Interview with Michael Peter Madsen and Torben Finnemann.

SDC nearshores to Poland

”The local consultants are incredibly competent”

In less than a year, SDC has established a development office in Poland with over 50 local consultants. In this interview, the executives responsible for the process describe how they’ve done it and discuss the value their new Polish employees have brought to SDC’s own organization and to their clients.

Interview with Michael Peter Madsen and Torben Finnemann

Things are going well for SDC, an IT service partner for a wide variety of Danish, Swedish, Norwegian and Faroese banks. SDC has experienced organic growth rates of up to 50 per cent over the last two and a half years, and as a consequence, the business will be short on developers soon – a situation which is projected to continue long-term. SDC already offshores certain development tasks to a partner in India. But not all development tasks are suitable for offshoring. For example, SDC is very cautious about who has access to bank clients’ sensitive personal data. A very strict regulation of this area is important, which was one of SDC’s motivations for launching a search for a nearshoring location within the EU in the first half of 2014.

Poland was a good choice

Michael Peter Madsen is nearshoring manager at SDC. He explains that SDC initially performed a thorough analysis of the market in the EU which involved analysing a variety of different parameters.

“Among other things, we looked at the accessibility of local, qualified manpower and the salary levels of the consultants. We looked at the political stability of the different countries. I happen to know a lot of people who now regret locating their development centers in Ukraine. We also looked at local infrastructure and at how easy it was for local consultants to get to and from our potential office location, as well as travel times to and from Denmark. We also consulted with business associates in the industry who have experience with nearshoring. Finally, we evaluated the level of flexibility and scalability,” explains Michael Peter Madsen.

Based on all of these parameters, the choice fell on Poland’s capital city of Warsaw. It was a good and relatively easy choice, according to Michael Peter Madsen.

“In the first place, there’s lots of good local labor in Poland. There are new IT graduates virtually pouring out of the university every year. In the second place, travel times between Denmark and Poland are limited. It takes me two and a half hours to get to our office in Warsaw from my own front door. And what’s more, a lot of international banks have branches in Poland, which means that we can bring in people with experience from the financial sector.”

Poles don’t like uncertainty

A number of years ago, the Dutch cultural analyst Geert Hofstede published a major analysis of the role played by culture in how people work in different countries. For example, some countries have a strong tradition for a well-defined, hierarchical relationship between employees and managers, just as some countries produce more collectivists than individualists.

“Not all of Hofstede’s conclusions are still accurate today, but some of them were useful as landmarks in relation to our analysis of Poland,” says Michael Peter Madsen.

What are the characteristics of Polish workers in this connection?
“Among other things, Poles don’t like uncertainty, which is a consequence of their country’s history. They want to know what’s going to happen in their lives three months from now. This means that we need to tell our Polish consultants whether they can expect their contracts to be extended well in advance. Otherwise, they start looking around for another job. We have a large social safety net in Denmark, and that means that Danish consultants have a higher tolerance for a greater degree of uncertainty in their jobs,” explains Michael Peter Madsen.

Give them lots of responsibility

Scandinavian businesses that are interested in establishing themselves in a country such as Poland can either choose to handle the process themselves – from establishing a local company, leasing office space, hiring and so on – or they can choose to rely on a supplier who can assist with all the practicalities. SDC chose the latter option, and works closely with other companies including ProData Consult Poland.

“They helped us get settled in and hire the right people,” says Torben Finnemann, director of portfolio and project management at SDC. “During this process, we’ve made a great effort to integrate our total developer capacity in our planning, so that each division manager has access to all of our resources, whether external or local, nearshore in Poland or offshore in India.”

How do you make sure that an external Polish employee performs his work in accordance with the same set of corporate values as an internal Danish employee?
“I know of businesses that view their sourced employees as nothing more than arms and legs. We would like to try and retain our consultants for a long time so that they get to know us and our particular systems, which makes them more efficient. Among other things, it’s a matter of giving our consultants in Poland a lot of responsibility. A lot of them have worked on financial systems for other banks in the area previously, which means that they come with a lot of industry-specific knowledge that they can pass on to us. If you’re able to exploit that knowledge positively, our philosophy is that the result will be higher-quality products that create more value for our clients than if we simply considered our consultants as temporary labor,” explains Torben Finnemann.

Get input from outside

According to a recent report by the market research firm Forrester Research, the world’s best online banking solution was produced by the Polish bank mBank.

The idea that we in Denmark can deliver better solutions than the rest of the world is a delusion,” emphasizes Michael Peter Madsen. The local consultants in Poland are incredibly competent. They’re experienced people from the financial sector who really know their business. Of course, there’s always a transitional period, but the internal reactions to them have been very positive.”

“In Denmark, there’s a tendency to work with local manpower. The developer community in Denmark is relatively limited, which means that we all tend to draw on the same resources, and so we often end up with solutions where we’re actually just confirming each others’ assumption that we’re doing things right. It’s healthy to get outside input from people who are used to handling challenges in a new way. As an organisation, we’re learning a lot from that,” he concludes.

Seven nearshoring tips from SDC

  1. Assess your need for nearshoring before you throw yourselves into it.
    Don’t fall into the trap of externalizing your development tasks just because labor is cheap. Establishing a nearshoring location needs to have a future. There are a lot of start-up costs associated with opening an office in a new country, and it will take time to show return on that investment.
  2. Define an operational model at a very early stage.
    It is important to describe governance, processes, guidelines and policies for using nearshore resources before you get started.
  3. Agree on what parameters are most important to you.
    Price is most important for some, for others it is the professional qualifications of the local labor force, the total travel time (and associated costs) between your country and the location, or the total package of parameters.
  4. Use experienced, locally-based suppliers in the start-up phase.
    They have the necessary local insight, and they have an interest in the success of your business. SDC has a multi-vendor strategy and used several different suppliers in the start-up phase.
  5. Make sure that the business has a good digital infrastructure that can support collaboration across national boundaries.
    Tools that can help reduce the distance between employees are important. Video conferencing technology is one example. But even more important for developers is making it possible for several consultants to work on the same task by sharing screens, which lets them help each other with concrete problems.
  6. Schedule frequent meetings.
    It might seem easy and natural to call each other or send an mail when there are questions. But often you don’t get around to it, or the person you want to talk to is not available. If there is a meeting scheduled, it becomes more natural to prioritize staying in contact – or at least it should be.
  7. If your business has decided to nearshore, then get started and try it out.
    Some things can be prepared in detail, in other cases it’s learning by doing. In both situations, the experiences gained are a positive learning experience for the organization.

About SDC

SDC was established in 1963 and is an IT service partner to the financial sector in Scandinavia. SDC’s core services are development and operation of banking applications. SDC is owned by its clients, which include over 120 Danish, Norwegian, Swedish and Faroese banks. SDC has about 620 internal employees at its headquarters in Ballerup, Denmark, as well as about 60 consultants employed at the development centre in Poland.

On March 11th 2015, Jesper Hommel, the Danish ambassador to Poland and SDC CEO Jesper Scharff inaugurated SDC’s new, expanded nearshore IT development centre at ProData Consult’s Warsaw location.

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