In a European services market where size is king, some services companies are left hoping that small can still be beautiful. One such contender is Rave Technologies, a low-profile offshore application developer with offices in London and a development center in Mumbai (Bombay). The 700,000-pound ($1.1m) services boutique believes it can capitalize on the needs […]
In a European services market where size is king, some services companies are left hoping that small can still be beautiful. One such contender is Rave Technologies, a low-profile offshore application developer with offices in London and a development center in Mumbai (Bombay). The 700,000-pound ($1.1m) services boutique believes it can capitalize on the needs of small software houses to find cheap, competent and reliable programming skills.
The Rs65.3bn ($1.8bn) Indian software export industry is an oasis for small IT services companies. The incentives for a company like Rave are obvious, as India has access to the second-largest pool of English-speaking programming talent for around one-seventh of the current UK rate and with little of the overhead costs. One of the side effects of these cost savings is that Rave gives a false impression of size. In fact, the company is not actually that small, with around 80 employees, six in the UK and the balance in Mumbai.
Although the present company was only formed in 1998, the Indian side of the business dates back to 1987. But where larger offshore development companies, such as Tata Consultancy Services and Wipro Infotech, have tended to diversify their offerings, the new Rave has taken the opposite route and has instead honed its skills in the specific areas of Microsoft Windows NT and internet/intranet applications.
The company has also consolidated its target sectors to just one. Whereas Rave has previously worked for a diverse range of customers including Union Bank of Switzerland and the BBC, it is now only targeting the IT industry itself. All of its 1998 sales were sourced from small UK-based software houses like Strategic Asset Management Solutions (SAMS), a specialist in providing front office software development to investment management companies.
The savings to a small software concern like SAMS can be significant. Mike Harriman, managing director of SAMS, estimates that the company has cut nearly one-third of its development costs by outsourcing to India, even taking into account the contingency costs of directing the development program from Britain. Perhaps more importantly, Harriman believes SAMS now has a better product than it would if development had remained in the UK.
However, Rave faces an ongoing problem of uncertainty among potential customers surrounding the quality of Indian programming skills. In fact, India now possesses some of the world’s most highly-qualified talent. This is borne out by the fact that five out of nine companies with ISO 9000 level 5 quality certification are Indian. Despite this, Rave’s dedicated UK office has been essential in helping potential customers overcome some of the cultural difficulties that can dissuade them from using purely Indian development houses.
Rave is making predictions of $1.5m in revenue for fiscal 1999 and an initial public offering within three years. But Rave may not get that far. It claims already to have been courted for acquisition on two occasions by unnamed rivals. Both were rejected on the grounds that the cultures of the potential suitors were considered out of step with its own.