Frederic Joye – Inception of Arcanys, a Software Developing Company

Derek: Hi and welcome to another episode of the Outsource Accelerator podcast and my name is  Derek Gallimore. This is episode number 83 and today we are joined by Frederic Joye.

If you recall we actually spoke to Frederic and got a bit of his backstory in Episode 77, so if you want the full picture then go and have a look at that episode. In today’s episode, we really deep dive with Frederic on Arcanys.  

So Arcanys is his BPO that he co-founded down in Cebu and it is a specialist software developing outsourcing service. I didn’t say that at all well but  Frederic certainly can say a lot better and this is not an infomercial but it’s actually deep diving into his thought process behind starting an outsourcing establishment and the opportunities that outsourcing and why he chose the Philippines and what he thinks about the depth of skill here in the Philippines. So a really good episode I’m sure you will enjoy and get a lot from it and if you want to contact Fredrick or get in touch with Arcanys then all of the contact details are at our show notes which is outsourceaccelerator.com/83. Enjoy.

Derek: Okay, so welcome back today I have Frederic Joye again, welcome back Frederic.

Frederic: Hi, Derek.

Derek: Frederic is the co-founder of Arcanys and he’s gonna give you a little bit of his background we did also interview Frederic previously so you can go back to that episode for more of a background but this isn’t going to be infomercial but I want to really dive deep into what Arcanys does, What’s Frederic’s vision for Arcanys and you know how it is a little bit different in service provision than everyone else in the space and by doing this it’s to give kinda rounded inside and experience the options here in the Philippines and for whatever software outsourcing stuff outsourcing and various services. So great to have you back Fredrick thanks for your time and would you mind just giving us a  background and how you found yourself to be sitting in Cebu?

Frederic: Yeah sure, so initially I’ve been working in the Finance industry for many years before moving out of Switzerland, so I’ve been in the insurance industry, I’ve been in the private banking world then I moved to a Software Company that was building a product for private banks. So I’ve always kind of been into technology and always wanted to see what was out there out of Switzerland and one day a good friend of mine, Allan who is my business partner today offered me to work with him on one of these ecommerce ventures in Hong Kong and knowing that, he was very successful in this his previous ventures and I had a lot to learn with him I decided to jump on board with him in Hong Kong and 1 year after we started working together,  we had an opportunity to actually buy a small business that was in the same industry as we were in Hong Kong but in the Philippines and after coming a couple of times seen the operations in Cebu we’ve decided to move our team from Hong Kong to the Philippines simply because we thought simply more sense for us and our customers most of them were in the US we’re speaking english in the Philippines, english skills are probably the best in Asia that was I think it was a very easy decision for us to move the team.

Derek: Yeah and we mentioned this before but I really do like to highlight I’m a bit bias towards the Philippines but it’s interesting that you felt that you had a competitive advantage in the Philippines when building a product facing the West, you know you’re not building a product for the Philippines, you are building a product to take on the west and you felt that you could find a competitive advantage here.

Frederic: Well also because they understand the Western Cultures since they’ve been exposed to it for so many years so that made everything easier of course the wages are lower as well so if you marry the two then the fact that they are highly skilled people then you get a great mix and competitive advantage that you’ve mentioned.

Derek: Fantastic.  So can you introduce Arcanys and briefly what it does the kind of elevator pitch but then also judging from your background you’re not here to start a moment pop kind of few seats and let it bubble along, I expect that you’ve got a pretty big vision for this thing.

Frederic: Yeah, so today we are doing software development outsourcing mainly so we stand existing teams in Australia, in Europe and the US and we have about 150 people now that are in our offices close to a hundred of them are Software Engineers we do also offer some additional services to help all the companies that come to us with the needs that they may have around building softwares we do have Business Analyst, we do have UI UX designers we also provide 24/7 service support just to make sure that we can support I mean the entire needs of a software or heavy software business and we can see that the more we add services around this core offering up software development to help companies even more so that’s why we are going really quickly in the last 2 years where we’ve more than doubled our size.

Derek: And outsourcing service provision has a lot of different approaches and a lot of different flavors.  There is a kind of full-service BPO where a few people can take a service on behalf of your company then there is pretty hands off seat leasing where affect the providing and staff and a seat for them to work under an existing organizations structure.  Where do you sit there if you provide two developers for a company? Do you oversee them do quality control or do you effectively provide the staff and the seat and then let the organization manage them?

Frederic: I would say a little bit in between in the sense where our developers are really part of our clients team right so they are dedicated long-term basis most of the time but we also monitor what our developers are doing, we train them on the side we have people that are looking into the project and doing quality control on a weekly basis.  We have people that are supporting our developers from Arcanys on this long-term basis so we take responsibility in the success of a project but the client is the one who’s managing.  I would say the requirements is managing the task of the developer on a daily basis so they are responsible feeding them with work and then we make sure that we can make everything smoother around that.

Derek: Is it a full time allocation if ever a company whatever engages with you then they have dedicated staff?

Frederic: Yes, they have dedicated staff it’s a full-time basis simply because sharing time of software developer It is extremely complex and doesn’t guarantee high quality of people switching one task to another since we are working on a complex business application, it really requires the people that are working on a full-time basis on projects.

Derek:  Project management and especially in software realm is Incredibly a difficulty isn’t it? There’s sit of establishing the requirements first and then there’s quality control and how do you manage that? Do you impart standards on your team or again does this sort of staff member fall in line with the organization whatever project management protocols

Frederic:  So before we onboard a client we try to really understand how they work internally of course we try to disrupt as little as possible but when we see that the way that they set up is not going to work well with outsourcing then we have to step in and tell them how we think they should evolve their organisation to make sure that they get the best out of the relationship and so I would say it’s a bit of both where we try to take our 8 years of experience of building teams and running projects and then see what they’re doing and trying to really bring the best out of the 2 organizations.

Derek: Right. So Outsource Accelerator is here because we are encouraging as many people to consider getting into outsourcing as possible and part of that education is actually educating the client.  Do you find that new clients new people to outsourcing is actually those people that need the hand holding the sort of education you know this is how you go down in this path?

Frederic: Yeah absolutely.  Well of course there’s a staff training and understanding what our clients are but there’s also a huge part of training that needs to be done with people who want to actually outsource because they think it’s just hiring someone and then sending a bunch of emails or skype messages to have their project run but it’s a bit more complex than that especially when this business and trust that they were very important part of their operations to an outsource partner and so this requires a lot of communication and of course learning as well how to make things work on the first trial I would say.

Derek: I had a conversation with a Russian guy who is looking for outsourcing staff or 1 staff member and he said he wants them to be a virtual assistant, he said that he wants them to do the social media management, he wants them to do the web management. he wanted articles written and also he was too busy so he did not want to train them and he only wanted to pay out $200 us a month and my answer to him is that description is not available anywhere in the world and also they want to add a below cost price but don’t want to invest in time to training do you commonly get that from software requirement?

Frederic: Yes, we do and I think you are right there sometimes there are real mismatch on the expectations and what can actually can be done, I think those people in some cases are looking at this people let’s say Russia for your example don’t find them in Russia. So they think by trying outsourcing they might find this magical person and I think that is not the right approach and it is to look for people that have certain skill sets but they can’t do everything.

Derek: And also, they need to invest in the training, you need to build the culture with them. And so the software world intrigues me because you know if you are working on whatever Civil Engineering space all of the companies are fairly standard but within the software development you have about imagined you have big multinational conglomerate you have probably Silicon Valley funded startup sort of never actually made a dollar’s profit  in their life there’s probably 20-year-old founders that are contacting you.  Do you find that there’s you know it’s just varied bunch of clients that you’re dealing with?

Frederic: Yes, it is a lot of people comes in different stages, different sizes of companies, different types of  expectations, different kinds of products, different ways in looking at how they want their product to be built and with time, we realize that there are not hundreds of way to build a software that works so there has to be a particular setup and then we are working with people who are committed to getting things right and as you mention before willing to invest in transferring knowledge spending time with their providers in putting the resources on their end to make sure that they are also setup for success.  So there are various ways of running things but I think there are a few ways that really work well big amount of other ways that won’t work at all.  So if customers are not ready to organize themselves to gear themselves up for success then we simply don’t work with them.

Derek: Fantastic. Talk to me a little bit about your sales cycle. How do you, do people approach you or do you reach out to the software community?  How do you find you generally start a relationship with the client?

Frederic: So over time it has become more on a referral basis so our clients refer other people to us so that’s I would say it’s a big part of our business.  Another part is that we are present online, we do also some outreach and that’s most of our clients get to us.

Derek: And then looking kind of hard figures.  You’re a banker, bank background there’s others that there is an aspect of friction by having people the other side of the world in a different timezone with a slightly different cultural alignment obviously then there are benefits because there’s a good pool of very loyal and eager staff but also there are cost savings.  You said you have about hundred developers.  What if the sort of if they are sitting on the Silicon Valley what would be the going rates for those hundred developers you’ve got onboard in your office?

Frederic: So if they were in the US they probably around I don’t know probably between $150 – $200k a year I mean that’s for San Francisco because it’s probably one of the most expensive places but what I’ve heard also, for example, people in Australia they are going at the rate at about $120 – $160k AUD a year for the same kind of people.

Derek: And I supposed I should technically mind a bit but, what kind of skills? Do they cover what kind of roles?

Frederic: Most of the time we provide Mid-level to Senior developers to our clients so since they don’t just, in general, don’t just take 1 developer they take 2 or 3, in general, it starts with 1 lead that is more senior or a senior guy and that would work with like 1 or 2 mid-level developers. We don’t put juniors because the price difference from a mid-level to a junior is very very small and the output difference is huge so we make sure that we train these junior people in-house working on in-house projects that they yet to understand how we want them to work and then when we feel like they are mid-level that’s when we put them into our client’s projects.

Derek: I want to explore that a little bit actually. And then what is the cost to your clients?  What sort of price range for these mid to senior level developers?

Frederic: If we speak on the hourly basis between $25-$30 an hour and I would say the average is between 25-27 on a blended rate for a team so that’s so that’s around $4,000 to $4,320 a month.

Derek: So you are talking about around 50k kind of wage that obviously includes all of the recruiting a bit of HR support that includes all of the office support and things like that.

Frederic: Absolutely.  So the rate that we are discussing about $160k-$200k a year that includes only the salary but when we speak about the $50k we charge on a yearly basis this includes absolutely everything that you could think of there’s no additional cost the saving are probably 4 to 5 times at least look at the whole picture yeah.

Derek:  Do you find sometimes amazing that not more people aren’t outsourcing? Do you think it’s just an awareness thing or?

Frederic:  Well I think it’s a perseveres is like “oh they are far” “it’s going to be hard” and so the worries about the time zone.  It’s majorly because they have fears or maybe they failed at the first attempt also the bad reputation that outsourcing has in some industries and I find it pretty sad but I understand that because I was a guy who was purchasing an outsourcing services with the some of the providers I had wasn’t very happy some others I was very happy with.

Derek: It’s a mix bag isn’t it? but that’s the same as employment and some business jammer you know you have some winners and losers on any team don’t you  and it’s a shame when and you know you as a outsource service provider I think it’s critical that you get some early wins for your client because they get very despondent very quickly aren’t they and if you get one bad employee then  they think the whole outsourcing is broken the whole Philippines is broken and sets of the chain reaction doesn’t it?.

Frederic: Yeah that’s true that’s we’re absolutely extremely close to the customer at any given time so we have 150 employees.  We have about 50 or 60 clients they can all reach out to us at any given time when they see there’s a problem and I think the trust also they have with us make things right away plays big role what we noticed is that in their own organization people are much slower at looking into problems, they are much harsher on providers than they have on their own staff and we have to be better than their own staff actually.

Derek: Yeah that’s an interesting point actually, and then I just want to touch briefly on your you say you do a lot of training and incubation of your staff and skills building? how does that work? And then, are you worried if you invest so much in these people they can go and get another job?

*Frederic: Right. It’s the main concern that the people have but what happens if you don’t train your people and they stay with you that’s even worst, so we train our people as much as we can we build is what we call a skills tree so they can see themselves grow and we keep them working on a very interesting projects that are very challenging that are cutting edge technologies. Our CTO is also a very experienced Swiss architect that trains them, does code reviews, so we keep them really challenged and motivated, and the other thing is we pay them more than the market average so that they stay with us and this is extremely beneficial  for our clients even though they feel like they might be paying a little bit more with us but if you keep someone in house, this is extremely high value so the longer people stay with us the move value our clients get out of them and for all of this clients none of the team members have ever left the team in 6 years but they have raised their skills by massive amount.

Derek:  And lot of that is down to you which is included in the $25 or whatever $30 an hour price because it’s up to you to create a warm environment, it’s up to you to manage the culture so it’s a huge value proposition isn’t it I don’t want this to sound like an infomercial but I just trying to get as many people into outsourcing as possible.  You can literally cut about 75% of the face value of the cost of this staff plus that includes office whatever housing and HR and you managing their happiness and culture and deliverables and highly experienced Swiss management team overseeing the whole thing. It’s an incredible value proposition really, isn’t it?

Frederic: Well the thing is if we want to survive and grow, that’s what we have to do. Because the competition is getting, everyone is really leveling up the playfield in the outsourcing, everyone is learning, everyone is getting better.  So I would say that’s also an industry that has completely changed in the last 10 years and has and learn from the previous mistake so if you don’t get better every single day you don’t exist anymore.

Derek: Which is good for general progress isn’t it? And just quickly again I don’t want to turn this into infomercial but you mentioned that you have a 2-week risk free option and then and then also just let people you know how they get in touch with you if interested?

Frederic: Yeah sure.  Yes we have this 2 weeks risk free option from where when we understand the needs and the technology that people need we find the right team for them they can try us for a couple of weeks without any financial commitments and if they don’t like us  then that’s it it just a little time that they’ve invested, but that’s it. If they want to get in touch with me they can mail me at  [email protected] or they can simply fill in a contact form on our website and I’m the one responding to all the request we have.  

Derek: Fantastic.  Thanks, Frederic, certainly learned a lot.

Frederic: Thanks a lot, Derek.

How was that? That was Frederic, and if you want to get in touch with Frederic Joye of Arcanys then please do, you can get all the contact details in our show notes which is at outsourceaccelerator.com/83 and if you want to get in touch with us at all about anything, ask us anything then just email us at [email protected].