Augmentum Gets Real about Outsourcing to China

Augmentum, one of the new breed of US-China software development companies focused on outsourcing, has a goal — a big goal — for its first decade of business: to grow to 40,000 people and have revenue of a billion dollars a year.

Currently, it’s somewhere south of that.

Leonard Liu, founder of AugmentumIts team in Shanghai had 650 people as of December 2006; its Beijing office had 150 people; and its US headquarters in Foster City, CA, had 50 people, according to Leonard Liu, CEO and founder.

Founded in 2003, almost all of the company’s clients are American, including Intel, Microsoft and Motorola. It also acts as the “development department” for several start-up companies, says Liu. The primary areas of work include: enterprise Web services built on .NET and J2EE; systems integration and porting; embedded software; and mobile computing.

For example, Augmentum worked with Intel on its Viiv digital home technology. “They engaged us to build the software stack all the way from the user experience for setbox digital TVs to software that drives devices,” says Liu. According to a case study about the Intel work produced by Augmentum, the service provider helped Intel create its “reference solution” to help developers working with the technology of the Intel Digital Media Infrastructure to build applications for the digital home environment.

Another client needed a new generation of government emergency response application capable of communicating with systems in emergency vehicles and small devices that firefighters or police officers could tote on their belts. Augmentum did “the total solution from beginning to end,” he says.

When explaining his strategy for success, Liu, who was born in China, raised in Taiwan and then moved to the United States in 1964 and was practically of retirement age when he cranked up Augmentum operations in 2003, doesn’t come across sounding like his competitors.

Who Needs Oral English Skills?

Unlike his direct competitors (Objectiva and Freeborders come to mind), Liu considers the focus on testing Chinese job candidates for their English speaking skills highly misplaced.

“Why? Because I know there are people who don’t speak good English over there,” he says. “If I give them an English-speaking environment, they’ll learn how to speak English over time… It’s not a big deal. But if I decided that speaking English is a primary requirement, there are not that many people I can hire.” So that isn’t part of the evaluation process for new candidates.

Last year, the company received 10,000 applications in China from students representing 130 universities in 30 cities. Augmentum hired 520 people from that pool. Most are probably schools you’ve never heard of. “We believe in all universities there are good students,” Liu says. “For some reason, they didn’t get into Tsinghua [University]… But we give them a chance. If their heart is in the right place, we’re willing to invest and bring them along. We’ll teach them what the right culture, the right discipline, the right behavior is. It takes time. It’s painful. That’s the only way to do it.”

Whereas the China staff must learn how to work with Americans (and how to work with different kinds of companies in the United States), not so the Americans in working with Chinese.

Liu explains it this way: “I think we Americans actually are reasonably good at dealing with different cultures, because we have people come from all over the world.”

Someday the China Team Won’t Need the American Middleman

A common practice with service providers serving US clients is to have a US-based staff that acts as a liaison between the client onshore and the programming team offshore. But Liu looks forward to the day when his China operations can take over running the software projects rather than relying on the American team to act as a middle layer.

“All of our people in the United States – in addition to being chief technology officers and chief architects – also have to be teachers, including myself,” says Liu. “They start as super-programmers, then they bring the team in China up the learning curve. As [the China team] comes up the learning curve, they will come more and more to the front end of high-level design architecture, user definition and so forth. The people here – their objective is to train the people in China so they can be less involved.”

Although Liu reports that the company puts new China hires through a three-month training program, the description sounds less training oriented and more get-to-work inclined. “We learn and teach by doing – in real project environments,” he says. “The only way you can really learn how to ride a bicycle is by riding it.”

Leave the Domain Knowledge with the Client

Unlike Wipro, IBM and Infosys, which have built centers of excellence in specific vertical categories, Augmentum has no ambition to build a company with deep domain expertise. Says Liu, “We tend to focus on building the systems and some of the horizontal domains. We tend to partner with our customers and depend on their expertise in the vertical domain knowledge. We’re not good at that. That’s not what we do. We try to do everything after that.”

Regarding those 10 year goals – 40,000 people and a billion in revenue? Liu concludes, “We’re on track.”

Useful Links


Intel Personal Computing site