CA’s Barrenechea explains offshore strategy

Mark Barrenechea, senior vice-president of product development at Computer Associates International Inc., spoke with Computerworld U.S. online recently about a range of issues, including an offshore development strategy that calls for spending a growing percentage of CA’s development dollars on developers in China and India.

Barrenechea stressed that this is being accomplished without sacrificing U.S. jobs. Excerpts from the interview follow:

How much of your development work is done offshore?

We’re going to put our corporate dollars in emerging markets. It’s a natural thing to do — to build a local presence in local markets. We have a big presence in Australia. We have a growing presence in Hyderabad, India; a growing presence in Hong Kong and Beijing; a growing presence in Eastern Europe.

What do you mean by “growing presence”?

Developers, sales personnel and back-office functions.

Are those developer positions ones that are currently in the U.S. that are being moved overseas?

No. We are expanding our R&D efforts by supplementing them with labour in markets that are growing and emerging for us. We have not replaced jobs in the U.S. with overseas jobs. As we get more efficient in what we do, we do free up dollars that we can reinvest. And as you would expect us to do, we’re going to invest in those markets that are emerging. So I’ve been able to, as I get more efficient, actually grow my R&D talent — grow my organization with more people — by investing in emerging markets.

When you say “get more efficient,” does that mean doing the same amount of work with fewer people?

In some cases, as the organization gets a little more streamlined, and there are duplicative tasks and you remove those duplicative tasks or you remove consulting dollars. Maybe we’ve had consulting dollars being spent on a variety of activities. We’re going to take those dollars and expand our head count overseas. We’re choosing to expand the work we do in the markets that are emerging, such as India and China. That has allowed me to grow my organization, to get more work done, and get it done faster.

So developers in India and China will constitute a growing percentage of your overall software development workforce?

Yes. The company is growing, the expense line remaining relatively flat as we grow. Let’s talk about the benefits of that. I can support a 24/7 support model. When the sun sets in the United States and the sun rises over India, we can work 24 hours a day on support.

That can’t be anything new for CA, is it?

It’s expanded slightly; 24/7 support is nothing new, but it’s expanded for us. Secondly, being able to write software 24 hours a day is a new thing. It allows me to accelerate product development.

You have a set amount of money you can pay for developers. Is it accurate to say the percentage of that money going to foreign developers is rising?

Yes. It’s the same for all software companies. It’s true for CA; it’s true for the industry.

What does that curve look like — that increasing curve of money being shifted to overseas developers?

The way that I think it’s most appropriate to have the dialogue is to say that I’m going to put our investment into the markets that are emerging. For me, it’s not cost optimization, although there is a benefit to that. It is investing in markets that are growing. China is growing. India is growing. We’re taking some percentage of our investment — let’s call it between five per cent and seven per cent — and putting it in China and India. But if it was Hungary or South Africa or Brazil or Mexico that represented the opportunity, we’d put it there. It’s not a matter of cost. The matter is the upside of those markets at the end of the day. And if I can have a local presence in those markets for selling and building and supporting, we’re going to be best positioned to capture those emerging markets.

I also think that one of the things we don’t speak enough about is the positive benefits to the U.S. economy for doing this. We can draw back to (the North American Free Trade Agreement) — Was NAFTA a good thing or a bad thing? The positive of NAFTA was that it raised the skill levels of American workers to provide more value in their jobs. So on the whole, NAFTA, from my perspective, turned out pretty good. If you think of the automotive industry — that by having particular work done offshore, the ancillary jobs that are created in the United States are incredible. If you think of the jobs that Toyota and (other) Japanese automakers generate in the United States, it’s phenomenal.

So if we’re looking at 5 per cent to 7 per cent of our budget ending up in foreign markets to invest in those emerging markets, the work that comes back, the net will be a positive result for the U.S. economy.

How do you deal with the political sensitivity of the issue, given that it’s an emotional one for a lot of U.S. IT workers, and at the same time do what’s best for your shareholders?

First and foremost, in terms of shareholders, they expect us to invest in emerging markets that we think add high value. Secondly, we continue to be respectful of jobs here in the U.S. by optimizing redundant tasks or dollars we’ve used on traditional consulting, and using those dollars to invest in emerging markets. So I think on whole we’re doing better than most companies in navigating this.

Are there developers at CA who can legitimately complain that they’re losing their jobs to workers in China and India?

I think most developers I talk to, and I speak to a lot — we’re a big organization, and I’m the spokesperson for the organization; they’re the folks getting it done, and I just have the privilege of leading the team — I think most that I speak to welcome the concept. Because at the end of the day, they want to compete and they want to win and they want to provide value in what they do. And if we can give them more skilled programmers to get it done, they’re happy to work in this model.

But that skirts the question. Are there or are there not U.S. developers at CA who are losing their jobs to overseas developers?

My answer is no. That is not the approach we’re taking.

Do you expect to continue your current approach for the foreseeable future?


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