Szymon Augustyniak: The year 2019 will mean the crystallizing of a new organizational model, which will be built on the basis of IT Kontrakt.
Tomasz Pyrak: Thanks to an investment by Oaktree Capital Management and Cornerstone Partners, in 2018 we started building the IT Services Competence Platform. We’re creating a capital group whose development strategy will be based on an intensive M&A program and fast organic growth in the Group’s companies. The goal is to create a global organization offering competences, expertise and software solutions for clients from Scandinavia, the DACH countries (Germany, Austria, Switzerland), the UK and the U.S., through our own delivery centers located in CEE countries and Asia.
The first stage of our project was the acquisition of the Polish software house Solidbrain, and also CoreValue, a technology company with its headquarters in the U.S. and software and services development centers in Ukraine and Poland.
There are more acquisitions ahead of us. At the moment we’re finalizing discussions with a German company specializing in digital consulting.
Szymon Augustyniak: Many companies in the IT outsourcing space are expanding their markets and competences through acquisitions and trying to create global platforms. Not all of them manage.
Tomasz Pyrak: In the IT sector, borders between countries don’t mean a thing anymore, and such projects are interesting for the market. We’re watching the competition on a global scale; we’ve closely analyzed about a dozen such initiatives. The companies are now for sale, being split up or in the best case are struggling with internal problems. In the case of projects that have failed, they were federations or consortia of various forces. In this latter case, the key mistake was adjusting the acquired companies to the entity chosen as the most important. Meanwhile, in federations, cultural misalignments made it impossible to build synergetic platforms in terms of the product offering and way of working.
The project we’re working on is unique. Our approach is what makes us different. Our working name, the IT Services Competence Platform, points to the heart of the matter. First of all, we work around the matrix of technologies and market sectors that are strategic for us. Secondly, our acquisitions are based on filling this matrix with assets. After each acquisition we evaluate how the Platform is changing, how well it fits with our strategy. Of course, the company being adapted to our organization also goes through an integration process. Thirdly, there’s no core entity that’s the most important and has a deciding vote: By definition all the Platform’s partners are equally important. That’s our advantage.
Szymon Augustyniak: That sounds very nice and democratic, but does this kind of equality actually work in business?
Tomasz Pyrak: First of all, it’s pragmatic. We maintain the overarching goal: strengthening the Platform’s strategic matrix. There has to be synergy and cross selling for clients in the region and around the world. We’ve defined three strategic sectors: automotive, healthcare & pharma, and banking & insurance. At the moment we specialize in eight main technologies: cloud, DevOps, security, data science, ERP, AI, CRM and enterprise app development.
Szymon Augustyniak: But every acquisition changes this structure a little bit. What’s the key to an acquisition? Complementary competences, the client base, maturity or financial and organizational standing?
Tomasz Pyrak: Of course, each acquisition doesn’t just strengthen but also enriches the strategic matrix. We’re already serving six sectors, but the three I mentioned are still strategically significant. In the acquisition process, in addition to hard due diligence we place great stress on the team of people in the companies that are joining. This is a key element of the integration process. We confirm that they fit with our company’s concept of organizational culture. Contrary to appearances, this is also pure pragmatism. It happens that a company is a fit technologically, but there’s a cultural difference, and then it makes no sense to buy it. Fitting together the cultures of very different organizations is exceptionally difficult, or even impossible.
Szymon Augustyniak: What are the benefits of this model for clients?
Tomasz Pyrak: In this model you can do unique, custom-tailored things, and do them globally. That’s a significant change. Thus far the company has been visited by a number of consultants, most often from the Big Four, and after examining the situation they’ve left recommendations for solutions. They should have been taken to a software house that was trying to implement recommendations even though it didn’t necessarily agree with them. Our first step is to examine needs. On the basis of that analysis we recommend solutions and we’re able to deliver them. We can also take greater responsibility and maintain this solution. Our developers understand and support the recommended solution with the right architecture, and then carry it out. The platform as a whole is able to service giant corporations.
Szymon Augustyniak: Are those the expectations of the IT Services Competence Platform’s clients?
Tomasz Pyrak: They place a lot of stress on us being able to support the solution – creating and maintaining it – around the world. Our project portfolio includes long-term contracts with applications supported around the clock, follow the sun or follow the moon, back-end or front-end, depending on the client’s needs.
We also have the ability to carry out both simple and complex tasks. The client can tell us: After building a complex, global solution, take the simplest first line of servicing the solution, so we don’t have to teach 3,000 of our people to do it. In this situation we open an office in India; we scale up to mass-scale first-line service. From there we’ll service English-speaking clients, and from Poland – German-, Spanish- and French-speaking.
Szymon Augustyniak: How many clients expect full service? Have you already taken IT off somebody’s shoulders?
Tomasz Pyrak: This is the clear tendency. We have clients who have decided that they’ll keep control over architecture and analysis, but they don’t want to build or maintain solutions. A year ago in managed services we worked for 30% of clients, and this year that share grew by an additional 20 percentage points. The longer the relationship, the greater the confidence and the more functions we take over from our business partners.
This approach in turn ensures the quality of the software. Nobody wants to sign a 10-year maintenance contract for badly written systems that can’t develop further. In our model, maintenance transforms into a process of scrum mini-projects improving functionality. That’s a fundamental advantage, using optimization potential.
Szymon Augustyniak: Entering the global league with a new model requires credibility. Does it work?
Tomasz Pyrak: Meetings with current and potential clients are the most important. Additionally, client recommendations are underappreciated. Our future partners want to speak with our current ones. For example, we have a wide range of cloud transformation projects. This is a complex process, full of pitfalls. In this area we’ve managed to achieve great proficiency. But there’s no way to just describe this. You can talk about it, ideally through the mouth of the client. As a rule, we’re not even present at these meetings. That makes an open discussion easier, because the potential partner isn’t so much interested in a specific solution as in how the project went. How the technological partner deals with problems.
Szymon Augustyniak: What will be the most important event in the next two years?
Tomasz Pyrak: Integration of all the Platform’s member companies is very important. At the moment we employ more than 2,400 highly qualified engineers, and we’re operating on several markets. This year we’ll have another three acquisitions, and over the next two years, six or seven. The goal is to expand the organization to 5,000-6,000 engineers. That will ensure the model’s endurance, quality and stability.
Szymon Augustyniak: It will be a challenge to make people aware of the benefits of this model.
Tomasz Pyrak: We already have an established position in the U.S., Denmark, England, Sweden and Norway, but in Poland we’re still largely associated with staff augmentation. Meanwhile, we get 50% of our revenues from additional services. This situation is changing, but it requires partnerships, giving us access to investigate problems, and not just providing a remedy to those the company has diagnosed on its own. Strengthening our image as experts and reaching clients’ awareness as a technological partner is our goal. Our strategic partnership with the CIO Club brings us closer to this goal.
Szymon Augustyniak: Thank you, I’ve been affiliated with the CIO Club for 10 years and it’s very nice to hear that. I wish you success in your unique effort to build a global platform. Thank you for the conversation.
See the original text in Polish
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