Keane Touts Business, Cultural Compatibilities of Near-Shore Development

Software Magazine, April, 2001 by Colleen Frye

HALIFAX IS A BIT LIKE HEAVEN, claims the admittedly biased Ande Lake, head of Keane Inc.'s Halifax Application Development Centre (ADC) in Nova Scotia. Lake says Halifax is called Canada's "smart city," with area schools and universities pumping out about 2,000 IT graduates per year. And Halifax doesn't have polar bears or thatched-roof houses--contrary to the perception he's found some of Keane's U.S. customers have about Nova Scotia.

In fact, Halifax's cultural and business similarities to the United States, common language, time zone, proximity, value of the Canadian dollar, and a state-of-the-art facility assessed at SEI CMM Level III, comprise the value proposition Keane brings to the outsourcing equation--a proposition Keane positions as "near-shore development" vs. offshore development.

The Halifax ADC, which Keane launched in 1997, targets U.S. and other English-speaking companies, for whom near-shore development has many advantages. Today, along with the IT organization of the local phone company, Keane is one of the premier employers in the area--an area that many new grads still have to leave to find employment. "We're bringing some of the biggest companies in the world [as customers] to Halifax, so people get to live where they want to live, they have quality of life, and they get to work on exciting and interesting stuff," says Lake. Today Halifax ADC has more than 300 employees, with about 500 expected by yearend. Turnover rate is in the single digits, Lake says.

The center's offerings include client/server, midrange and mainframe application development and maintenance; project management; e-solutions, e-management, and Web branding and engineering. Lake says that application maintenance and long-term outsourcing represent about half of ADC's business today.

Lake acknowledges that offshore developers in countries such as India can often offer cheaper coding and development costs, and with the time difference, an around-the-clock model. However, he suggests that customers "are willing to forgo some perceived cost difference for quality and deliverability. They're not looking for us to work around the clock, but to be available around the clock, and all maintenance deals are available around the clock. And when we do work for West Coast people, we work the hours the West Coast works.

"But when you look at the value of a common language, and in [customers] being able to jump on a plane and be in Halifax today, the value proposition starts to make sense."

It made sense for Worcester, Mass.-based Allmerica, an insurance company with $3.1 billion in revenues. CIO Greg Tranter says the company needed to increase its capacity for new development, as well as baseline maintenance and support for a mission-critical application supporting its variable annuity system. While part of Allmerica's sourcing strategy is to provide new opportunity for internal technical employees, Tranter says, "we needed to grow our capacity for our technical organization; we needed a sourcing alternative other than hiring our own employees."

Allmerica has 700 employees in its technical organization, located in Massachusetts, Michigan, and Georgia. It is structured into three major groups: new project development and delivery; service delivery, including the data center, desktop services, and application maintenance; and enterprise IT, whose responsibilities include architecture, database administration, resource management, and technology strategy.

Allmerica's short list of outsourcers were all U.S.-based companies. "Each had a unique story; one had an outsourced relationship in India; another had sourcing out of the Philippines; one had it out of Ireland. We hit most of the gamut of the offshore or near-shore solutions," says Tranter.

While Keane was price-competitive with the others, several factors cinched the deal: Keane's reputation for project management and disciplined development processes, Keane's willingness to be flexible in the structure of the relationship and how resources were managed and deployed, and the "availability of resources in Halifax and the ability for us to grow quickly if we need to," says Tranter.

In addition, Tranter says, Allmerica typically doesn't outsource, and its last experience had been negative, so he had to sell both executive management and internal technical staff on the idea. So Keane's proximity and common culture helped. "We can jump on a plane and in an hour we're there. Also, the culture of the people is very similar to our culture. For our businesspeople, I'm not sure they would've been comfortable with a relationship as far away as India, the Philippines, or Ireland. Now if we want to make the businesspeople more comfortable, we put them on a plane and show them the developers working on their stuff."

Today, Keane's Halifax ADC has taken over about 95% of baseline support for the variable annuity systems. "We have a key baseline manager who works directly with their team. But we're not only using Keane for the technology; we're also using six of their business analysts, so we have both a business and a technology relationship," says Tranter.