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Press Release: Intertech Software was featured in the Entrepreneur section of the Pioneer Press: Offshore in the Offing.

Offshore in the Offing Intertech Software plans to send part of its software production overseas next year. SHERYL JEAN / Pioneer Press Sunday, December 31, 2000 Intertech Software may be a small business, but it tries to think like a big company -- for example, by going global. Tom Salonek, founder and chief executive of the Eagan-based e-commerce consulting business, plans to send part of its software production overseas next year. ``A year ago, people who were doing an average job could survive,'' he said. ``We realized that now a consulting company must compete with how quickly we can work, how much will it cost and what will the quality be. We needed a way to say we're different.'' Salonek believes if Intertech Software can turn its product around faster and at a lower cost, it will be more competitive. Eventually, perhaps in three years, the offshore component will help Intertech Software to deliver a software product in one-third less time than it does today, he says. Intertech Software also is looking at the project as a way to boost revenue and find a new work force outside the tight labor market in Minnesota, said Virgil Howard, vice president of operations. Labor costs in many of the countries considered by Intertech Software are about half of what they are here, he said. The challenge is to successfully manage and integrate offshore software production with the 30 software engineers and designers at the company's home office. Intertech Software began a feasibility study of its plan in January and has invested about $50,000 in the project to date, Salonek said. The company offers e-commerce strategy and development, including customized software applications, to companies with revenue of up to $1 billion. Its sister company, Intertech, provides software training. Salonek started Intertech Software in his home nine years ago. It was named one of the nation's 500 fastest growing companies in 2000 by Inc. magazine and Deloitte Touche. Sales have risen from $200,000 in 1995 to an estimated $3.7 million this year, Salonek said. He believes Intertech Software has been somewhat protected from the layoffs hitting e-commerce consulting firms because its foundation has been built on customers such as 3M, Medtronic and Northwest Airlines rather than the pure dot-com companies. Next month, Intertech Software plans to start a 2-month-long pilot project with four offshore software development groups -- three in India and one in the Philippines. Intertech Software chose to run its test on an internal project -- an online pricing system for Intertech -- with the offshore entities developing pieces of the software. Initially, Intertech Software considered 10 companies in those countries as well as Malaysia and Singapore. Officials soon put together a checklist of requirements: a partner in a country that had a business culture similar to the United States or a partner that had done business with the United States for a long time; a business with a U.S. office or consultants in the United States; a partner with software standards similar to Intertech Software; and ISO 9000 (international quality control standards) certified. ``The real challenge here is the work flow -- how we'll communicate and verify and modify code,'' Howard said. ``This will help us define roles. This will be a good test.'' Intertech Software is seeking to enhance communication by using a ``Virtual Team Room'' -- a message board where members of the project team from scattered places can communicate at a central place. And the company is using a liaison to help coordinate the project and to verify that certain work is being done. Internal communications and appreciation also are important. Salonek recently began an e-mail newsletter for employees, and everyone participates in ``daily huddles'' -- to provide daily business updates to track trends and make changes quickly in how the business is operated. Salonek, who participates in a prestigious three-year CEO training program at the Massachusetts Institute of Technology, realizes that his plans may sound threatening to some employees. ``For our people, what we're trying to communicate is that the overseas work will be the more mundane, maintenance software code'' because the overseas software developers typically aren't fluent in the latest technology, he said. ``Our software developers will get to work on the cutting-edge, cool stuff.'' For example, Intertech Software's Eagan employees will form the e-commerce strategy with the customer, design the software and create the online graphics while the overseas workers will focus on writing basic programs such as a reporting component of financial software, Howard said. If the pilot project goes well, Intertech Software plans to send about 10 percent of software development offshore next summer, Salonek said. He thinks overseas work could reach up to 50 percent of all software development in about three years. The company's operational costs may rise 20 percent initially but in a few years, costs are estimated to decreased about 20 percent, Salonek said. ``What we're trying to do is be realistic about what we can save,'' he said. ``And if we have a reasonable profit margin, it's significant to the top line.''

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