Achievo CEO Lee Talks China Outsourcing: Q&A

Robert Lee knows how to acquire software companies. The chairman and chief executive officer of Achievo oversaw the acquisition of several companies, including the 1990 buyout of Peter Norton Computing, during a stint as executive vice president of Symantec.

Now, Lee is putting his acquisition experience to work at his latest venture, Achievo, a software outsourcing company that has grown rapidly by snapping up companies in China, Germany and elsewhere. Based in San Ramon, California, the company combines local offices in North America, Germany and Japan with a back-end development capability spread across six cities in China.

Lee recently spoke by telephone with IDG News Service to discuss China, customer concerns over intellectual property, and the art of the deal. The following is an edited transcript of that conversation.

IDG News Service: Has the backlash against outsourcing died down in the U.S.?

Robert Lee: Well, I stopped watching Lou Dobbs on CNN so I’m probably not a good source. More seriously, it absolutely died down after the 2004 election. Frankly, during the time when the backlash against outsourcing was very noisy, the business community never really paid attention to that. Just look at how the Indian companies did during the dot-com crash and that election year. They sailed right through, growing very, very fast. Politics and media is one thing, a businessman is something else.

IDGNS: How have you addressed customer concerns over sending their intellectual property to China?

Lee: That is a concern expressed by everyone I ever talk with and it’s a subject I speak to every time I speak at a conference. If I don’t speak about it, people will ask me. IP protection is very important, it’s something that should be a concern. But while you can reduce your exposure to the risk of IP theft, you can never eliminate it.

Sometimes people like to think there are a bunch of IP thieves out there waiting to steal our stuff. It’s not true. While there are criminals everywhere in the world, the people in China, just like the people in the U.S., are generally honest and want to do a good job. It is when we don’t communicate to them and educate them how to handle IP where those risk exposures occur.

For Achievo, we have some things that are unique. Because of our global footprint, we can distribute our work over multiple locations, both inside and outside China. One of our larger customers is Mercedes-Benz, of Germany. We have developed a very important piece of software for them that determines how much it costs to build a Mercedes-Benz all over the world. In that case, the IP protection procedure includes a requirement that the source code resides in Germany. We have a relationship with the customer such that the source code actually resides inside our office in Germany, not at Mercedes-Benz. This is a measure that can be put in place where it is relevant.

In China, we can also break projects into multiple locations. That is part of the reason why we have a presence in six Chinese cities and there are going to be more in the future.

IDGNS: Are you able to recruit staff with the skill sets you need to manage large projects? There has been a shortage of experienced people in recent years, particularly those with years of project management experience.

Lee: The people who didn’t have experience three years ago now have earned three years of experience. And next year they will win one more. Before you know it, they will be experienced.

We usually consider people with five years of experience to be experienced, and I don’t have to tell you how many people are entering the market over there. It is absolutely true that China needs more experienced project managers, designers and so on. It is really a statement of the dynamics and the strength of the market, but it’s also a problem that will correct itself when given the right environment and opportunity.

IDGNS: There has been relatively little growth through acquisition in China’s technology industry, perhaps because many Chinese entrepreneurs prefer to retain control rather than be acquired by their rivals. How has Achievo closed its acquisition deals in China?

Lee: Perhaps it is the instinctive nature of the culture. We obviously cannot change culture in the broad sense, but when one faces a bigger goal than one’s self, everybody gets a little bit more humble. And that starts with us. When we talk to these people we treat them as successful executives. We are also unique in our ability to combine entities that wouldn’t usually consider working for each other.

Some of our key executives, not everyone, but a couple of us, have a Chinese cultural background, so we are able to communicate with them more effectively, even though we are a U.S. company. They appreciate that. We speak the language, we understand the culture, we understand how to hang out with them at night. That helps us.

Also, the high-tech space China is relatively young. Yet, people like myself who are Chinese-American and in the high-tech industry have a long record of experience that they can easily research. They know that they won’t find anything like that among their peers in China. That’s not because I don’t think those people are very capable, but they need another 20 years to get there.

Through a combination of these attributes we’re able to win their trust and respect. Until you get through that, you are going nowhere with these folks.

IDGNS: What is the key to making big software M&A deals work?

Lee: Having a very clear vision that can be communicated and winning the support of your key team members is what’s going to make it happen. People are all trying to do a great job, it’s really the duty of leadership to create the environment for them to do so.

I tell my folks they have to understand what the company is all about and what we are trying to do. When they do, they will make the right decisions because their intentions are going to be to help the company succeed. Where they make decisions that are not right, there has been some misunderstanding or miscommunication.

There’s no way that i can possibly spend my time looking over their shoulders every day. We spend a lot of energy on tuning our wavelengths.

IDGNS: How important is it to get your customers involved in that process?

Lee: It’s obviously very, very important. Part of our integration model involves calling on our customers right after the deal and explaining to them what this is all about. Instinctively, every customer will be worried in the beginning. That is the fine art of integration, to turn that fear into excitement.

-Sumner Lemon, IDG News Service (Singapore Bureau)

Related Links:

• 2006 Global Outsourcing Guide

• Outsourcers Induslogic, Bonus Technology Merge

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