Tower of brainpower

Tower of brainpower

Choosing an offshore software developer was a matter of the right price, good synergy and great timing for Tower.

Chief information officer of financial services company Tower Group, Ed Saul, says having up to 120 world-class programmers working simultaneously on your system is a luxury made possible by Indian industrial behemoth Tata Group, even if the Bangalore-based developers are several thousand kilometres and eight hours’ distance from New Zealand users and testers. Four years ago, Tower was examining its options to replace the 20-year-old, mainframe-based administration system that currently backs its fire and general insurance products. Executives went through a far-reaching exercise of evaluating whether to buy a ready-made application and adapt it to suit or build a new system from the ground up.

Starting from scratch to end up with a system with as perfect a fit as possible was deemed the ideal scenario, but was also the more expensive option. According to Saul, employing Tata’s IT consulting division in 1999 allowed Tower to take up that option at an affordable price. He declines to divulge the final costs but admits it runs to “several million dollars”. Approximately 160 employees at Tower Insurance will use the new system named Quantum.

“Operating out of India means Tata has a different cost model to most other big software companies. Their developers earn very good salaries in India, but the exchange rate means the costs are lower for customers in other countries. At one point, we had 120 programmers in Bangalore working on the system. That kind of combined brainpower is just not affordable anywhere else.”

Significant development

However, price is not the only reason why Tower chose Tata for its Quantum project. At the time, Tata did not have a significant presence in the Australasian market and winning a contract with such a large player was a significant coup. “We knew that Tower would be very important to Tata and become a reference site for them in the region – it gave them an anchor in Asia Pacific. We felt it would mean they would be more focused on following through with their intentions – delivery would be very important to them. It took away a lot of the risk of doing things long-distance.”

Further synergy between Tata and Tower arose from the fact the software developer – a major applications provider in the global IT market – did not have a fire and general insurance product in its suite. Quantum gave it the opportunity to build such a package and leverage Tower’s expertise.

Intellectual ownership of Quantum is split between the two companies and if and when the product is sold to a third party, Tower will collect 50 per cent of any revenues. Saul would like to think the project might some day pay for itself.

Tower bosses had many concerns about how the offshore project would work, but third-world security issues, as touted by some US and European companies recently, weren’t among them, according to Saul.

“Tower executives visited Tata offices in several Indian centres and saw for themselves the world-class facilities and met the highly qualified staff. Much of India may be third world but Tata is a first world organisation. It’s one of the biggest software companies in the world and we had total confidence in its technical expertise. But it was a new model – a new way of doing things – and we knew there would be difficulties,” says Saul.

Not surprisingly, communication was the single biggest issue. Users and testers were not sitting in the same room or building or even city as developers, but on opposite sides of the world. Also, the eight-hour time difference meant the two groups were seldom working at the same time. And while Tata employees spoke excellent English, the differences in pronunciation sometimes led to misunderstandings.

“If a communication took place at the end of a NZ working day and the beginning of an Indian working day and both sides were not completely clear, 24 hours could be lost because programmers could not progress until further contact the next day,” explains Saul.

Remedying the problems was a matter of trial and error and finetuning. Saul says circumstances forced his team to closely examine the process of building and testing software. “Communication became very formalised and process dependent,” he notes. Having Tata liaison people on-site in New Zealand and Australia also helped improve communication.

Quantum leap

Quantum, like many large-scale IT projects, has run over time, admits Saul, largely due to underestimating time needed for testing. However, with 10 per cent of the rollout complete, the signs of success are there, he says. “Users love it and implementation should be complete by early next year.”

Would Tower consider employing Tata again? Saul says Tata has already almost completed a second project for the finance company – a distributed management system that consolidates commission and bonus payments for its 6000 financial advisors who work with multiple product lines, giving each a single payment and statement.

“And, while we are not in the business of looking for new systems to build, if the need arose, we would certainly consider Tata again.”

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