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I love stories like this because it tends to result in a "Who??" from all over the place and reminds us that, yes, you too can be a multi-billion dollar company
by petercooper 6y ago
I love stories like this because it tends to result in a "Who??" from all over the place and reminds us that, yes, you too can be a multi-billion dollar company with very modest mindshare in the broader industry.
- qaq 6y agoIt's outsourcing company there is a decent number of them. Many from small Eastern European countries like EPAM Systems from Belarus (Stock: EPAM) Mkt Cap 22.55B. They tend to have HQs in US fo obvious reasons though. Surprised there is not much invest in this space as you can grow one pretty rapidly to a fairly large size.
- 55555 6y agoWow, impressive. Probably not much interest because they trade at a low multiple, but that's quite the company. In my experience the quality of the experience you get when working with a software consultancy/dev shop is inversely correlated to the size of the firm. But I guess it works for others.
- azinman2 6y agoThey probably have enough processes in place and enough longevity to be able to get government contracts, big corp contracts, etc.
- tstrimple 6y agoI've seen the same pattern as well. Growing dev teams quickly without quality drops is difficult. At some point, if you're successful enough in that space, your need to bring in more bodies outpaces your ability to ensure you've got good staff and processes.
- varjag 6y agoEPAM is there for soon three decades, I dunno about "quickly".
- qaq 6y agoThere is a good bunch of companies that got to Billion plus land much quicker than a decade. It is very feasible to do it in 5. You have to realize that most of them were bootstrapped and to grow you need enough resources to have a decent sales office/HQ in US which is out of reach for a long time unless you start with a very solid financial backing.
- varjag 6y agoIf you read my reply in the context I wasn't saying it in a negative way.
- imtringued 6y agoIf you don't have qualified staff then that should be part of your business model and you should be honest about it to your customers. Of course what happens is that managers ride on the reputation for some short term money.
- qaq 6y agoIt's way lower risk and if you can grow 50M into billions thats pretty much Unicorn level returns
- dopidopHN 6y agoI work with them on a regular basis. You are correct, talented folks. But they get the short end of the stick when it come to who does what. Moral is not super high.
- jan_Inkepa 6y agoI like that they chose the name "Effective Programming for America".
- AlotOfReading 6y agoIsn't EPAM a consulting company? I didn't think they designed their own products to outsource.
- Yizahi 6y agoThis distinction (and naming) is really not strict today, especially when total corp headcount exceeds a few thousands. One project may be pure software consultancy, another may be a a complex solution, yet another can be a hardware project inside the big corp (so if it was a separate entity it would be called a product company or startup). People can be outsourced or outstaffed or anything in between. Basically in a case of 10k outsourcing corp it is pointless to think about it as a single entity, it's a collection of projects each managed differently, with different expertise and different share of in-house development, from original products to dumb legacy support.
- ridethebike 6y agoDisclaimer: former EPAM employee (early 2010-s). Such big* consulting/outsourcing companies in Eastern Europe(epam, globallogic and the like) have competent engineers. I can see it especially clearly after moving to the US and having to interview engineers from other big consultancies. *big - everything with several k employees is considered big in Eastern Europe.
- wil421 6y agoThe Big 4 consultancies hire college grads give them basic training on the big cloud platforms and then fill up projects. Otherwise they hire cheap engineers from Eastern Europe or India. They are not looking for experienced engineers. At least in the Technology Advisory space.
- MangoCoffee 6y ago>The Big 4 consultancies hire college grads give them basic training on the big cloud platforms and then fill up projects. that's correct. i went thur that with Avanade. they teach us some basic about the security system that they implemented for their client and client ask for tech support and guess who they send.
- raincom 6y agoThat's how these offshoring consulting companies make money: for every 7 fresh undergrads, there is one senior person. They pay $3500 per annum for these cheaper resources; the senior resource gets paid about $16000 per annum. Profits for these consulting companies come from these $300 per month resources.
- texasbigdata 6y ago$300 per month for an undergraduate? Genuinely seems a bit low
- imtringued 6y agoThere are countries in Africa that pay more than that for unskilled manual labor. Even the cheapest software developer should be able to get $1k before tax per month. Of course I am assuming that these people actually became software developers, if those 7 juniors are merely trainees who haven't written a single line of code in their life then that salary may be justified.
- redisman 6y agoSame reason that WeWork was magically worth 100x equivalent real estate companies because Adam Neumann was so cool and quirky.
- redis_mlc 6y agoI talked to some non-real esate people about We. They couldn't separate the fact that WeWork offices seemed like a good idea overall from also being a financial dud.
- reader_mode 6y ago> Surprised there is not much invest in this space There is - huge spike in demand for talent locally in the last 5-10 years as this business model started becoming popular. Also seeing smaller agencies being acquired by larger ones in some decently sized acquisitions recently. Initially the local IT sector was undeveloped, there were quite a few good engineers working in really poor condition, the only decent option was relocating to Western Europe. So there were experienced developers available for cheap, and, compared to India, Central/Eastern Europe is closer to US (some overlap in work hours), usually a much nicer destination to travel to for offshore offices (depending on the country, Croatia for example is a really nice tourist destination, good English level and the culture should be more familiar). So initially that higher quality talent got absorbed at below market rates (especially for US standards) and there were quite a few success stories and reputation builders. But now as this model expands competition is driving up the price locally as well - there just isn't enough people to outsource - they are starting to scrape bottom of the barrel talent, asses-in-seats, straight out of college Indian code farm model with all the problems that had. Also portals like toptal made it easier to skip these agencies and work directly for clients so now the agencies have to compete with that for talent. I think the peak for this agency model is behind us and I think the quality has started to drop (there were a few smaller agencies that built their reputation like I described above and had great success, they used availability of local talent to built respectable teams and getting hired there was a resume highlight, sort of like getting hired at FAANG on a local level. Nowadays they are hiring people they would screen out after an initial call and it's selling asses in seats, cashing in on built reputation)
- missedthecue 6y agoSame goes for Hitachi... I thought they mainly dealt in heavy industry like Caterpillar. They seem to be more of a Samsung.
- nolok 6y agoAs a rule of thumb Asian giants tend to deal in everything. Especially true for Japanese giants (which is weird, since for Japanese companies it's also common to find small giants that deal in one thing only and never integrate). Especially especially true for Korean giants.
- DoofusOfDeath 6y agoAgreed. Hitachi makes a rather famous "muscle relaxer" called the Magic Wand.
- Ftuuky 6y agoFrom magic wands to self-propelled mortars, Hitachi manufactures pretty much anything that has enough market demand. https://en.wikipedia.org/wiki/Hitachi#Products_and_services https://en.wikipedia.org/wiki/Hitachi#Products_and_services
- MangoCoffee 6y agoyup. i didn't even know Hitachi is in IT. (https://en.wikipedia.org/wiki/Hitachi https://en.wikipedia.org/wiki/Hitachi) so many Global IT houses like IBM, Avanade...etc. is IT outsource/consulting pie so large to feed all these companies?
- dcolkitt 6y agoI would honestly love to read a write up from somebody closer to the source, what the hell do all these companies do? I’ve been in tech and tech-adjacent companies for over a decade. And not once have I or anyone around me ever thought “we really need some IBM/Hitachi/Avanade products now”. What value proposition do firms like this actually fill? I’m genuinely curious.
- namdnay 6y agoThey’re outsourcing firms
- ab_testing 6y agoI have worked in this space for a long time . Most of these companies implement COTS software . So if you want to implement Oracle, SAP, Salesforce, Service Now , JIRA or other such enterprise software , you will invite bids from these consulting companies for implementation, support and SLA .
- keypusher 6y agoThe short answer is that they deliver solutions and support. What they sell, primarily, is the ability for someone at your company to call them and say "we have problem X" and they will respond "no problem, we can solve problem X for you", and they will take care of the rest. This usually costs millions of dollars. Let's say you are a large Fortune 500 company. A bank perhaps, a large retailer or an oil company. Your net worth rivals Amazon. You do not use AWS or GCP, you host your own data centers, and you have for decades. Now let's say you need another few petabytes of storage with global replication, durability, availability, you need hardware delivered, fibre cables routed, software to tie it all together and someone to call when you run into problems or someone on your backend application team can't figure it out. Or maybe you need Oracle and SAP integrated with Active Directory for your 100,000 employees. Well, these companies will make that happen. Or many other problems you might have, such as building custom applications, implementing tooling, designing systems, whatever. It's kind of like asking "who employs all these personal chefs?! I've been eating for years and I've never needed a personal chef. I just go to the store, buy some groceries, and make food from the recipes I find online!" The thing is that some people just don't want to deal with all that, and they have enough money to make it someone else's problem who has done it before.
- spaetzleesser 6y agoThat’s pretty common. There are a lot of super successful companies that do good business without any mention in the media. I think a lot of SV companies are very dependent on media coverage to get their valuation up. Especially since they don’t have an idea how to make profits.
- dna_polymerase 6y agoThe Silicon Valley rockstars you are talking about are usually customer facing, therefore media coverage is of interest for a broader mass. GlobalLogic provides services to companies, which makes them less commonly known. Meanwhile Hitachi is known in a certain niche at best...
- fireattack 6y agoI honestly think Hitachi is well-known even for average people (not for IT division though). Not Sony level for sure, but isn't exactly niche. But maybe it's just my bias too.
- okl 6y agoI think so, their name is on a lot of construction equipment.
- pySSK 6y agoThey also have the Hitachi Magic Wand vibrator, which is commonly known as just Hitachi. The brand was also known for power tools but that's not a part of the company anymore and is being rebranded to Metabo.
- sangnoir 6y agoNo - I'm afraid you are mistaken: what Hitachi sold was a "massager" - they were "distraught" to discover it's salacious "alternative" uses as it harmed their brand. Hitachi only agreed to continue selling the product as a joint venture (IIRC) if they removed the Hitachi name from it. So it's rebranded as just the "Original Magic Wand" now - no Hitachi :)
- flycaliguy 6y agoPlenty of people saying “who?” because they only know the sex toy I suspect.
- antonvs 6y ago> you too can be a multi-billion dollar company with very modest mindshare That's in terms of valuation, not revenue. GlobalLogic has barely hit $1 billion in annual revenue. Its FY 2019 revenue was $771 million, according to [1]. It's projecting $1.2 billion for 2021. It has somewhere around 17,000 - 19,000 employees, which works out to somewhere between $40k to 60k revenue per employee per year. And that's not even profit. (As a completely unfair point of comparison, Google's revenue per employee is upwards of $1m.) So a $10bn valuation is just ~18,000 people, times ~$55k revenue per person, times a 10x "times-revenue" multiplier for the valuation. I think a lot of the surprise at unexpected multi-billion valuations comes from the perspective of how big $1bn seems to an average individual. But it's not that big once you do the math for companies with 10,000+ people. [1] https://www.prnewswire.com/news-releases/hitachi-to-acquire-globallogic-a-leading-us-based-digital-engineering-services-company-301259254.html https://www.prnewswire.com/news-releases/hitachi-to-acquire-...