Smart Practices

By Bob Violino

November 2008

Borderless IT may sound easy, but international service provider provider Luxsoft's CIO Gavrilyuk puts theories to the test every day.

Ivan Gavrilyuk

Operating a business on a global scale is nearly a given today. Supply chains extend into the far corners of the world, where customers and business partners collaborate on a 24x7 basis. And it's all fueled by IT.

While it's increasingly apparent that seamless, global operations are the goal, reaching that point is no easy feat. Even the best CIOs and CTOs charged with managing globally dispersed business units, providing reliable connectivity, and delivering critical applications without a glitch may spend some sleepless nights worrying about how to execute their plans.

Luxoft, a fast-growing technology service provider, understands both the opportunities and the challenges of borderless IT. Although its business is unlike many because of its high-tech orientation, the corporate structure may provide a framework that other global IT operations — especially those offering IT services to remote partners — can follow. The company not only built its own IT infrastructure to support a global business strategy, but it is also an integral part of the global IT economy.

Luxoft is staking a claim to a market where many Indian IT service providers already have strong footholds. Based in Moscow, it offers IT outsourcing services to major multinational clients, including Caterpillar, Citibank, Dell, Deutsche Bank, UBS, Thomson, the U.S. Department of Energy, Boeing and Sabre Holdings.

Services range from application development and maintenance, product engineering and embedded systems development, to software quality assurance, IT infrastructure management, and architecture and security consulting. Forty percent of its employees are based in Russia, 35 percent in the Ukraine, 20 percent in Romania, and operations are growing in Asia, Europe and North America as well. While each office has its own IT staff, Moscow serves as the corporate home office, with about 1,000 employees located there.

Michael Bykov, Chief Technology Officer, Luxoft

The company has flourished at a time when worldwide IT talent is scarce, costs are escalating and demands are rigorous. For the fiscal year 2007, ending in March, Luxoft Holding posted a 48 percent growth over the previous year. Revenue was $106.7 million (USD), up $34.6 million from the previous fiscal year. (See sidebar for more about current outsourcing trends.)

"Initially, Luxoft started working in new locations for better talent, scalability and cost benefits," says Michael Bykov, Chief Technology Officer. In the Ukraine, for example, "We found a lot of [programmers] with engineering, embedded [systems] and automotive knowledge," he says, which resulted in better customer satisfaction. But a multicountry presence yields many other benefits as well. "We also find new business development opportunities" in new locations, he says. Many of Luxoft's clients have shifted their development centers from Moscow to the Ukraine as a cost-cutting measure, for example.

Local and Global Benefits

The extremely decentralized business model is a competitive differentiator that offers options and cost benefits to customers. It's also one that multinational companies in all industries can emulate. Project management, architecture and business analysis can be done in Luxoft's U.S. or Canadian office, for example, while application development might be carried out in the Ukraine, and testing done in Russia. Luxoft also has branches in Romania, the United Kingdom and Germany, and this year opened its doors in Vietnam.

The company finds "the concept of a near-shore front team and an offshore development team very useful," Bykov says. The model ensures quality, and the teams work with local resources for some tasks, "removing any communication obstacles," according to Bykov, but other tasks are done offshore. The Luxoft teams collaborate closely so that goals are clearly understood, projects run as expected, and services are delivered as promised regardless of geography. English is the primary language used throughout the company.

Additionally, a two-tier operating structure accommodates the global operations. First-tier locations have offices in large cities, such as Moscow, Kiev and St. Petersburg in Russia, and Vancouver, B.C. These offices are responsible for all client communications, overall management and critical application-development functions. Their teams are made up of senior professionals, and the facilities are easily accessible for Luxoft's clientele. Second-tier locations — including regional delivery offices in Omsk and Dubna in Russia, Dnepropetrovsk in the Ukraine, and Ho Chi Minh City in Vietnam — are primarily for development, testing and maintenance services, and are managed by local executives, Bykov says. "Having multiple locations allows us to be closer to the client and bring value and cost benefits at the same time," he says.

For example, a client in London cuts travel time and expenses significantly when working with Luxoft's Romanian team instead of with an Indian company. In addition, Luxoft says its clients gain access to 700-plus Romanian software development specialists, as well as to the overall global pool of IT specialists.

Proximity to clients is a plus, agrees Jerry Durant, managing director of Certellus Corp., an analyst in Winter Springs, Fla., that also provides consulting services. "Clients are looking for every opportunity to reduce risk, and a near-shore presence offers them a degree of risk reduction," he says.

IT support and automation "are key elements of every process at Luxoft," says Ivan Gavrilyuk, CIO and CSO. Therefore, the IT organization is closely involved in all business processes — from purchasing policies and operations, to designing and implementing project environments for development teams, he says.

The company operates data centers in Moscow, Kiev, Bucharest, Omsk, St. Petersburg and Dubna (which is also used for business continuity purposes). As it grows, Luxoft plans to develop additional data centers in Vietnam and elsewhere in Russia in the near future, Gavrilyuk says.

Collaboration, Communication Challenges

Online collaboration technology, as well as voice and video conferencing systems, plays a huge role in enabling dispersed technical teams to work together effectively. LUXproject, the primary collaboration environment, is used internally and for clients. Developed in-house, it's a Web-based system that allows Luxoft's distributed development teams to share work and communicate more easily. "All project documents, source code, tasks, issues, requirements and defects are tracked online, linked to each other and [are] available not only to the team, but to the clients as well," Bykov says. It's an efficient and useful tool for global development projects, he says.

Even with in-house software expertise and good tools, successful global communication can be difficult. "One of the greatest challenges is communication and language," Bykov says. The company has "English teachers on staff in our offices to provide training for all personnel levels." In addition, seminars and training sessions are offered for all managers to improve communication skills and understanding of cultural differences.

With open collaboration, security is another big issue. Luxoft's IT department ensures information security for its own operations and for clients through a set of measures that include virtual private networks (VPNs), physical security, network security, and network access restrictions based on roles.

International standard compliance is important, too. Luxoft is ISO 27001-certified, which allows it to work with clients in finance, manufacturing, aerospace and other industries where security requirements are very strict, Bykov adds. In addition, all support processes are built according to IT Infrastructure Library (ITIL)® best practices, and are held to demanding service level agreements.

Many of the IT challenges Luxoft faces arise at the setup of a new customer's environment or with the opening of a new branch office, Gavrilyuk says. Typically, it takes one to two weeks to get a new customer environment running smoothly, and up to two months for new offices.

"But throughout the past seven years, we have been treating [these openings] as new and interesting tasks," Gavrilyuk says. "We really see nothing that cannot be solved." This healthy dose of confidence — added to fine-tuned multinational IT operations — may help Luxoft succeed in its global business mission.

Bob Violino is a New York-based business and technology writer.

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Ask the Experts

Ivan Gavrilyuk, CIO, Luxoft
Ivan.gavrilyuk@smartenterpriseexchange.com

Ivan Gavrilyuk holds a master's degree in science, specializing in computer methods and physics. He started his career at Oriflame Cosmetics Ltd., where he was responsible for all IT infrastructure and corporate information systems. After joining Luxoft in 2002, he was instrumental in the opening of five new offices, where he designed and implemented the integrated IT infrastructure. He was also responsible for IT infrastructure development for several dedicated delivery centers for clients, including Dell, Deutsche Bank and Boeing.

Michael Bykov, CTO, Luxoft

Michael.bykov@smartenterpriseexchange.com

Michael Bykov graduated from the Moscow Institute of Electronic Technology with a Ph.D. in computer science and a specialization in Web component-based platforms architecture. Upon joining Luxoft in 2004, Bykov was charged with managing mission-critical projects. Later, he was appointed head of Luxoft's Project Services Group. As CTO, Bykov is responsible for technology leadership within the company, including core and new services roadmaps, and new platforms and solutions.