Valtech: Eye On The Prize

Only three short years ago, big companies' mantra to VARs seemed to be: "We want it cheap, cheap, cheap." Today, notes Brad Murphy, senior vice president of North American business/product development, marketing and sales at Valtech (VARBusiness 500 No. 197), companies don't want to overspend, but they are far more sensitive to getting what they pay for. And sometimes, they're willing to pay just a bit more for something they need quickly.

Valtech is offering those customers a "something"--an alternative to offshoring. The company's "proximity centers" focus on building software for clients nearby, using a collaborative approach and eliminating unnecessary elements. The secret, Murphy says, is in designing the project with speed in mind from the beginning, not just engineering speed, but with urgency on the business process end as well. The result is often 40 percent to 50 percent more expensive than using workers in emerging nations, but the project is completed in half the time. Murphy discussed $133 million Valtech's "just-in-time" approach to software development.

VARBusiness: You're not a typical outsourcing company.

Murphy: The DNA of our culture is a little different than our competitors'. We started not as an outsourcer or traditional consultant. We started as company with a passion for collaboration. We took technically skilled people and equipped them with skills to be an engineer in a big company. Even today, when we do work for customers, the ideas we advocate are born out of business transformation in terms of business and technical partnerships.

VB: Valtech is about 15 years old. A lot has changed since the early 1990s.

Murphy: The landscape has changed massively. Our typical customer is global; they're on the Fortune 200, as a general rule. They've expanded to using emerging markets, like Central and Latin America, China, etc. They were driven by the perception of cost and gaining operational efficiencies by having software projects done offshore. Now we're seeing the pendulum shift. If cost savings is what's driving you, you're going to have slow growth and not innovation. That fact drove us 18 months ago to reflect on our business strategy. What is the customer's passion, and do we have the right vision? We determined that our vision was not big enough. So we took our capabilities, knowledge and applied and configured them differently so we could offer more value for our company and our customers.

VB: What was the big "aha?"

Murphy: A statement like the one we made has to include what our constraints are. We build stuff that's important for the customer. So that doesn't mean we go and configure SAP. What are we great at? Building really cool .Net and Java software. We almost never get to build brand-new stuff. We build software that enables new ideas. Customers are recognizing that innovation is necessary. And it all has to collaborate and integrate with existing stuff.

VB: Sounds like some companies are realizing that they moved some parts of their business offshore, but are paying a price in innovation.

Murphy: Yes. Also, customers are seeing biz cycles collapse. Ironically, that's partly because of technology. Competitors can move faster, so the amount of time a company has to capitalize on an idea has collapsed. They need agility.

VB: If not outsourcing, then what?

Murphy: Clients don't think in terms of big projects, but rather as a stream of incremental but strategic changes. It's not a neat, tidy project. How do you outsource that? You might rent smart people. But they are expensive, and there aren't enough of them. We came up with a two-pronged approach: What if we could build a configuration model that's software on demand? If the customer needs more software, you can buy it incrementally over a period of time. The second prong is to build domestic engineering software "factories."