Quark Denver Software Club Presentation

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QuarkDenver Software Club Presentation

• Jürgen KurzSenior Vice PresidentQuark Inc.

2
Quark Overview

• Headquartered in Denver, privately-held, founded
  in 1981
• Market leader in desktop, workgroup and
  enterprise publishing with more than 3 million
  customers
• Time Warner, Omnicom, JC Penny, Gannett, Publicis
• Strongest rival is Adobe

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Some data around the beast

• A total savings of 1 of RD cost to revenue
  owing to offshoring can translate into a growth
  upwards of 8 stretching to 12 in operating
  profits, if taken to the bottom line.
• 88 offshoring or planning to in the next year
• 80 of the offshore work gets done in India
• 5 only in China
• Data Sandhill Research Report

4
What was our motivation?

• Availability of affordable engineering talent in
  the US (.com days) limited our ability to execute
• Key talent was locked down in maintenance as
  opposed to new product development
• Attractive cost reduction for the RD budget
  resulting in higher operating profits whilst
  still being able to increase our engineering
  staff in terms of headcount
• Prospect to reduce our time to market by having a
  245 development cycle

5
Quark India

• Established in 1999 in Chandigarh (North of
  Delhi)
• Quarks largest operational center and critical
  to our success
• 650 employees in software engineering, customer
  service, and technical support

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Why India beat China for us

• Software is driven by intellectual property
• 1994 India revamped IP following an agreement on
  Trade-Related Aspects of Intellectual Property
  (TRIPS) of the World Trade Organization
• IP law is called toughest in the world
• Overall result for Indian IT sector
• Annual average rate of growth of Indian software
  exports from 1994 to 2002 was 48
• Indian software exports expected to reach 50
  billion by 2009
• English is our global operating language

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Nice side effect of moving to India

• Still growth in traditional print media
• 1.1 billion citizens
• Median age 24 (China 32, US 37)
• Newspaper readership hit 200 million with 300
  dailies, increase of 12 (circulation in the US
  down by 2.5 in last 6 months)
• 25 of the 730 million Indians over age 15 read
  newspapers, up 21 from 1999
• Print ad revenue has grown on average 12-14
• Result Our revenues in India have doubled every
  year

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Quark India future investments

• People Focus on quality over quantity
• Stabilize attrition with attractive salary
  packages
• Invest in strong local management
• Invest in superior communication infrastructure
• Take the Quark India brand to the next level
• Focus on northern India for recruitment
• Develop solid career advancement tracks

• Side note
• Quarks owners are also investing into QuarkCity,
  a 51 acre township and special economic zone.
• DELL has just set up a call center in 2005.

9
Key challenges

• Talent is now harder to find and hard to keep
• Salary increases on average of 15-18
• Average employee salary has moved from 6,000 to
  16,000 in the last 5 years
• High attrition rates around 20
• School system is uneven
• Lack of domain knowledge requires extensive
  upfront documentation
• Infrastructure is still a challenge For example
  Investing in your own electricity is key to
  success

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Tips and Tricks

• Invest in
• Strong local management and a strong daily
  communication plan
• Training and travel (e.g. Indian English is tough
  to understand)
• Understand that India is a political beast
• Going there will require extensive research on
  locations and infrastructure (what, then where
  how).
• Ensure you have proper counsel on all fronts.
• Laws and regulations change frequently.
• Example Software Technology Park Infrastructure
  (STPI) tax scheme is no longer offered expiring
  in 2007. Now special economic zones (SEZ) are
  available, but only to new companies.

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Tips and Tricks

• Set your goals and objectives wisely
• e.g. Maintenance versus original product
  development
• Dont fight Indian culture
• e.g. Hierarchy, role of the family
• Be very specific when communicating your
  expectations
• Dont get carried away by low cost
• Understand Indias culture of negotiation
• Develop tight internal controls over cost/expense
  structure