Exigen taps growing services market

Exigen Group, the U.S.- and Latvian-based provider of business process optimization services, wants to take a bigger slice of the growing European IT services market through its Latvian unit, Dati Exigen, which it acquired in 2004. The move brought an additional 700 software specialists into the Exigen organization.

Exigen Group ranks Allstate Insurance, Wells Fargo & Co., and Australia’s Westpac Bank among its customers. It’s also building a digital rights management and royalty-processing system for Universal Music Group and Warner Music Group.

The company designed its business process optimization tools around GRADE, a process simulation and analysis system developed at the University of Latvia in the early 1990s. Exigen Group sent one of its founders, Alec Miloslavsky, to oversee the operations and integrate the IT service and business optimization businesses into a more powerful offering for European and North American customers.

The Russian-American entrepreneur, who was recently named chairman of Dati Exigen, will divide his time between Riga, Latvia, and San Francisco. IDG News Service caught up with Miloslavsky at its offices in Latvia.

IDGNS: What you will be doing here as the new Dati Exigen chairman?

Miloslavsky: Exigen Group has two operations. One is Exigen Latvia, which has been doing work almost 100 percent outside the Baltic region, mostly for customers in the U.S. and Canada. Dati Exigen group is a formidable Baltic IT company with substantial business outside the Baltics, mainly in Germany. Having these two as separate operations doesn’t make much sense. It is more advantageous to have a single company with the bulk to compete in its own right. Being here, we have the nearshore geographic proximity to the European market, and the skills from implementing cutting-edge technology in the U.S. that give advantages for North America.

IDGNS: Until now there have been differences between the two businesses. Exigen Latvia does business process streamlining, Dati was a systems integrator.

Miloslavsky: There were two different accents [and] both skill sets are required. Dati Exigen is an excellent projects company, they know what project management is. Exigen developed innovative new technologies. That skill set is in demand in Dati solutions as well. Dati is getting into data warehousing, etc, where Exigen solutions are needed.

IDGNS: Dati Exigen recently signed an agreement to provide services to Sweden’s telecommunications group, TeliaSonera. That may require both of these skill sets.

Miloslavsky: Exigen Latvia has been executing some projects for U.S. telcos, so we have the vertical knowledge that we can apply to the Dati business. From the point of view of U.S. businesses, they know we have a “factory” in Eastern Europe, so that doesn’t change, but the Dati side gets the Exigen skills. That means we can offer a customer like TeliaSonera not only application maintenance and upgrade skills, but we can also use knowledge from Exigen to suggest improvements in business processes.

IDGNS: Have you evolved from the “application factory” model often seen in Eastern Europe?

Miloslavsky: Without a doubt. Even the business we do with the local [Latvian] government spans everything, even a kind of business consulting. If we don’t evolve, we cannot compete with the larger players. For instance, some of the big European players are coming onto the market. The Asian firms are also very active in Europe. Growth is outpacing supply, so we have to be able to grow and deliver more volume.

IDGNS: Can’t someone like Accenture clone what you do? What about the Asian companies?

Miloslavsky: The large American-based integrators use Latvia and other places as pure back-fill, for bodies. It is difficult to be just a body factory without the structure and professional growth offered by a complete operation. From the professional point of view, people can go up the career ladder in our operation, the others offer just consulting jobs to be thrown around here and there. The strategy against the Indian organizations is different. They are challenged by proximity, language and cultural factors.

IDGNS: Even as we speak, there is talk of capacity problems for the industry here and for the region as a whole, simply because of the small population.

Miloslavsky: We can, under the Latvian management, grow in the former USSR. Call it sub-nearshoring. The interesting thing is that we already run projects this way, in St. Petersburg and in the Ukraine. All are run out of Riga where we have experienced managers. The problem in Eastern Europe is that there has been no IT services industry. You don’t find many mature organizations that can do this kind of work, which is often like changing engines on a flying airplane. This is where we have an advantage.

IDGNS: Dati Exigen has legacy maintenance and upgrade skills, including Cobol, among other things. Exigen urges companies to renovate and replace existing processes. How will you blend these?

Miloslavsky: We can start as a pure service delivery organization, maintain a system and give you a financial benefit from going offshore or nearshore. You can then invest the financial benefit in modernizing a system with us. We can offer both stages of the process. Here, there is a huge opportunity for nearshoring in Europe.