exact numbers – if we pay $600 a day for a senior Indian resource, we find that they pair those people,” he says. “In actual fact you’re paying for two.
“Because they’re very specifically skilled in what they do, each pair needs the support of half of a business analyst [position] to interpret for them because of language barriers. Then they have [to add the equivalent of another half of a full-time] quality analyst between a development pair as well.”
He claims the sum of this means that while $600 per day is the top rate, it frequently balloons out to about $1500 to $1800 per day because communication becomes more complex.
“While our daily rates here may seem higher – between $800 and $1000 per day, paying for three people on $600 is a lot more expensive,” Luke says. “You end up actually paying for three people in India to do the work of one Australian developer, because our developers here can speak English, and can converse directly with the business analysts in the UK to get answers.”

When MIS checked Luke’s figures with two local recruiters and a local J2EE and .NET-based independent developer, all confirmed such rates are common. Significantly, both recruiters complained their margins were coming under pressure from large international IT service vendors seeking to increase their skilled temporary visa headcount from lower cost destinations.

By comparison, developer rates in Britain are now about one-and-a-half times the Australian rates. As a result, recruiters such as Ambition are eagerly snapping up and exporting antipodean IT talent (often with patrilineal work rights) with the lure of better pay and international experience courtesy of the so-called kangaroo trail.

The sun also rises
One skill neither British nor Indian developers have yet mastered is the ability to code in their sleep, an issue LOS is able to exploit by virtue of Australia’s position not only at the other side of the globe, but at the opposite end of the clock.

As Lifetime’s British office winds down for the final two hours of its working day, the Australian development operation comes online in plenty of time to discuss process requests generated over the course of the working day at LOS’s Cambridge office.

The result is a time advantage that is difficult to replicate in most offshore locations unless developers in these sites are willing to perform the undesirable task of coding through the night. Thus, by virtue of the same geography that creates horror jetlag for economy class passengers, Luke’s team has the distinct benefit of being able to deliver their product to the client at the same time as they’re tucking into their morning papers and porridge.

The result is that production times are dramatically shortened, producing a true competitive advantage in the marketplace because it means a far shorter time to market for new products. Luke also says that this time-zone advantage creates much needed breathing space that keeps his people sane despite the high demands. “We’re not getting tied up with doing a build over here or a build over there and trying to do it in the same working day,” he says. “They’re sufficiently separated. We have that true 24-hour cycle and it’s a huge advantage.”

Alpha-supplier syndrome
When it comes to extracting maximum value and flexibility from those who supply developers and development services on contract, it seems that there are still plenty of hard lessons to be learned from shopping around for skills.

Luke says that when it comes to getting the best level of performance from the right sort of supplier, it pays solid dividends not only to shop around but also to give smaller specialty IT integration and development shops a chance to prove themselves against their bigger rivals.

Part of LOS’s competitive sourcing agenda is to shun the tier-one suppliers and especially multinational outsourcers. Luke says he has found that while such organisations may be able to deliver on price and bulk, they forfeit flexibility and responsiveness in the process and seek to tinker with their client’s business process.
“We have a deliberate strategy of staying away from tier ones,” Luke says. “The politest way I can put it is that they come in and try to convert you to their way of doing things. But because we have very aggressive delivery time frames, given the time-zone differences … many of the methodologies they pronounce as being the solution to all evils don’t necessarily map well to what we need to do.” The suppliers he rates more highly are those with strong skills in service-oriented architecture-based applications, especially for the J2EE development platform. He specifically names two smaller Sydney-based developer shops – Glintech and Centrum – as examples of businesses that secure and supply committed contractors who take pride in their work and aim to fit in with his organisational culture.

Not that the demands all flow one way. Of the 100 full-time IT positions at LOS, 74 are filled by contractors – and the company’s make-up predominantly comes from either Australians with British or other European experience, or recent European Union migrants to Australia. “It means we offer business-class travel back to the UK,” Luke says. “In the past four months, we’ve doubled our full-time equivalent staff numbers.
“We’re in a rapid growth phase.”
still love me tomorrow?

Even with the offer of a glorified recliner in-flight to the old country, staying attractive to employees and contractors prepared to work hard to get ahead remains a challenge.

Luke has little envy for organisations attempting to source diminishing skills for systems that have passed their use-by date, a scenario that frequently arises as a result of sweating every last possible drop of value from IT capital investments. While certainly no slave to the fashions that regularly sweep through the IT services market, he remains adamant that rapid application and infrastructure development models based on open standards and code sources such as Java, Linux and internet protocol will increasingly become the norm rather than the exception as traditional client server software models are gradually retired and replaced.

Part of this natural cycle includes an increasing awareness among the up-and- coming generation of developers of the need to stay at the leading edge of innovation, an intangible benefit that a smaller, more agile organisation like LOS sells to prospects and candidates who want to boost their knowledge and credentials.

“We’re not doing a redevelopment of an existing system,” Luke says. “It’s all new functionality, architecture, tool sets. There’s analysis of rules engines, implementation, AJAX-based interfaces, plenty of training. From an IT person’s point of view, it’s quite sexy. It’s a good thing to put on your CV. It’s basically everything a developer wants.” Just how many of those cutting edge developers will be graduates of Australian universities, in the wake of declining enrolments blamed on the great offshore push of 2003-04, remains to be seen. In the interim, the frankly spoken Bryan Luke appears determined to ride out the code-around-the-clock export odyssey as far as it will take him and those capable of keeping up – even if it doesn’t fit the prevailing wisdom of the analyst community.

A Lifetime online: growing up at a fast tick

• Founded five years ago.
• Wholly owned by Norwich Union.
• Australian IT staff of 100 (plus 10 in Britain).
• Contractor to permanent ratio of 75 per cent to 25 per cent.
• Web platform to access 1200 managed funds.
• 5000 new application end users per month.
• Load balancing based on clustered web servers.
• Current user load still below 100,000.
• Delivery rate of 500 developer days per week.

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