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EPAM, a midsize, $800+ million service provider, is growing faster than the market. And it’s achieving this notable status in a mature application space where others have struggled and also in a services world that favors scale and size. What is its secret for beating the odds and seemingly defying gravity?
At first glance, EPAM shouldn’t be able to succeed. Its customer base is large enterprises with mature sourcing models. And although it has an arbitrage value proposition, it uses Eastern European resources, which are more expensive arbitrage than available in India. Yet it achieves attractive margins and is quickly growing.
EPAM succeeds because it has a highly differentiated value proposition around its talent model, client intimacy and capabilities. It’s a compelling story.
It delivers against the traditional pyramid offshore factory model with its incumbent churn. EPAM provides, instead, talent from Eastern Europe who have deep engineering skills and are more technically savvy. Once it puts a team in place, it keeps that team in place; so there is low turnover in staff. This positions EPAM as better understanding its clients and bringing a more stable, higher-productive, knowledgeable team than its competitors, with deep customer and technical knowledge. They don’t take over all the operations; they focus on highly technical applications that tend to be mission critical.
EPAM succeeds because it hits the market with the right differentiated story and a set of capabilities, messaging and business practices that align well for large, mature companies. In today’s mature market, EPAM presents a nice counterpoint to the big Indian firms. And they are taking share.
“Sir, sir – a monkey pooped on your shoe!” was the first thing that brought my attention to the large, wet mound on my casual walking shoe.
Not a convenient development when walking around Connaught Place in New Delhi.
Interestingly, the next thing I heard was “Shoe shine – only 500.”
Despite the jet lag, I was able to immediately recognize the scam. The fact that the same person who pointed out the poop before I noticed it also happened to have a shoe shine kit was a pretty good clue. Never did see the accused monkey, although I strongly suspect it was actually the person who I begrudgingly paid INR 500 for that shoe clean-up and shine!
I filed it away as a humorous lesson and forgot about it until mentioning it some colleagues in our India office the next week. They were aghast and surprised that I would pay so much for the shoe service (about US$10 at the time, and 20% of the value of the shoes – which I had never previously considered deserving of a shine). From their perspective, I had paid far above market value (10-15 times the market rate) and should have negotiated the price down. From my perspective, I had no idea of the market price and just wanted the issue fixed quickly despite knowing the painful truth that the source of the problem was also the solution to the problem.
I was recently reflecting on this for reasons completely unknown to me (er, might have come about while changing a baby diaper…you get the idea). I was struck by the fact that my colleagues, the shoe shiner, and I all had different thoughts upon the value exchange. In an effort to demonstrate exactly how much I over-analyze life, I distilled this to three lessons.
The shoe shine from my perspective cost US$10 and allowed me to get back to enjoying the sights and sounds of Delhi. Frustrating, but well worth the money from a functional perspective that had nothing to do with the shoes themselves, but rather to remove a nuisance and enable me to do other things. From my colleagues’ perspective, it was 10x the market rate. From my experience, it was about 2X the market rate (US$5) in the U.S., so I did not mind the rate too much. If I had been asked to pay 10X the U.S. rate or US$50, I would have resisted and likely gone ballistic. For the shoe shiner, ignoring raw material costs of the poop, it was tremendous profit and a highly valuable exchange.
Depending upon one’s perspective, the financial price of a value exchange and the utility from the value are viewed differently.
No wonder we struggle to put a price to value in outsourcing!
Although the shoe shiner definitely helped solve the issue and did so quickly, I could not be pleased with the value received; the context of the need for the services completely undermined his shoe shining contribution.
If this had not been a scam and I accidentally stepped into something and a shoe shiner happened to be nearby and solved the issue, then I would have thanked him profusely and happily paid the INR 500. However, instead of thanking him, I left grumbling and scowling because of the context in how the value was created for me.
In other words, if you cause the problem, your perceived value in solving the problem is less than if you solve problems created by others.
After starting to reflect on this, I pulled out these old shoes (see photo), which I have not worn much in recent years. Ironically, they look pretty good. In fact, I believe the leather is softer and better looking than when I first bought them. They have also avoided collecting as much dust as before the unplanned shoe shine.
In other words, they benefited from the shoe shine and it appears to have been a decent shoe shine.
But I can’t give the shoe shiner any credit for this because the experience was such a turn-off.
So, solve the problem, but also ensure the experience of problem resolution is appreciated by the recipient.
Outsourcing is fundamentally a service provided by one complex organization to another complex organization. The situation is ripe with many factors (mis-communications, mis-aligned stakeholders, budget pressures, turnover, etc.) to limit the chance for perceived value exchange between organizations. Although we need to ensure the work completed creates value, we should not forgot that how we treat each other and manage our interactions can completely undermine the appreciation of value. If you solve a problem, don’t expect credit if you created the problem – solve problems beyond your scope. If you solve a problem, don’t expect much credit if the experience is suboptimal – own the problem and the service experience.