INFORMATION TECHNOLOGY
By: Madeline Bayliss
We need a better mousetrap.
That’s what many companies have said to Richard Osborne, senior vice president at EPAM Systems LLC, a Princeton-based application development company.
"Companies know certain basic processes and problems they have won’t change," Mr. Osborne said. "What needs to change is the way they deliver goods and services and how to achieve efficiency. They are looking for a better mousetrap."
Mapping technology against how a business operates has been adopted in a number of service industries, notably financial services and insurance. Web-based solutions have provided certain efficiencies, additional revenue opportunities and an opportunity to link all the stakeholders.
Mr. Osborne believes that health services has room for more adoption, especially given the number of different parties involved in delivering and paying for services.
"Most health insurance companies don’t really know who their customers are in their markets. There are so many forms of distribution. What can look like success could be an underperforming business," he said.
He cited one insurer that had a 55 percent market share in one state. On the surface, it would be assumed that this leadership position was developed through excellence in service quality medical and administrative at a reasonable price. The reality was market share achieved on low price alone.
With competitive pressures on revenue and profits, the company realized it was underselling service. One solution was a Web-based application, well integrated into the various parties, which enabled keying in data once for all the various functions that needed it. A simple concept, but one with significant impact given the number of inputs required in this complex business network.
Technology alone is not all that is different in today’s solutions. With the "mousetraps" built by EPAM, they come with a "Made in Russia" label.
EPAM, in business over 20 years, is a player in the outsourcing market. Outsourcing having a third party perform a complete IT project or function has existed for years as well. Now 8 to 30 percent of outsourcing budgets are being spent with offshore vendors. The industries who were first in the more strategic use of technology in business processes seem also to lead in their use of offshore resources.
India pioneered this industry as the key country of origin for offshore resources. The ready availability of an English-speaking, highly educated, technical workforce was leveraged by a number of U.S. companies that placed entire departments there, as well as by Indian IT services companies that brought this expertise to the U.S. to a greater number of firms.
Other countries have entered this market, filling a growing demand that India alone cannot meet. (According to Forrester Research, India is projected to provide about 60 percent of the demand forecast of 1 million workers by 2005.)
One of those is Russia. EPAM has centers in Moscow and Minsk, Belarus. Mr. Osborne pointed out that English is the business language in Russia. Furthermore, EPAM maintains English instructors in its centers to assure good communication with clients.
He also noted that the centers are in the same time zone as most of Europe, facilitating the coordination in the United States.
Recognizing some of the early concerns regarding sending work overseas and responding to current issues of global security and confidence in foreign sourcing, EPAM offers a hybrid onshore-offshore outsourcing model.
"The key to successful application development is expertise," explained Mr. Osborne. "Outsourcing decisions have sometimes only considered the technical expertise. There has been a view that a Java body (an application development language programmer) is a Java body.
"But you also need domain expertise in the industry and company functions, project management expertise, testing capability and, of course, strong client relationship management. The EPAM approach of a U.S. team facing the client along with the foreign team of solution engineers builds relationship trust on one side while providing the brain trust on the other."
Minsk is a former technical center for the Soviet Union and home to highly trained system engineers that had previously applied their talents to defense requirements.
"The key word is ‘applied’," Mr. Osborne said. "These individuals are very solution-oriented, well-suited to develop applications to make business processes more efficient."
Security is a concern in outsourcing, whether offshore or not. Clients want confidentiality of their projects and the intellectual property they may be creating. EPAM creates firewalls between all teams and individuals are dedicated to projects.
"We are a U.S. company, so all U.S. laws apply to us, providing the same legal assurances as with a pure domestic outsourcer," he said.
Why consider a partner whose capabilities are just like those you could create internally or get through a U.S.-only company?
Getting more for less.
Forrester Research indicates that at least a 25 percent cost savings is realistic through use of an offshore provider due to local labor costs. Recent articles in the IT press have illustrated savings in the range of 25 to 55 percent.
"The rule of thumb used to be that a packaged application implementation was cheaper than custom development," Mr. Osborne said. "Many companies then overbought software and still had a lot of customization and integration left to do.
"Not only do we provide competence in the business issues, but the emphasis on project management and more targeted solutions reduces the cost factor."
Mr. Osborne acknowledges that companies are hesitant to proceed with projects today given the economic uncertainty, especially if they had a previous experience that failed. He sees the newer offshore model responding to these concerns.
"Traditional outsourcing used to focus on the ‘ox in the ditch’ a financially failing firm that needed to sell assets to raise cash. Today the focus is on ways to get higher revenue, more market share and more efficient operations. Separating applications from the infrastructure and making improvements incrementally, along with more sophisticated resources, addresses those challenges," he said.
What’s on the horizon in technology, from Mr. Osborne’s vantage point?
"Disease state management. We’ve made headway in administrative functions, but they still only represent 6 to 12 percent of premium costs. Medical care is the core expense. Technology could make it possible to predict utilization of different medical services. By collecting diagnostic conditions as predictors of disease, we could begin to treat disease earlier and plan for the services needed in each area."

