'It was a light bulb for me'

'It was a light bulb for me'

MARY GOODERHAM

From Wednesday's Globe and Mail

As the owner of a small executive search firm in Toronto, Angel Mehta has always thought big.

Starting one of the first companies focused on recruiting senior staff for venture capital software start-ups just as he was leaving high school in 1996, Mehta quickly moved into Silicon Valley and Boston to take full advantage of the dot-com boom. Mr. Mehta and a couple of colleagues dreamed up the company name, Sterling-Hoffman Management Consultants , in a brainstorming session where they considered the stodgiest monikers of the elite consulting firms and crafted their own.

When the tech bubble burst and 9/11 sent the venture capital market plummeting, the young entrepreneur had to think bigger than ever. "Our business basically disappeared," Mr. Mehta says. He had begun trimming his Toronto staff of 20 and was facing bankruptcy when he read about the idea of companies outsourcing administrative operations overseas to save costs. "It was a light bulb for me."

With Sterling-Hoffman's survival in the balance, Mr. Mehta set about moving parts of the company's core functions to Hyderabad, India, with its advanced IT infrastructure and educated, English-speaking work force. Four years later, the company has more than 50 employees in Canada and another 200 in Hyderabad, with plans to almost double that number in the next year.

"To have the kind of future we have was a pipe dream in 2001," says Mr. Mehta, 29, the chief executive officer of Sterling-Hoffman. "There's been enormous growth."

Companies large and small are "rethinking their global footprint," says Michael Corbett, a consultant, author, lecturer and founder of the International Association of Outsourcing Professionals in LaGrangeville, N.Y.

"Outsourcing has changed the world of business and with it the business of management," Corbett says. "It creates breakthrough-thinking through a clearer focus on an organization's core competencies, combined with harnessing the unique capabilities of equally talented and focused outside partners."

Off-shore outsourcing, largely considered the domain of big business, is now an option for small companies. But first they have to make their processes work abroad, understand the local culture where they set up shop and cope with questionable practices common among many emerging markets.

"It's extraordinarily challenging," says Mr. Mehta, adding that small businesses especially have to think big before they make a move overseas.

When choosing which services to outsource abroad, for example, look to processes "for which you're not getting credit from your customers," Mr. Mehta suggests, such as bookkeeping, market research, lead generation and collections.

Having such functions performed thousands of kilometres and numerous time zones away means breaking down and documenting internal policies and procedures associated with them. "You have to get your house in order," Mr. Mehta adds. "When you're transferring knowledge to an employee on the other side of the world, informal conversations don't do it."

Local culture and customs are especially important to consider, says Mr. Mehta, whose parents immigrated to Canada from India who but knew little of the country before setting up his first office there in 2002.

He made a number of gaffes as a result. For example, after hiring his first handful of young employees on contract he learned that Indians considering marriage must have permanent jobs -- and salary slips as proof to show the families of their prospective brides or husbands.

Mr. Mehta quickly went to the additional expense and paperwork of hiring his staff outright.

Ensuring the confidentiality of clients and the security of intellectual property is a challenge "when ethics are questionable and corruption is rampant," says Mr. Mehta, who stopped his office manager from paying off a local government official who showed up around the holidays each year randomly pointing out inadequacies in paperwork to elicit "gifts."

In such an environment, protecting client lists, financial spreadsheets, training materials and presentations from theft or surveillance is especially vital. Sterling-Hoffman has adopted enterprise rights management (ERM) technology that enables the company to restrict the access to and use of all documents and e-mails throughout the organization.

Edward Gaudet, the vice-president of product management and marketing for Liquid Machines Inc., a Boston firm that makes ERM products, says traditional encryption doesn't offer protection in the long run because once documents are un-encrypted the data becomes available for users to do with as they wish, from printing or copying it to saving it to a USB-drive.

The ERM technology allows Sterling-Hoffman to create policies that control virtually every function that can be done with data -- view, cut and paste, print, save, save as, and even print screen -- while enabling employees to collaborate and exchange information.

Competition for workers in overseas markets is fierce and extends to fields such as legal and equities research, accounting and X-ray analysis. "Offshoring is not just about call centres, software support and manufacturing," Mr. Mehta says. All around Sterling-Hoffman's office in downtown Hyderabad are mega-companies such as IBM Corp., Dell Inc., G.E. Co., Infosys Technologies Ltd. and American Express Co., all hungry for staff. "It's like Silicon Valley in the '90s; everyone has five or six job offers for double the salary."

Mr. Mehta's strategy has been to "win hearts" by connecting emotionally with employees "who have been ignored by the management of their companies for a long time" and cultivating a value system where all are equal. The turnover in Sterling-Hoffman's India office is about 10 per cent each year, compared with 40 to 50 per cent among Hyderabad's call centres.

For Sam Desai, 35, Sterling-Hoffman's director of marketing in Hyderabad, working in a firm where he has room for growth and can call the boss by his first name is a big attraction. "The job I'm doing here is great and the culture is great, I can't find that at any other company," says Mr. Desai, who oversees a team of 11 and manages advertising, direct mail, on-line campaigns and branding initiatives.

Offshoring has meant savings for Sterling-Hoffman, with each employee in Hyderabad costing 50 to 60 per cent of one in Canada. But the extra staff has especially allowed the company to expand into territory where smaller search firms can't go, such as tracking executives and corporate practices across North America.

The jobs remaining in Canada revolve around managing client relationships and adding value to Sterling-Hoffman's products. Contact is maintained between the two offices via e-mail, instant messaging, phone and especially video-conferencing, with a giant 60-inch screen that's "like having a window" into the Hyderabad operation, Mr. Mehta says. The system has also come in handy for joint end-of-quarter celebrations and a massive cake-eating contest between the two offices.

Offshoring advice

Some tips from Edward Gaudet, vice-president of product management and marketing for Liquid Machines Inc. in Boston, for small companies looking to take some of their operations offshore:

Pick trusted partners: Interview, verify backgrounds and follow up on references for possible offshore partners like you're checking out a nanny for your kids; speak with five references at a minimum.

Set realistic objectives: The benefits of offshoring won't come overnight; if you're doing it to save money, recognize there will be set-up costs that should be figured into your return-on-investment calculation.

Take a long-term view: Expect to make mistakes and view partners and the people you bring on board as extensions of your work force. Don't start with offshoring core processes or applications.

Verify the infrastructure: Ensure that staff and outsourcing partners have security to protect data at rest, in transit and in use.

Ensure continuity: Prepare for the worst and have a disaster recovery strategy in place; understand the local legal system as well as cultural environment, and recognize risks outside of your control like weather and environmental issues.