Worlds Together
Soon after starting his own computer consulting firm, Paramjeet Dargan got a rush contract from GTE Corp. with a six-week deadline.
Instead of panicking, the Indian immigrant went home, called all his expatriate Indian programmer friends in Southern California and persuaded them to take their vacations and come help him deliver the project on time.
“I put them all up in my house, working 16 to 18 hours a day,” recalls Dargan. “GTE gave me $5,000, and that was enough for rice and bread to feed all those people for six weeks.”
From those humble beginnings in his Orange County living room 15 years ago, Dargan’s firm, BMD Inc., has grown into an international company that posted $38 million in sales for 1997.
Much of the company’s early success lies with Dargan’s ability to navigate between American and Indian business cultures, which allowed him to tap into Indian expertise at home and abroad to meet the shortage of technologically skilled workers in America.
Now, with BMD’s acquisition by Houston-based Corestaff Inc., an information technology and services company with sales of $1 billion a year, BMD has received the cash infusion to expand and provide Corestaff with a strategic advantage in the exploding Indian programming market.
BMD’s success illustrates how immigrants, with their contacts overseas, may be well-placed to become part of the international business community in Southern California.
“I saw that Indian companies were beginning to do business here, and I thought that maybe I could cut costs if I go develop offshore,” Dargan says from BMD’s conference room in a gleaming industrial park in Irvine. “So I sent an associate to Hyderabad and we opened up an office. Within two years, we were the second-biggest in the state for software export development.”
The shortage of American computer scientists has helped India, Ireland and the Philippines become worldwide centers of offshore programming, said Marty McCaffrey, an adjunct research professor in computer science at the U.S. Naval Postgraduate School in Monterey, Calif., who studies the offshore programming phenomenon.
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India gets the most business, McCaffrey says, because of its large pool of English speakers, college graduates trained in the hard sciences and the Indian government’s decision to develop an indigenous software industry by setting up high-tech free-trade zones.
Another key factor: An Indian programmer’s salary is roughly one-third that of his or her American counterpart.
To encourage foreign investment, India has offered tax breaks and eliminated tariffs and duties previously imposed on imported high-technology equipment. The country also built industrial parks to house the new firms and set up phone and satellite lines crucial for doing business.
The moves have paid off.
India’s programming industry took in $1.2 billion last year and is expected to take $1.8 billion this year, according to McCaffrey.
Dargan, who was born and reared in Punjab and has two decades of experience in computer programming in the U.S., was uniquely placed to take advantage of this shift to India.
About 70% of the members of BMD’s U.S. technical staff are Indian expatriates. Most employees are hired through word-of-mouth and advertising in Indian emigre newspapers.
BMD’s Indian subsidiary, Metamor Global Solutions, employs 730 people at facilities in Hyderabad, New Delhi/Noida and Chennai who are connected by satellite links to BMD’s 250 employees in the U.S.
With access to Corestaff’s deep pockets, Metamor is recruiting 50 programmers each month, with a goal of reaching 2,000 by 2000.
“A lot of people in America think these are just high-tech sweatshops where they’ve crammed a bunch of programmers into one room, but it’s not. The work environment is state-of-the-art,” says McCaffrey, who has toured BMD’s Indian facilities (among others) and says its engineers do everything from mainframe maintenance to cutting-edge software design.
Analysts say the Corestaff acquisition is part of a trend in which large information technology firms are snapping up smaller ones with offshore capabilities.
“The market’s consolidating at a breakneck pace, and BMD recognized that in order to grow, it needed a much bigger partner and base of customers. And to be a major force, Corestaff needs to have the capability to access resources offshore,” says David Grossman, a financial analyst who tracks the information technology industry for Nationsbanc Montgomery Securities in San Francisco.
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With a master’s degree from the New Delhi Institute of Information Technology--India’s MIT--Dargan has been able to ride that technological wave. He arrived in New York from India in 1969, where he found work as a computer engineer for Columbia University and spent his evenings studying for a master’s degree in computer science.
In 1978, he and his wife, a physician, moved to Southern California, where he did software engineering for a subsidiary of GTE until 1982, when he picked the name BMD--Business Management Data--and struck out on his own, first working out of his home and later out of a 500-square-foot rented office in Fullerton.
By 1989, Dargan noticed the rise in Indian companies doing U.S. business, so he sent an associate to check out opportunities and open a subsidiary.
By 1992, BMD had grown to 50 employees in India and 20 in the United States. His overhead was low, since employees usually worked on site, at the computers of the customers.
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By mid-1995, BMD had reached $3 million in annual sales. But Dargan had bigger dreams. That year, he brought on board as president Russell A. Cappellino, former president of GTE’s information services subsidiary and Tandem Computer Inc.’s telecommunications division who had been hiring BMD for various projects since 1982.
Dargan, who became BMD’s chairman, gave Cappellino free rein to reorganize the company, and Cappellino became a part-owner.
“I knew its capabilities,” Cappellino recalls. “BMD had brilliant technical people, but they didn’t have any sales, marketing or account management.”
Cappellino restructured the company’s management and built a sales and marketing team to woo Fortune 500 clients.
He also brought in new managers and initiated a customer relations program that could develop strategic partnerships with top customers.
With Cappellino’s help, BMD was able to grow at a crucial time, when Indian programming was exploding on the worldwide market.
The phenomenon of offshore programming relies on satellite phone links that hook up computers and programmers so they are in constant contact with each other despite being half a world and 12 time zones apart.
“The Indian employees are working off American client computers, and they’re just sitting there in India as if they were sitting across the street,” McCaffrey explains.
Yet BMD faces challenges. Wages in India are rising 30% each year, McCaffrey says, and will eventually catch up with the United States as the global shortage in skilled programmers drives up pay worldwide.
Second, an increasing number of Indian firms with sterling reputations are entering the U.S. market, and many of them are much larger than BMD, which will mean tough competition.
But Corestaff says it wants to expand Metamor, already one of the top 10 offshore computing firms in India, into an even bigger player. One key strength, company officials believe, is BMD’s ability to bridge Indian and American business cultures.
“Most of our competition is headquartered in India with a U.S. affiliate,” says Cappellino. “If you have a problem, who do you call? Someone in India? I tell CEOs, ‘If you have a problem, you call me, and I’m at your site the next morning.’ ”
To help achieve that, Corestaff has made Dargan managing director in charge of Indian operations, and he will be spending more time at the offshore facilities doing strategic planning for Metamor, which is expected to triple its size in the next three years.
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Dargan won’t discuss how much of BMD he still owns after the acquisition but says Corestaff has kept the company’s original name and given him a free hand to develop business.
And he attributes BMD’s success to its reputation for good work.
“From the beginning, we’ve been doing specialized development for our clients, and we’ve always had their trust,” Dargan says as he prepares to jet off for a monthlong business trip to India. “It’s something we’ve worked hard to get and keep.”
