Recruitment and management of a software development team for a Fortune 500 bank* Overview... 2 Location options and recommendations... 3 Options... 3 Evaluation parameters... 3 Ratings... 4 Recommendation... 5 Recruitment plan... 6 Resource breakdown... 6 Timeline... 7 Financials... 8 Projected costs Quantilus... 8 Proposed contract rate... 8 Setup and other costs The Bank... 8 Comparative savings... 9 Quantilus Inc 115 Broadway, Suite 1202, New York, NY 10006 1.212.768.8900 www.quantilus.com *Referred to as "The Bank" to protect privacy.
OVERVIEW Quantilus proposes to recruit, hire and maintain a team of software developers and assign them exclusively for work on The Bank s projects. The exact size of this development team will depend on The Bank s projected needs, and based on our initial discussion, is expected to be around 100 resources. This team will be based out of The Bank s offices in a to-be-determined location. The Bank will pay Quantilus a fixed hourly contract rate for these resources, and will have the right to permanently hire any resource on the payment of a pre-determined fee. The benefits of this arrangement for The Bank are: Savings on salaries and bonuses: o Resources will be hired by Quantilus our salaries are in line with other consulting firms and 10-20% lower than salaries in the financial industry. Bonuses are also significantly lower o Resources will not be based in New York. Salaries in NYC are 15-20% higher than the national averages for comparable professionals o These savings will be passed on to The Bank in the form of significantly lower hourly contract rates Savings on property costs and overheads; all of the suggested locations have significantly lower property prices/rents than the NYC area Quantilus experienced recruitment team will ensure staffing and quality levels are maintained, reducing project delays caused by turnover Quantilus will manage the immigration requirements and paperwork for all the resources who require such processing, resulting in lower overheads for The Bank The Bank will be able to evaluate the contract resources over a period of time and hire only the very best on a permanent basis In this document, Quantilus presents a number of options for locating the office to house this development team. We have rated these locations on a set of parameters and made a recommendation based on these ratings. Once The Bank has made a decision, the Quantilus team can assist with the following tasks: Selection of office space to purchase/rent Purchase and setup of infrastructure (hardware, servers, network, etc) Also in this document, we lay out a recruitment plan for the development team including a timeline and a breakdown of resources by experience level and skill-sets. The recruitment plan is intended as a draft and will be adjusted as per The Bank s specific short- and long-term requirements. Finally, we present a summary of projected costs for Quantilus, and propose a fair hourly contract rate to cover our direct resource costs, recruiting and management overheads, and a reasonable profit. 2
LOCATION OPTIONS AND RECOMMENDATIONS In this section we have selected a number of regional areas that have been consistently rated among the best in the US for business by various reputed publications. We have narrowed the selection down to areas on the East coast eliminating time zone differences and providing relatively quick and easy access from New York. We have then ranked these locations on parameters that we feel are the most relevant for this report. Options The following large metropolitan areas on the East coast are consistently rated among the best in the US for business by various reputed agencies and publications 1 : 1. Raleigh-Durham, NC 2. Charlotte, NC 3. Atlanta, GA 4. Jacksonville-Gainesville, FL 5. Orlando-Tampa, FL 6. Washington, DC Northern VA 7. Philadelphia-Allentown, PA 8. Columbus, OH Evaluation parameters We consider the following parameters most relevant to the success of this effort: 1. Availability of resources: This affects relocation costs, hiring costs, and overall project downtimes in case of turnover. Data from the U.S. Census Bureau's annual American Community Survey was used to determine the relative number of computer professionals in each region. 2. Relative salaries: This is the direct cost paid to resources lower average salaries result in lower contract rates for The Bank. Data was obtained from Move.com and The Geographic Reference Report 2007 (published by the Economic Research Institute) on salaries of professionals with comparable skill-sets and experience levels. 3. Property costs: This is an indicator of operational costs interest payments in the case of property purchase or periodic rent payments. Data on the availability and pricing of commercial property in the different locations was obtained from Costar.com and Remax.com. 4. Business tax rates: Lower tax rates will result in lower contract rates for The Bank, as the consulting company can afford to take lower margins. The primary source for this data was the Competitive Alternatives 2008, Special Report: Focus on Tax, published by KPMG. 1 References: Forbes, Fortune, Inc.com, Experience.com. 3
Ratings On the basis of the data obtained from these sources, we rated the different locations using the numbers for New York City area as reference points. For each parameter, New York City was given a 1.00 rating and the ratings for the other locations were scaled accordingly. For example, a rating of 0.8 in the relative salaries column indicates that average salary at the given location is 80% of the average salary the New York City area for comparable skill-sets and experience levels. The lower the rating, the more favorable the location. For resource availability, we have tabulated the inverse (1/x) of the rating value, as in this case, more is better. We decided to weight the parameters according to their relative effect on the total costs of the enterprise. The weights assigned are: Availability of resources: 0.05 Salaries: 0.70 Property costs: 0.15 Business taxes: 0.1 Resource availability (1/x) Relative salaries Property costs Business taxes Weighted rating New York, NY 1.00 1.00 1.00 1.00 1.00 Raleigh-Durham, NC 3.71 0.75 0.27 0.90 0.82 Charlotte, NC 6.50 0.75 0.24 0.90 0.95 Atlanta, GA 1.73 0.75 0.33 0.87 0.73 Jacksonville- Gainesville, FL 8.13 0.70 0.20 0.90 0.99 Orlando-Tampa, FL 2.17 0.72 0.24 0.90 0.71 Washington, DC North VA 1.30 0.84 0.40 0.93 0.78 Philadelphia- Allentown, PA 1.86 0.80 0.29 0.93 0.76 Columbus, OH 4.33 0.75 0.27 0.92 0.85 4
Recommendation The Orlando-Tampa area of Florida has the best total rating, closely followed by the Atlanta, GA and Philadelphia-Allentown, PA areas. We recommend that The Bank s new location be opened in the Orlando-Tampa area as in addition to the quantitative analysis supporting the choice, the following qualitative factors also make it attractive: The Florida real estate market is one of the worst affected by the recent downtrend. As such, the real property acquisition costs may be even lower than the current reports suggest Florida is attractive for potential recruits due to the following reasons: o No state income tax, resulting in higher in-hand salary and a higher saving rate o Weather since a large percentage of skilled resources in the IT industry are immigrants from warm-weather countries, they prefer to relocate to states with warmer weather Florida has a large number of universities providing a huge pool of potential resources. Two of the top-10 universities by total enrollment are in the Orlando-Tampa area the University of Central Florida and the University of Central Florida 5
RECRUITMENT PLAN Quantilus currently has a staff of 5 recruiters based out of its New York offices. This team has extensive experience in recruiting IT professionals with diverse skill-sets and located across the US. The recruiters evaluate the candidates on their communication skills, attitude, and perform reference and credential checks. Our recruiters also have sufficient technology knowledge to perform a first-level check of candidates technical skills. We also have an in-house team of 10 technology specialists with extensive experience in the technologies/skill-sets that are in demand. These specialists will conduct in-depth technical interviews of the candidates presented by the recruiters. Candidates will be hired for The Bank s development team after they have cleared a minimum of two such interviews. For permanent placements, our recruitment team coordinates with our immigration lawyers 2 to transfer H-1 visas, process EADs, etc. when required. On average, a single recruiter can initiate and manage the recruitment of 5 resources per day. The average lead times for the recruitment process are as follows: Contract positions Permanent positions Developers (.Net, C++, C#, Java, etc) 1-2 days 8-10 days Infrastructure and support (databases, networking, etc) 1-2 days 8-10 days Project managers and business analysts 2-3 days 12-15 days ERP specialists (SAP, Oracle Apps, etc) 3-4 days 12-15 days QA experts 1-2 days 8-10 days The lead times vary by experience levels. The recruitment process for experienced resources is slightly shorter than that for inexperienced resources, as there are more intangibles to be assessed in the latter case. Resource breakdown As per our current understanding, The Bank will require approximately 100 resources primarily C++ developers, Oracle developers, and DBAs. There may also be a requirement for Project Managers and QA experts. It is also assumed that the resources will be at varying experience levels junior (0-2 years experience), mid-range (2-5 years experience), and senior (5+ years experience). This will help us restrict turnover in the team, and will also help us keep the overall costs down. The ratio of experienced to inexperienced resources will be maintained at a level that allows for adequate skill development while not hampering the live development projects. The following table is presented as a template to be revised after further discussions with The Bank management. 2 Murtha, Cullina LLP. 6
Skill-set Senior Junior Mid-level level level Total C++ developers 20 35 15 70 Oracle developers/dbas 4 8 3 15 Project managers 5 0 0 5 QA experts 4 4 2 10 Total resources 33 47 20 100 Timeline Once the resource plan is finalized after discussions with The bank management, our recruitment team will initiate the process. The objective will be recruit in stages, trying to keep the relative distribution of skill-sets and experience levels constant. Based on our average recruitment lead times and the current capacity of 5 recruiters, we expect the resource pool to grow as per the following chart. 120 Number of Resources 100 80 60 40 45 70 95 100 100 100 20 0 20 0 1 week 3 weeks 5 weeks 7 weeks 9 weeks 11 weeks 13 weeks 15 weeks With our current recruitment team, it will take about 12 weeks to recruit the full 100-strong development team. If The Bank requires the team be built up faster, Quantilus will hire additional recruiters as required. After the team is up and running, our team of recruiters will still be involved in recruiting replacements for resources who leave or are let go. 7
FINANCIALS In this section we lay out the projected direct costs for Quantilus and propose a contract rate for The Bank based on these costs. The contract rate is marked up to cover additional overheads, including recruitment, management, administrative, and HR costs. Projected costs Quantilus Description Quantity Rate Total/year Salary Senior Level 33 $85,000 $2,805,000 Salary Mid Level 47 $65,000 $3,055,000 Salary Junior Level 20 $55,000 $1,100,000 Payroll Taxes/Benefits 100 20% $1,392,000 Bonuses 100 10% $696,000 Legal/Immigration expenses 80 $7,500 $600,000 Relocation 50 $10,000 $500,000 Travel and accommodation 52 $2,500 $130,000 Yearly Expenses $10,278,000 This translates to an hourly rate of $54.09 per resource, taking an average of 1,900 working hours per year. Proposed contract rate In addition to the direct costs detailed above, Quantilus will also incur the following overheads: Recruitment costs (recruiter salaries, interviewer salaries, travel, etc) Management costs Administrative and HR costs (salary processing, bonuses, reviews, etc) We feel that a 25% margin on the direct costs will allow us to cover our additional overheads, and also recover a reasonable profit from this project. As such, we propose The Bank pay Quantilus an hourly rate of $68 per resource. This will be a flat rate paid for all resources, irrespective of their skill-sets and experience levels. We propose that this rate be reviewed on an annual basis and adjusted based on the actual direct costs incurred. Setup and other costs The Bank In addition to the hourly contract rate, The Bank will incur the following costs: Property costs (rent or purchase payments) Utilities 8
Furniture Computer hardware servers, desktops, laptops, printers, etc Software, as required Communications infrastructure costs (Internet connection, telephone lines, instruments, etc) Office supplies We estimate that in a location like Orlando, The Bank will incur a one-time setup cost of approximately $2 million and a yearly running cost of approximately $600,000. The actual numbers will depend on a number of factors, including the specific property chosen to locate the team, whether The Bank buys or rents the property, etc. COMPARATIVE SAVINGS Adopting the proposed model will result in significant savings for The Bank, especially when compared with the cost of hiring a similar team in the New York City area. The following tables provide some representative numbers. NYC Metro Area Costs Description Quantity Rate Amount Rent 18,000 sq ft $80 $1,350,000 Salary Senior Level 33 $100,000 $3,300,000 Salary Mid Level 47 $85,000 $3,995,000 Salary Junior Level 20 $60,000 $1,200,000 Payroll Taxes/Benefits 100 25% $2,123,750 Bonuses 100 25% $2,123,750 Legal/immigration expenses 80 $7,500 $600,000 Relocation 50 $15,000 $750,000 Recruitment Overheads 5 $100,000 $500,000 HR Overheads 3 $100,000 $300,000 Yearly Expense $16,242,500 Costs as per Proposal Description Quantity Rate Amount Rent 18,000 sq. ft 25 $450,000 Resource Contract Payments 100 * 1900 hrs $68 $12,920,000 Yearly Expense $13,370,000 Assuming other running costs (infrastructure, connectivity, etc) are approximately similar, this will result in almost $3 million in savings for The Bank every year. 9