Tech Unboxed
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Tech Unboxed
South Africa As A Rising Tech Outsourcing Hub
Tech Unboxed with BBD.
SPEAKER_02:Welcome to a new unboxed episode. And today I'm with Matthew. I'm your host, Kun. And Matthew, who are you and what do you do within BBD?
SPEAKER_00:My name is Matthew Barnard. I'm an executive director of BBD in Europe. And my role is actually to grow the software offering we have from South Africa, you know, through into Europe, in including UK in the larger, larger Europe area.
SPEAKER_02:Yeah, and a little bird told me that you're working on a research paper, and there has been some recent events where clients or now new clients have been using ChatGPT asking about outsourcing in general. Can you enlighten us a little bit on that topic?
SPEAKER_00:Yeah, I think it's um it's quite it's quite interesting. Um yeah, we had off had our first um actual new client opportunity that actually came via somebody doing some res their own research on chat GPT, which was like a first for us.
SPEAKER_02:Super interesting, right?
SPEAKER_00:Quite excited about that. Um, and they were quite excited as well. So it started off where they're a German company um and they were looking for interesting um areas that they could outsource to. They currently do work in from Germany into Eastern Europe, into the Philippines, and a few other countries. And they were doing their research and using Chat GPT, they came across South Africa and BBD as an option, and they were like, oh wow, this is interesting. Um, we went through a process with them and now we're doing work with them. But um, yeah, quite interesting that that um that came up. Um what's what's interesting as well is we're starting to see more and more of those opportunities come through the various chat GPTs or Google Gemini's for people looking for alternatives to where they're currently doing it, outsourcing or near shoring.
SPEAKER_02:And is that is that what the research paper is about?
SPEAKER_00:Yeah, so I think based off the off the back of that and and what we've seen over the last um last 18 months or so, we've seen increasing interest coming from um coming from Europe. People have been querying, like, you know, who is South Africa, what is South Africa, are there even people in South Africa that can do outsourcing and that? Um, and based off that that interest, you know, we were like, okay, well, let's understand why why we suddenly starting to see this influx of queries. And when when I sort of dug down into that, was doing research on it, it seems that many companies have obviously been doing, um, I think you know, it's been the last 10, 15 years, I think India was a big outsourcing area. And then um more increasingly, um, recently is um Europe has been that. So it's specifically Eastern Europe. But I think Poland has been leading that charge for like the last 10 years or more, where you know, really good staff and and um and people and companies coming out of Poland. But um what we've seen seen recently is is many companies are going is okay, um Poland's getting or Eastern Europe's getting more expensive over time. Are there other areas that we can explore? And as part of that exploration, um South Africa's obviously coming up as a as an option that not many people have really explored before. It's quite interesting.
SPEAKER_02:What would be the most important factors for a typical European CTO to put in the to look at uh different options of outsourcing or software development in general?
SPEAKER_00:I think um it's it's really around what they're looking for, looking for and what they they come to is obviously what they were looking for is very good technical skills. So I think the base of most things are how do we get access to really, really good quality technical skills is one thing. The second thing they're looking for is is language. You know, software development is really all about communication. Um and so language, especially ability to speak English language, is very, very important, important and have good knowledge of that. Um, time zone is important as well. Having people that are within one or two time zones of where you are is quite important because you want people, if communication is important, you want them working at the same time as well. So communication and language is very important. And obviously, cost. Cost is always uh always a key part of the equation. Um, but balancing it with those other things is actually quite important. So those are the key factors that looking for. Um, the other the other aspect is risk mitigation. So having you don't want to have all of your eggs in one basket in terms of one country or one um one company. So they're looking for like, you know, how can I spread my risk a little bit? You know, do some work with this company there, some work a little bit more offshore, some work closer, closer to our company. So how do they balance that um that mix of of where their vendors are working from?
SPEAKER_02:Is that the famous hybrid mix that people talk about in the industry?
SPEAKER_00:Yeah, yeah. They talk so people talk about hybrid, yeah. So how do we have people that are really close to close to our office, um, potentially can work very closely with us in a in a meeting room at a whiteboard? How can we get other people that are possibly within Europe? You know, so issues like GDPR and data privacy and that become important. We may want them to be within the within the legal construct of Europe. And then how do we actually have like outsourced offshore um uh people and companies that we can work with that maybe give us a cost advantage as well? And how do we mix those together in like a hybrid way? Um, but also when we talk about rightshoring, is how do you make sure you get the right people in the right places with the right skills that are giving the the company the benefit and advantages that they can get from that?
SPEAKER_02:Matthew, you mentioned uh a few um parameters to look at um where you should outsource. I guess you forgot the the sun, the nice weather. Um I'm saying that because in the list there is also, for example, the south of Europe that comes in very often. So, what's your view on the south of Europe? Where there's obviously a little bit more sun than in the middle.
SPEAKER_00:Yeah, yeah. Um yeah, so I think, you know, so we've we've recently um started um have a development team development hub in in Portugal in in Porto. Um I think as companies have been um been looking as to where they could potentially create and and find high skills from, the the obviously Eastern Europe has has got a lot of skills, but it is quite saturated and the costs are increasing. So they're looking for like Southern Europe on that. And Portugal's come up as quite a good option. I think it's been known for a number of years. People haven't really sort of taken to it sort of fully. But we have noticed in the last um, I suppose two or three years that Portugal's getting a good reputation. They've got uh quite a decent amount of capacity in terms of IT skills and that in the country. Um, the education system's quite good. You know, from a language perspective, Portugal's English language is is very good. Um, and um so it is a good is a good good option. And from a price perspective as well, it ticks some of the boxes when it comes to cost as well. So Portugal's definitely a rising area. Um and that's why we as BBD we've invested in terms of um having a having a development hub there and starting to be built skills in that region. You know, so we're trying to make sure that how do we have people based in UK Netherlands near our clients, near shore option in terms of Portugal, so that's southern Europe's option, and then also from South Africa and also from India as well, so we can actually um package together those skills from various countries to put a unique offering to our clients.
SPEAKER_02:To go a little bit further on the nice weather and the sun, I think we talk about pools, uh, in this case talent pools. How does how do the tenant pools compare with all those different regions? Is there any difference in speed of hiring, access to experience, potentially engineers? How could you compare them?
SPEAKER_00:Yeah, um so so in the research that we did, um Portugal um sorry, Poland came out um came out with a really good offering, and Poland has approximately over 500,000 um technical or software engineers in the country, and quite big. If you compare that to Portugal and South Africa, Portugal and South Africa probably about 200,000, approximately 200,000 or so. So less than Portugal, but still quite substantial in terms of 200,000. The other part as well is that is um we need to look at like universities and how are those talent pools actually growing. And so when you look at that, um uh uh Poland has about 15,000 graduates in in um STEM subject science and technology um coming through. Um South Africa about 7,500 a year, um, and Portugal about 9,000 a year. So South Africa and Portugal are quite similar in terms of the size, the capacity of the market. Um one thing that we've been doing in BBD for a long time, BBD has been going for 40 odd years, but we've established in South Africa is to get access to those, that talent pool is really important. And so we really built up a really strong grad program where we don't just employ grads as they come out of university. We actually start in terms of looking at them from schools all the way through university and making sure we're able to pick up the best talent to come into our come into our company. And we have, you know, sometimes between minimum for 50 or so, up to like over 100 grads that we bring in each year, and make sure we train them up and give them access to that best talent. That's a key thing. It's it's about the size of the market, but also your ability to actually access the best talent in the market.
SPEAKER_02:No, no, absolutely. And that brings me a little bit on beyond the salary levels. It's not just about that cost, that there's so much more that that comes that comes to the picture when you talk about outsourcing. So, what is it that companies really need to look at? And how do they also um make sure that the quality remains at the all-time high?
SPEAKER_00:Yeah, um I suppose that the the talk around sort of quality and that is I think um and at the starting point, I think, is communication. Um, so communication, language, um the ability for all the people, all the members of the team to be speaking uh common language and in software development throughout Europe and throughout the world, to be honest, it's actually all about the ability to speak English really well. But language is part of it. Um it's actually the culture and understanding is you know, even though you speak in the same language, do you actually understand what each other is actually saying or inferring? That's really important. Um, and obviously the time zone um linked to that is is is important as well. So are you able to work together at the same time? Another thing we say is is quite important as well is um is getting the team to actually know each other. So actually, how do you, even though you have remote teams, you actually need to bring them together at a point, especially early in the project or early to the start of an engagement, to get them to know each other socially and personally. Because actually, when you know people like that, then the communication actually increases when you're talking on a video conference call with somebody if you actually know them as an individual. And so getting that right from the start of a project is is really important to something we we really push. Um and then often with teams and that, you want to get quality across the teams, across the regions. You want to start off with a really small team to start with, a small team of experienced engineers. They establish the sort of patterns, the practices, the way of work that team will work in. And then you then expand that team to bring in more intermediates and junior staff. So starting off with a small experienced team and expanding is something that's very important to do as well. And then um just making sure that that experienced team is just setting up those really quality engineering practices from the start. So when you're bringing people from different regions that may have different experience, um, they're actually then um aligned with what the the patterns and the practices are and the quality standards are. So that's quite important to to get in place to make sure that you're getting a good high-quality team that um that can um add value to the client.
SPEAKER_02:So working in such a hybrid model, uh combining teams on South Africa with with European uh clients, what would be your number one uh best practice that you could give to companies using outsourcing?
SPEAKER_00:Um quality, the look at the quality of the the quality of the actual staff and the experience of the company. You know, so what you're looking for is um is a company that's done it before, is mature, has experience of doing this, because there's the practice of doing outsourcing, you have to be experienced at, as well as the quality of the staff that you have. And so those are important things to to actually actually consider. So it's a it's a skill and art to be able to run an outsource team efficiently. And so what you really want to look at, and I read a report the other day as part of my research, there's a there's a report from a company called Accelerance in the US, and they've got a their CEO is a guy called Andy Hilliard. And he talks about don't buy by the hour, buy by the outcome. And that's really important. You know, often um procurement teams are just looking at uh how do I just get the cheapest rate for a senior developer. Whereas actually, like if you think about it, it's the point is having a cheap rate if that person's gonna take three weeks to do a job that could have been done in two days or a week. So start focusing on the outcomes rather than just on the hourly rates. And that's something that's really important. And so as a company that does outsourcing, it's not just about providing teams and people, it's about providing experience of engineering over how to deliver a project efficiently and quickly and right the first time, rather than just cheap resources that can run for for many, many years to go.
SPEAKER_02:Super interesting. Can I bring another ingredient to the mix? Because um outcome, I totally buy it. But then um talking about business with fintechs and regulated companies, there's also regulations. So, how do you deal, for example, with data privacy? How do you deal with compliance in Europe?
SPEAKER_00:Yeah, I think that's a that's a big concern. If you look in if you look across at data security is very important, you know, if you look at the increase in terms of cyber and hacking and that, it's like it's growing year on year. So it's so that's really important to get right. Um there's a couple of things. There's obviously the legislation in Europe around GDPR is is important. And um so you want to make sure that that's uh obviously well understood. And I think GDPR doesn't um doesn't work for just people that are based in Europe. GDPR applies to actually anybody, even if you're outside Europe working for into a European company, you mean to adhere to those those standards. Interestingly, about South Africa, South Africa's got very similar legislation to GDPR. It's called POPI, Protection of Personal Information Act, is what it stands for. And it really has very similar um safeguards as GDPR has around strong data protection, um, user rights for getting access to data, breach notifications, um, and obviously accountability around that. And so that's one thing that we've seen, and our clients appreciate is that South African legislation and rules are actually quite strict and similar to Europe in many, many cases, which allows them and similar legal systems as well. So it actually works quite well in terms of those protect that protection. The other thing as well is obviously putting um the right jobs in the right place. So what we say to clients is if that it really is a major concern, um, could we put some of those roles to be in Portugal, which is actually sitting within the European Union? Um and then people something comes from that happening.
SPEAKER_02:I'm always amazed and and uh flabbergasted almost by the transparency that you bring to your clients in terms of uh scaling, upscaling, downscaling. But if you look at from that perspective, what are potential early early warning signs that would come up for a client to change their behavior in terms of developing?
SPEAKER_00:Yeah. Um yeah, I think when clients come to us, I think um the things they've experienced and the frustrations that they they sometimes have is as often as with they've sometimes to be dealing with arrogant suppliers and sometimes where teams have not been dedicated to them. And so they feel like they're not getting a first-class interaction and that. So it's like, hold on, but why is the guy not here today? I know he's looking at another client. Yeah. You know, so having dedicated teams is something that's really important. Um I think just keeping uh keeping control on costs, you know, costs are rising and everybody has to be cost efficient. Um and sometimes people are going as well, hold on, there's a scarce there's a scarcity of IT resources, so therefore we can just raise our costs no matter what, and then people just have to sort of suck it up. So I think those are those are things. And I think the one of the main things is actually non-delivery. Um it's like people are clients or vendors that aren't delivering. Um they're delivering bad software with a large bug bug account, there's technical debt because things are not being looked after. So those are all sort of early, early warning signs that um that companies should be looking at and going, hold on, this is maybe not the right the right um vendor, the right solution to us. How can we how can we solve that? Um we try to solve that in terms of if we if they're moving from one vend one existing vendor to ourselves or you know, to to ourselves as another vendor, we really um have quite a um defined transition model. That transition model um has got about eight or nine steps to it, but a key part is shadowing and reverse shadowing of resources and how do we actually slowly understand their systems and slowly take more ownership of them until it can be handed over to us um completely enough. And we work very closely with our clients in that. And so, as part of outsourcing, and that's what you need to look for when you're looking to do outsourcing, is you know, do these outsourcing companies have an understanding of how to transition and how to transition well? You know, so that should always be a key part of any discussion, um, rather than just as do you just have the right staff at the right cost? But actually, are you able to transition or do you have the maturity around that transition model, moving from one vendor to another, or even just adding another vendor into the mix? It's quite important to actually do that well. So you're offering a smooth ride. Yeah, so it's it's uh yeah, it's a smooth ride. Um we like to start um start slowly and build from that with experience. Um, and and BBD has that stability. We've been around for 40 years. We're a we're a large company, all of our staff are permanent employees. And so what you want is is to have that um that stability from the company that you know they're gonna be around. They have the stability, they've got the size and the capacity to do it. Um and that's that's really important to look out for.
SPEAKER_02:No, I agree. And talking about the smooth ride, uh, what was that? Something that I was thinking about is um when working with outsourcing, then uh you you actually have salaries in different currencies. And smooth right, that's the least what you can say in terms of inflation worldwide. So how can outsourcing be a solution to sort of I don't know, to how to say it? How can it be a solution to mitigate um these swings?
SPEAKER_00:Yeah, um yeah, it's difficult. I mean, if you look in look at Europe over the last sort of five years, you know, there was Europe had massive inflation, went up to like you know, 10, 11 percent a couple of years ago. Um and and so what's what's interesting is actually, you know, if you look at South Africa as an outsourcing destination, it's that continued volatility on that. And so we're actually used to dealing with those types of those types of those types of uh um issues. Uh whereas in Europe it was quite a surprise is how do we deal with with volatility and inflation and and cost changes on that. It's about um it's about planning long-term together. It's about saying like what does our two, three-year roadmap look like as a partner organization? It's about making sure that you've got the right um talent and skills in place, but actually a plan that actually we adapt and change that team. You know, so if you've got a long-term um relationship with a client, our staff are growing with the client as well. And so what may start off as a junior, maybe an intermediate or a senior within a number of years. Um, but you want to keep bringing in the youngsters and the grads and training them up as part of that. So getting that pyramid of skills right and getting continued fresh skills in from the bottom, bottom up, is actually really important in that. And so that ecosystem of what a team looks like needs to be managed well and that actually helps manage the price for the for the client. Um, obviously, um what we do is we can build in local currency. So that does remove some of the fluctuation. But some of our clients, where we build out South Africa in Rand, we have um different um foreign exchange approaches in terms of collars and caps in terms of exchange rates. So not either party is benefiting massively or losing massively from it. Because what you want is a partnership that's actually having a stable relationship financially. Um, because if it's benefiting one party more than the other, then that's not a good partnership. So we learned that thing. And I think the last thing as well, as I mentioned it earlier, was um was um that report from Accelerants as well was look at the outcomes, you know, not just the hourly rates. You know, so if you're able to deliver software fast and effectively in a short period of time, that's really, really beneficial to the client. And that's what saves you the biggest costs, not the hourly rates of actually buying a team on a monthly basis.
SPEAKER_02:Yeah, so it's more the holistic approach. Yeah. Matthew, we met each other last week at uh Cyboss and uh we had a nice uh BBD table of 10. Um, so a lot of conversations. What is it that you uh took away from that week in Frankfurt?
SPEAKER_00:I suppose a few things. Um there was you know, Cyboss is massive. There was I don't know how many people were tens or hundreds of thousands of people at Cybos. It was it's a massive conference. Um and the good thing is you're getting views from all around the world, you know, what's actually happening, especially obviously related to financial services and payments. But in terms of talking to people, I was there to talk to people about, you know, um, are they aware of South Africa? Do they actually know South Africa is an outsourcing destination? Um and very interestingly, majority of people I spoke to didn't know that. They were like, oh, you know, I've worked with I've worked with really good South Africans in my team. You know, like I know this guy, I know that guy. They're really, really good. They're passionate, they're skilled, they're hardworking and that. But we didn't know you could actually outsource software development to South Africa. What is this all about? And so so that was interesting. It's like, you know, that so it's interesting just to see how many people are unaware of this, which is why we're trying to get the word out there as to as to this is something that, you know, um companies and corporates within Europe should be investigating a bit further. That was it. I think the other theme as well was just everybody was going is rising costs, rising costs. You know, it's like it's so hard. We've got costs increasing, we're not able to increase our prices to the market and that. So there's like definitely a squeeze. And so finding lower cost destinations, whether it happens to be Portugal or South Africa, is something that's on the top of people's minds is how can we help manage our manage our costs, manage our long-term costs? Um, and I think just I think this is obviously growing sort of like I suppose geop geopolitical risk in in Europe and Eastern Europe and that. And it's weighing on people's minds as well. It's like, you know, what do I need to do to mitigate this? How can I mitigate something? Can I put my part of my software development team somewhere else on that? And that's on people's minds as well. So yeah, very interesting conference, some really, really interesting people. Um and yeah, I think it's uh I think it's it's positive. I think we we're living in times of change and volatility. I don't think that's going to change, but I think um the majority of people I spoke to had quite a positive outlook on on things going forward.
SPEAKER_02:I think that's always good to hear. Yeah, no, absolutely. And I think maybe that's also a very nice way to sort of stop this uh conversation because uh we we stop on a high that there is a good outlook for 2026 as we're going almost towards the end of this year. Matthew, thank you so much for joining us here in Tech Unboxed. And uh, please to the listeners stay tuned because more news will come from the technology world together with BBD and Tech Unboxed. Thank you very much. Thank you.