« In silent mode | Main | Letter to Darl from Torvalds »

September 09, 2003

Outsourcing financials

iCode's experience with Outsourcing -

Nowadays, iCode has 250 employees in India, and the burn rate for that entire crew is just $200,000 per month. Plus, look at the company's other operating metrics: Mehta says iCode spends 7 to 8 percent of revenues on R&D — an absurdly small ratio for the U.S., where software companies typically spend 25 percent.

With the venture funding in place, Mehta says growth is now the focus, and that's why marketing and sales each consume about 25 percent of revenues — pretty typical for an aggressive growth plan. Support and implementation costs are running about 20 percent of revenues, and admin eats up another 15 percent; that leaves, in very rough numbers, about 8 percent for profit.

And, prior to the VC infusion of cash last year, iCode has always been profitable. "Last year we invested money to build a brand-new channel," Mehta says. "But for our revenues to double, we only need a 20 percent incremental increase in expenses. Revenues are now $10 million, and our run rate on a quarterly basis is $14 million. We expect 100 percent growth for the next two years."

Let's be clear: We're not talking about outsourcing here; like many entrepreneurs, Mehta wanted maximum control, and figured the best way to retain that was through setting up his own office.

"There are a lot of small services organization that you could use to get your feet wet, then see how it goes, and maybe acquire them," he says. "My vision is to have your own setup there. The highest amount of control you can have is through your own employees."

September 9, 2003 in Economics of IT | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Outsourcing financials:


The comments to this entry are closed.