Co-founder of Astound Commerce: “We want to attract about 3,000 IT experts in the coming years.”July 26, 2021
What follows is an excerpt of the interview published on Mind UA.
In the late 90s, three Ukrainians––Ilya Vinogradsky, Roman Martynenko, and Igor Gorin––met in San Francisco and soon launched an ecommerce business in the United States. Over the past 20 years, the startup has smoothly evolved into a major global IT player in creating digital business solutions.
Now Astound Commerce has engineering centers in Ukraine (Kyiv, Chernihiv, Vinnytsia, Uzhgorod, and Lutsk), Colombia (Medellin), Slovakia (Kosice), Bulgaria (Varna), India (Ahmedabad), Turkey (Izmir), and the company employs about 1,300 experts. Customer support offices are located in the United States (San Francisco and New York), Canada (Toronto), United Kingdom (London), Italy (Milan), Spain (Madrid), Germany (Osnabrück), and United Arab Emirates (Dubai). Its customer portfolio includes famous retailers, such as L’Oréal, Under Armour, El Palacio de Hierro, Jimmy Choo, Lacoste, and Versace, to name just a few.
Why have the founders of the company recently risked abandoning a controlling stake? What assets are they looking for to buy, and are they ready to invest in startups?
Ilya Vinogradsky, co-founder, COO/CIO, and board member of Astound Commerce, spoke about this and much more in an interview with Kyiv-based Mind UA, an independent journalistic business portal covering economic, business, and cultural news.
Mind UA: You started in the US at a “good” time, on April 1, 2000, shortly after the dot-com crash. Then you went through several other global crises. Can you remember the most important decisions that helped you stay afloat?
I.V.: On the one hand, each crisis was unique. On the other hand, the solutions to all problems stemmed from the company’s core values. Therefore, first of all, the key steps were aimed at protecting the team. Our people are the most important thing in the company. They are even more important than our customers.
During the pandemic crisis, the first thing we did––was cut all the less important costs to protect our team. The focus was on maintaining a stable financial base so that the company would last through a period of declining business and shrinking orders from customers. I’m proud that we didn’t lay off a single person.
In previous crises, we also placed a focus on the team. We knew that the crises would end, and our experience, knowledge, and corporate spirit would support us, pulling us forward.
We had luck during the dot-com bubble. In fact, a crisis is a great time to start a business. When there are big changes in the market, one can take advantage of them. At that time, ecommerce platforms that supported online stores began to “deflate”. Their owners were telling their customers: “We are closing down in two months, and you will lose your website.” We took advantage of this opportunity and attracted a large number of customers.
Mind UA: Many IT companies specialize in different niches: fintech, automotive, agro, entertainment, telecom, etc. In contrast, you have concentrated on ecommerce only during Astound’s 20 years in business. Why?
I.V.: We, the company founders, fell in love with ecommerce (laughs). This is a very dynamic niche that began to develop in the mid-1990s. Over time, the industry grew, and new requirements and approaches were added. Ecommerce used to be only a small part of our customers’ businesses, but now it has become dominant. Ecommerce is gradually being transformed into digital commerce. It is a broader niche––a cycle of approaches, systems, marketing, business processes––to enable brands to work effectively with their customers at every touchpoint: on the website, in the call center, through apps, and at delivery points. Multichannel approach is based on an advanced strategy and process infrastructure.
The focus on ecommerce has helped us gain broad industry experience and expertise and position ourselves as global experts, rather than spreading ourselves across multiple lines of business.
Mind UA: Concentrating on one niche is a risk, especially in times of crisis.
I.V.: Yes and no (laughs). According to economic theory, it is risky to place all eggs in the same basket. However, that basket has gotten bigger and bigger every year. Now in the US, 20 percent of retail purchases are processed through ecommerce. That’s both a lot and a little. There is a lot of potential for further growth. We are confident that this trend will continue to grow, especially given the pandemic circumstances.
Mind UA: Has it become a serious impetus for ecommerce growth?
I.V.: Rather, it has accelerated the trends that we have been watching. Ecommerce has been growing 15-20 percent per year in the United States and other markets for over 20 years. Very few industries have seen such steady growth every year.
Mind UA: And what about last year?
I.V.: In the last six to nine months, the demand for ecommerce solutions has tripled or quadrupled. If there wasn’t a pandemic, we would have had that kind of growth in about 10 years.
There is tremendous competition between brands in retail right now. Some of our customers are competing directly with each other. They need innovation to fine-tune the most seamless customer experience, meet the customer where they want them to be, retain them, etc.
Mind UA: What innovations drive sales?
I.V.: I think AR will be developing actively over the next few years. There are already quite a few companies experimenting with augmented reality solutions. For example, a customer chooses a table lamp and wants to know how it will look on their table. This can be done through an AR application.
Another in-demand niche that we are involved in is product customization. Let’s say a customer wants to buy a bag or a golf glove with initials and see how his order will look beforehand. Tricks like that are highly promising for end consumer retention. According to our research, consumers who order custom products show a 30 percent better conversion.
Mind UA: There are probably not many buyers like that yet.
I.V.: You’re right. However, in terms of developing innovation, it is the direction in which the brands will be moving in order to differentiate themselves and to attract customers who want something new, unconventional.
Mind UA: Your team has implemented more than a thousand projects for customers all over the world. Are there any Ukrainian retailers among them?
I.V.: Unfortunately, no. We tried to work with Ukrainian companies more than once. We made offers. The last time was several years ago. I think the puzzle did not add up for several reasons.
First, Ukrainian ecommerce at that time was not as developed as in the US and Western Europe. Local companies did not think it possible to invest in creating an ecommerce infrastructure at the highest global level.
Second, we are specialized in complex solutions that require a lot of investment. We work with large platforms such as Salesforce Commerce Cloud, SAP, Adobe Experience Cloud, etc., and offer their implementation and customization.
Mind UA: In which regions do you have the most customers?
I.V.: About 50 percent are in North America (USA, Canada). There are also customers in Mexico. The other 50 percent are in Europe (Germany, Switzerland, Italy, France, United Kingdom, and Ireland). There are also a few customers in the UAE.
Mind UA: During the pandemic, many IT companies must have recognized the potential of ecommerce and rushed into this niche. How much has the competition for engineers increased? How do you lure and retain experts?
I.V.: The competition has skyrocketed and not only for developers in ecommerce, but also for all IT experts. As a rule, when hiring employees, we do not expect them to have expertise in ecommerce. We hire engineers with basic knowledge, skills, and training. Historically, at some time, we were ahead of the industry, that is, the required experts did not exist in the market.
Over time, a lot of companies trying to take advantage of the ecommerce boom have appeared and now they are poaching our experts. As I said before, people are the most important thing for us. We do our best to keep them from leaving. We have several programs to retain and attract new experts.
Yes, it’s impossible to retain everyone. When a company is growing very dynamically, we understand that new people will actively join the team, while others will look for new challenges and opportunities.
Mind UA: How much has the number of leaving experts increased?
I.V.: While it used to be about 10 percent per year, it’s now around 15 percent. On the one hand, it’s not a small jump. On the other hand, our churn rate is much lower than in many other companies, which have 25-30 percent per year.
Mind UA: Why?
I.V.: I think the most important achievement is that over the years we have created a friendly atmosphere in the company where everyone feels comfortable.
Our experts feel protected in the company. For many people, this is more important than the promises they get when they are poached.
Mind UA: What’s the lure now?
I.V.: Mostly it is money.
Mind UA: Many of your peers attracted hundreds or even thousands of new hires in 2020. What went wrong for you?
I.V.: First, at the beginning of the pandemic, when there was a downturn in business, we stopped hiring. For about six months, we did not attract new employees. We resumed active hiring at the end of last year.
Second, we have a very high recruitment bar. Some of our peers on the market, the big outsourcers, are growing so fast simply because they recruit everyone. We are very careful in selecting people according to their technical skills, soft skills, and core values. We look for people who are close to us in spirit. Sometimes this is even more important than technical skills.
Mind UA: How many vacancies do you have now?
I.V.: Over 200 globally.
Mind UA: Who is the hardest to find right now?
I.V.: There is no single answer to this question. There are certain skill sets that we need in large numbers, such as back-end developers and QA engineers. This request is hard to meet from a quantitative standpoint. We also have a need for more niche skill sets; we need to find “single-point” people.
That is why we have long ago started organizing special programs; that is, boot camps. Essentially, we are looking for people with basic skills and offer them training in certain areas––web development, front-end development, testing. Previously we held offline classes in our offices. During the last six months, we switched to online.
Mind UA: Are these programs in demand?
I.V.: Yes, quite in demand. Often more than 500 candidates apply for training. We form groups of 15 to 20 people. People know that we give very high quality training. And even if we do not invite someone to join the team after completing the program, the participant can get an IT education and use it to advance in their career. Usually, we make offers to 50-60 percent of the students.
Mind UA: Have you moved only to training online, or have you started hiring experts who don’t live in the cities where your offices are located?
I.V.: Yes, such experts already exist. We are looking for candidates all over the country. In addition, during the pandemic, our people moved all over Ukraine and started working remotely.
Mind UA: Are you recruiting outside the country? For example, in Belarus?
I.V.: We focus on recruiting in countries where we have registered companies. That is, where we can pay people officially.
Mind UA: I was surprised by your choice of Colombia. I do not associate it with a large number of IT experts.
I.V.: About six years ago, we thought we needed to support the company’s growth and create another development center. At that time, we had several offices in Ukraine, Slovakia, and Bulgaria. We decided to focus on South America so that it would be convenient to work with North American customers. I began to analyze which countries we could open offices in. I immediately ruled out the big regions––Mexico, Brazil, and Argentina––because there is already a lot of competition for talent there and many IT companies. I wanted to find a country where we could retain employees for the long term. I also excluded small countries: Paraguay, Uruguay, Costa Rica, and Panama.
I focused on three countries: Colombia, Peru, and Chile. I used my connections to sound out the situation and find out what the conditions were like in those countries. I was advised to look at Medellin in Colombia. It is the second-largest city in the country. I was introduced to the staff of a local government organization, which helps corporations enter the Colombian market.
We communicated several times via Skype; then our lawyer and we went to Colombia and had a series of meetings. I liked the city, the infrastructure, and the steps the local government had taken to attract IT. Eventually, we decided to open an office in Medellin. Now we have more than 70 experts there, and we plan to develop this location actively.
Mind UA: And how did you open engineering centers in India and Turkey?
I.V.: In India, we followed the same strategy: we did not enter the largest city, where most of the IT companies are concentrated, but instead chose Ahmedabad. It is located in the northwest of India and has a population of 5 million people.
We decided to develop our location in Turkey as it is geographically close to Ukraine, our global center of knowledge and experience.
With each location our goal is the same: to attract, train, and retain talent.
Mind UA: In February 2021, Astound Commerce acquired the American marketing agency MarketForce. Have you already disclosed the amount of the deal?
Mind UA: What is the purpose of the purchase? Wouldn’t it be cheaper to hire a marketing team?
I.V.: We compared the cost of recruiting and training people with the opportunity cost. If we didn’t get the marketing skills quickly enough, we could lose customers. This purchase was made to accelerate our ability to provide this type of service. Marketing is now tied closely to technical services. Many of our larger customers want to work with companies with diverse expertise, that is, companies that are able to provide consulting, help attract consumers, and promote sales. This purchase helped us stand out from our competitors.
Mind UA: Is this your first acquisition?
I.V.: In 2018, we acquired the American agency Fluid. It specialized in design and user experience. The integration has taken quite a long time. The goal of the deal was the same.
We didn’t disclose that cost either (laughs). There is stiff competition in the market. We are careful about sharing financial information.
Mind UA: Can you tell us about the conditions for raising investments? In 2019, you were funded by Salesforce Ventures Fund, and recently by RLH Equity Partners of California jointly with Salesforce Ventures.
I.V.: In 2019, Salesforce invested a small amount in us. It was a symbolic investment to emphasize that we have a serious, strong relationship, that we are an important partner of Salesforce.
And RLH bought the controlling stake. Its representatives are on the Board of Directors. This is a long-term partnership.
Mind UA: Wasn’t it hard for the founders to part with their controlling stake?
I.V.: It was very hard. It was a serious step. We made it because we had and have ambitions. We wanted to expand the company significantly. At some point, we realized that we would not be able to grow as fast as we had before without additional investment. Ten years ago, we had a team of 100 people, and now we have 1,300. In the next four years, we want to attract about 3,000 more experts.
Mind UA: What else will be financed by the RLH investment?
I.V.: The expansion of the existing infrastructure. We are expanding our offices. We want to invite our employees back offline.
Funding will also be used to buy the other companies. We want to expand our service portfolio and move into the countries where we would be able to open new development centers and offices to attract customers.
Mind UA: What assets are you looking at?
I.V.: Strong IT teams could potentially be of interest. For now, however, it is more effective to invest in recruiting. Over the past three months, we have doubled the size of our recruitment team, and we are taking advantage of our own expansion opportunities.
When making a purchase decision, we must first consider the geographic location. Then we consider the team skills, those that we already have and then new ones. We would like all these “stars” to align.
Mind UA: So you’re not interested in product startups?
I.V.: Product companies require completely different approaches and types of financing. Our focus is on service. We don’t want to spread ourselves out on something in which we don’t have serious expertise.
Mind UA: What new countries are you going to enter?
I.V.: We do not have an office in Australia. This region is interesting to us for further development. There is also the prospect of opening another office in South America. Yes, there is Colombia, but now it’s time to expand to the other countries in this region. There are potential customers and technical teams with knowledge and skills there.
Mind UA: Do you still intend to attract investment or hope to rely on organic growth?
I.V.: It all depends on the opportunities that will appear in the market. If we find a big, cool asset, we will attract investments to acquire it. As for buying small companies, I think our own funds will be enough.