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Priit Pavelson & Petri Niiranen, Allies

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Tomi Kaukinen (host) [00:00:00] This podcast is brought to you by Allies. Allies is all about bringing growth to the software services industry. It's a platform where hundreds of companies grow together by exchanging talents, projects and best practices. In this podcast, we will bring you the stories of the most successful companies and people in the business. We cover topics from sales, marketing, H.R. and culture to give you ideas for future growth. Hello and welcome to another episode of Allies Podcast. I'm your host,Tomi Kaukinen, and with me today is actually the founder of Allies and also another very popular person in terms of software industry services. So let's start with Mr. Software Services Expert. Who are you? What are you doing in my studio?

Petri Niiranen (Evangelist) [00:00:44] Yeah, thank you, Tomi. I'm Petri, Petri Niiranen. Yeah. So I'm here working with Priit to tell about the Allies. And also, if I can help and bringing in some understanding of Finnish software consulting market. So that's.

Tomi [00:01:04] That's your stuff?

Petri [00:01:05] Yeah.

Tomi [00:01:05] What's your background? How did you end up in this situation?

Petri [00:01:08] Oh, that's a long story. My face is old. I have engineering background, so I used to do hands on engineering work.

Tomi [00:01:19] Developer?

Petri [00:01:20] Yeah, testing and developing. So all of that projects also, I was heading R&D units, so also international. So US, Finland, China, this kind of background. So then at some point of time I started to think about, okay, maybe I should learn more about business, business side. And I went to Accenture, which is a management consulting company and there almost ten years services business, consulting business, this kind of stuff. After that, a little jump back to Nokia and became an entrepeneur in Lingonberry island as a consultancy and now I'm helping actually 3 year old so I help Finnish companies to become international. I help Baltic companies to become international from their aspect to enter Finland. And the third aspect is I help companies grow. So micro strategy help their competitive advantage and yeah, try to.

Tomi [00:02:25] Show us some street cred like what was the first develop developer? What was the first language in development you learned?

Petri [00:02:32] Assembler.

Tomi [00:02:35] Because I mean, hearing like Simon's basic and basic and all this stuff.

Petri [00:02:39] Yeah, yeah, yeah. Actually, that was. Yeah, all right, I forgot it. Okay.

Tomi [00:02:44] I got some credibility.

Petri [00:02:46] Assembler was first one that was kind of a professional language. The basic stuff with a MSX computer spectrum user was.

Tomi [00:02:57] You have the Vic 20 or Amiga 500 or a Commodore 64?

Petri [00:03:00] No, no Spectrum video MSX.

Tomi [00:03:03] Okay, because there were two schools of thought out. The other one was like the Commodore Amiga and the other one was Atari and Spectrum and these guys.

Petri [00:03:09] Yeah, yeah, yeah. Those were in but actually when I was sixth grader, it was something like 1983. My teacher was very advanced, so he had bought Vic 20 and he brought it in the classroom and he showed how it's working. And then we used this yliolan heitin at this kind of where you have transparency and the light comes on the wall, we made with pen writing first basic code and that was the first touch of coding.

Tomi [00:03:43] My dad bought me a Vic 20, I only played games with it. But yeah. Okay. Priit, what's your first coding language?

Priit (CEO at Allies) [00:03:52] So that's what I was going to say, is that we had a computer at home when I was really young already. But instead of writing code, we had this winter sports game where I had to press enter really fast in order to ski really fast. Yes. And that's what I did. So and actually, that's as far as my coding experience goes, I've never coded anything. I guess the people that in the end either you grow tired of code or you are not really good at it, then you end up in business.

Tomi [00:04:22] It's like, this is disqualification.

Petri [00:04:26] Good save it for him.

Tomi [00:04:31] So what, what brought you two guys together? Because I understand you're you're somehow linked.

Petri [00:04:35] Covid.

Tomi [00:04:35] Covid?

Priit [00:04:37] Yeah, actually covid. Yeah, maybe. Maybe I can. I can tell how I got to Petri.

Petri [00:04:42] Yeah, let's compare.

Priit [00:04:45] Let's compare this story and who's lying. Right. So we were building the start startup, which is called Allies and, and the Allies stories that we always wanted to build a startup. We didn't want to build a services company, but we wanted to build something for software services. At the beginning, we had no idea who to sell what or anything. So what we did initially is that we built up, we had a Slack group and we went and met almost every software services entrepeneur and CEO, first in Estonia, then in the Baltics, and told them, Hey, we don't know yet how, but we're going to bring you growth, join our Slack group. It was free of charge and we really didn't know how exactly and who the customer was going to be. A little bit later and, you know, we were a little bit more mature. We had built up, I would say, pretty good supply. And during COVID time, we were doing some sort of research. I would say initial COVID wave was influencing the companies in Estonia. And then I heard from one of our early partners in Finland who was Janne Kalliola from Exove and Koodia Suomesta, he said that there is someone else doing this kind of work in Finland.

Petri [00:05:57] Yeah. Yeah. So, so I had started to also collect data that how, how this COVID reactions are going in such companies. And I had the Typeform questionnaire and it was part of exercise I was thinking about a little bit, this is a lot more my own business. So, so I created this kind of Typeform questionnaire and every week I was asking that how much you are now still trying to understand the COVID impact how much you are already having changes in your company, how much your customer meetings are handling on your offering, etc., etc.. So like this crew how is it going through? And that was just touch point to Priit which led into many, many other touch spots.

Priit [00:06:54] I think I think within the first LinkedIn conversation, within half an hour you were put into a call with, I think like ten or 15 Estonian software House CEOs and you presented your case. So it was really fast. I think it was not even about doing business together at the beginning, but from Allies perspective, we had so he was already the point where we had gotten our first investors on board and, and we, we knew we needed to figure out. We had a year to figure out who went, how, when, what we're going to sell and how we're going to productize whatever we had. And that's that's actually when we started talking with Petri and and and the long story short is that Petri helped us figure out the Finnish market.

Petri [00:07:44] Yeah, yeah, we started segmenting it. So Priit and Robin and his team was having idea that what who different customer segments could be their customers in Finland. And what we started we started a project where we were studying customer problem a little bit, this kind of service design type of type of approach business.

Tomi [00:08:07] And so what did you find?

Petri [00:08:08] We found that there's a talent shortage and we found that there are about 200 software consultancy companies in Finland who all suffer talent shortage. And we found that Priit has competitive advantage because he has been building with his team the important network of talent in Baltics. So and that's that's that's what we started to build the value proposition and that differentiation.

Tomi [00:08:38] So you I mean to be honest, so did I get this right? You basically you were doing almost against the principles of building a company. So you started building something before there was anything. But it turned out to be a very, very, very well educated guess.

Priit [00:08:56] Let's put it this way, that if we had gone to the market without no supply, we wouldn't be able to enter the market. So I think that sort of when you build a platform or marketplace, there is one theory saying that first you build a supply, then you build a demand, and then you go back to the supply. Yeah, because you're going to run short. And actually we have done it maybe intuitively like that. We first built the supply, then we got our first customers that are mainly the large software consultancies with a head office in Finland that suffer from a huge talent shortage. And then we started delivering. But within that delivery you realize that you don't have everything, so you need to build more of the supply. And then, then, then when you have your first customers, then we start productizing and then why did we start productizing? I think the fact is that we want to get access to a talent pool which is not available on the job market because that's the value you bring every software services company their first choice would be to hire in-house, right? Because on paper you make more money. But the time to these resources is also critical. So in reality, if you get these resources fast from a subcontracting model, then you end up making more money. That's what we've proven with some Petri's research anyway.

Tomi [00:10:19] Let's, let's rewind a bit because. So if we move back. So did I get it right that you actually gathered the people through a Slack group?

Priit [00:10:30] We gathered the heads of companies into a select group and started pushing deal flow to them. We didn't gather the developer themselves. So, okay, our supply comes from 100 plus companies from the Baltics and Poland. We have access to currently, let's say, the real access to real good sellable CVs that are available at any given moment. It's 1200 and a theoretical access, which is much bigger. But in the Slack, we didn't have, I don't know, 10,000 developers. We had we had the owners and business development or the sea level of these companies that wanted to sell to the Nordics, but they don't really know how.

Tomi [00:11:13] Okay. Got it. Okay. So you. Okay. So you started from top down, basically. And did you like your value proposition for them to join the Slack? Was that. Provide deals to them.

Priit [00:11:27] We're bringing growth, which initially comes in the form of deals. So as we see it in software services, two ways you can bring growth. Either you bring me a new deal. From someone. I cannot reach myself and it's probably more interesting than what I have currently on the table, maybe better paying, etc. or you bring me new talent. So on one side we tackle the talent shortage and on the other side we tackle that access to deals that these are all there. But you have to follow a certain supply chain in order to reach these deals. It's unrealistic that a 30 person niche dev house that focuses on X in the Baltic or Polish market gets a deal with an enterprise customer in Finland or Sweden.

Petri [00:12:16] One important point what we discovered in early was that we met a customer of this kind of customer profiles that were there in Finland and the market. And when we were discussing about our value proposition, the feedback was that there are some similar kind of solutions available, but they are all poorly productized. So, so we started the productization project and started to think about that, that what are hard to copy type of elements in the service.

Tomi [00:12:53] What are the hard to copy elements?

Petri [00:12:55] Maybe, maybe not revealing all of them but some of the thing how you can warranty give a warranty for the quality of the designer's order so that if if there's no competence match what Allies is providing next day, they can give alternative person to work on that so for example.

Priit [00:13:21] We have productized a little bit or quite a lot on one side, a little bit on the other side. So basically there we sell to sales of larger companies because they use our talent pool to get deals from their customers. So we productize some on on that side made it very easy for them to get the talent from us and talent that is really sellable to the customer because their entry barrier is a little bit bigger. If you bring a non Finnish or non Swedish or a non Danish speaking resource, then you have to make sure that the talent you provide is really in the format that it's sellable. And on the other side we productize a lot. These companies use our talent management platform to manage their whole CV operation, and that gives us the access to a much broader pool of talent than just if we would be sending out requests and letting them to answer with their CV's and profiles.

Petri [00:14:27] Also, it's very important how Priit and his team is listening to customer. So, so the customer feedback has been extremely good. So, so they, customers tell what they need, how they need it, and they are delivering it. And at the same time then the feedback from the customer is that this is exactly how it must be.

Tomi [00:14:53] Because I've been on them, I mean basically all my life on the buy side, but not in a, in software services companies, but rather startups. And, you know, you get this in inbound messages all the time from different software services providers around Europe. And, you know, the first thought is always like, okay, what is this company? You know, is it Eastern Europe? Like India, you're skeptical. So that's why I'm interested in knowing, like when you come from the Baltics and you come to Finland, like, how did you manage to pass through that? Because now you worked with all the big companies in Finland, basically. So what how did you penetrate that kind of.

Petri [00:15:34] We built value proposition jointly with customer. So we didn't we didn't do our own guessing too much. We built kind of a frame of value proposition. So value proposition means what is our offering, what is the value it delivers to customer? Also, we made a list of those pain points that are difficult to buy and we shaped this to work. So that this entire value proposition where you have value addressing three layers of buy decision. So the purpose, what is the meaning, meaning of a strategic value of this service buyer emotions and also to functional value so that this talent so that this talent is rare, skills that are rare in the market talent supply that is fast in days you have team available Priit can open some of those success cases what you have been delivering really amazing results to customers. So so so building this and verifying and validating which customer profiles, we started with non selling made things so we called that hey we have a new product coming out. We would like to present our story and get your feedback. This is no sales meeting. We are not selling anything and we shaped and shaped and then we wanted to go in a sales meeting and the first meeting they didn't make a deal but meeting number two - deal, then we knew that. Yeah. Yeah we are close.

Tomi [00:17:20] Yeah. Smart strategy you kind of get, get you because when you start selling and as I said, you are in the buy side, you always turn defensive when it's like sales. So but I still need to I'm still curious about how you got to that meeting, where to get them feedback because that's also like people's time is valuable and all that stuff. So there must have been challenges there too.

Priit [00:17:47] But I think getting the meeting was not too much of a problem. I think maybe played a little bit down to also a Petris background that and his status on the market and the network. But I think this is not the most important in terms of I think a very good point about this like the extreme example of companies reaching out to everyone from not their market and then no one is ever going to buy their services almost. But like it can be explained by how different markets work and they work a little bit differently. So for example, maybe Petri knows a little bit better. Like what is the percentage?

Petri [00:18:23] You are professional. Go ahead.

Priit [00:18:25] Okay, like, like what is the percentage of new sales in Finland that is done with CV sales.

Petri [00:18:31] Yeah, I see. We say is if we translate it a little bit so that the software services market and software consulting but it's all about skills. So I would say that teams are built based on skills and profiles that are available and it's 100%. And then when you are opening a new customer, new client, they ask very often CVs and skills profile .

Tomi [00:18:59] Who's going to do this?

Petri [00:19:00] Yeah, yeah, exactly. And they can be very picky. So I would say that 80%, more than 80% will start with CV. So once there's a trust, then maybe you can just fill in the need and bring the people into. Yeah.

Priit [00:19:18] So, and there is like a little bit of a difference, let's say, from how Finnish companies approach their CV and how, let's say companies that come from outside of the market, near shore in beat Baltics, beat Poland, they have different ways of building up CVs. So you want to get the trust of the customer. We have had cases where to finish from competitors, exchange Cvs through Allies with each other by stating the name of the resource person that picture, the phone number, email address, all the projects really well always described. The Finnish CVs are like maybe four pages long and they are really descriptive about the project that these people have done. So you can read as a customer quite a lot from the CV's, but then for example we have another extreme is like we wanted to bring a good Polish resource into a project. We know that this company and this resource person could have the skills to deliver it, but then we receive a profile which is blind. Project names are under NDA and very thin description of what this person has done. And then you like you cannot really do much with it because by default you have less trust because it comes from somewhere which you do not know as well as if it was from a, you know, local resource. And then you are going to be very skeptical and you're not going to bite, but you kind of have to turn it around and you have to make sure that you sell your stuff the same way as it's being sold on the local market. So with our partners, we put a lot of emphasis on how these candidates are being presented so that the end customer. However they receive it, they are used to buying it. And it comes down to simple things like how would you craft a CV in a way that it can be sold on the market?

Tomi [00:21:20] Are you part of this process? And you make sure that it becomes like that.

Priit [00:21:25] If I am, well Allies platform is part of the process, these companies use our talent management software to handle their whole CV sales process, to craft CV, subversion them, to pull them out for our cases, but also their own sales cases. And then we have we of course, consult them, our, our, our team when we see that, you know, we cannot really push it forward to the customer, then we ask them to, you know, work on it a little bit.

Tomi [00:21:54] Okay. So once you have the I want to get into the story because I like stories, you know, once you've got these meetings and you got the sales after subsequently after you had the first case, surely it must have become a lot easier.

Priit [00:22:13] Yeah, I would say yes. Like it becomes easier and it becomes a repeat customer. So they've seen that it works and then it becomes a repeat customer. So you kind of sell once and then build trust to the platform and the people behind it, the people that manage it and the people that are accessible, the talent that is accessible through that. So. So, of course it becomes easier.

Petri [00:22:39] Yeah. Yeah. Yeah. And then we started to build as a publicity, so Allies was a no name in the market. So only a couple of customers knew about Allies. So we built the talent report under Allies Brand and made the press a campaign related to that. And it was it was a quite, quite good campaign. Several medias were publishing the article and also the Talo Sanomat in Finland, the biggest media in Finland was publishing article about it and it was the most popular article on that week.

Tomi [00:23:21] So that sounds like a very smart way to do marketing because a lot, I think as we talked about, I mean, the buy side skepticism is going to vanish when you build kind of your validate through PR and media and smart kind of marketing, I would say because PR is marketing. So. It's a very hard place to get to if you're not there. And once you're there, it's very easy to get repeat sales.

Petri [00:23:52] Yeah.

Priit [00:23:53] Yeah.

Tomi [00:23:54] What what's the biggest problem coming to Finland? What was the biggest challenge?

Priit [00:23:58] I think you're not able to enter any market unless you have one way or another, a really good method to get to know the market. Our method was basically Petri.

Tomi [00:24:08] Yes.

Priit [00:24:08] And you really have to have someone as a market insider to get you into this market. We have I've been in these meetings like ITL is the organization that unites Estonian software services companies and other I.T. companies. And there have been these discussions like how much does it cost to enter a foreign market? And they always say a certain number, but, okay, it's that certain number or you buy a company there which gives you or you somehow, you know, invent your own way. And you I don't think it's easy, but it's trial and error.

Tomi [00:24:45] Yeah, yeah, yeah, yeah. But I think the main point when, when my own companies, I brought them to, for example, the Spanish market and stuff, you know, I've learned the lessons from losing money and stuff that a local representative is. I mean, there is no question you just got to have someone who understands the market and knows the people. I mean, it's if you do that, okay, then you have to be very, very smart if you're if you're going to manage without understanding the market because okay maybe Finland and people see Estonia fairly close but surely there are differences.

Priit [00:25:19] That's true and also we don't have to as this platform only open Finland or whichever is the buy side, you have to open the supply side. So being a good company in Poland among software services companies that are your supply is not also as straightforward. They know how to do business really, really well. And you don't just, you know, they don't run after you like, hey, you, you know, they have so many places to sell their services to and the demand is so high that in a way I could argue that they don't really need you. So you have to make it. You have to productize that part really well as well. So it's not only about Finland, but it's, it's figuring out what whichever side one could want from you and then maybe, maybe trying.

Tomi [00:26:11] So what do the what, what does the supply side want from you then.

Priit [00:26:15] I hope I'm, I'm, I'm right there but I think supply side well the supply side always in reality, the best deal for any software services companies, a deal I own, which gives me a ton of resources to go into that project, which is long lasting. My team is happy in that project from a I don't know, enterprise customer which can go on forever in this is like quite hard to reach. So we have to start somewhere. You will always make some sort of like sacrifices so you either get a deal. Your response like, like you get a lot of responsibility for and you manage it. But most likely it's not going to come from the biggest or most important customer or you are either placing one or two resources starting really small, but your end customer can be really significant. Your people can be really happy in there. So you have to and we kind of bring them everything so we can we have to somehow the same way segment the market like we for example hotels they all use you can help open a hotel you plug into and you are there deals start coming in. Yeah but they're not the best maybe deals. The best deals are the ones that you get directly, but to get directly you sell, you market, etc. So you pay a commission to or you pay to the marketing and sales team so it's a balance and we can help these companies that are not local companies that want to enter the Nordic market in to enter the market. And they are not going to be owning all the deals, but they will be able to place their talent into really, really good projects and from there kind of grow.

Petri [00:28:03] Yeah, yeah, exactly. The market is there. So it's hard to make business if there's no market.

Tomi [00:28:08] So yeah. So for supply side, let's talk about let's say there are some Polish, you know, software services company wants to get into Finland. So their option is basically we can go through you or we can try to do it ourselves.

Priit [00:28:21] For example. Yes, of course there are more options. I'm not saying that these are the only options.

Petri [00:28:27] Yeah. The important thing here is that the Allies is not competing inside Finland because Allies is helping these companies that need talent and to get the talent. So what we learned also in the process was that there are alternatives, solutions inside the market to help companies find talent. But they were optimizing the talent market that is inside Finland but what Allies is really doing is extending the market.

Tomi [00:29:04] Yeah.

Petri [00:29:05] So and that's the thing. What we can also offer to supply side so that so that there's a good relationships between Allies and market players in Finland. And so there's a trust in place and it's a good, good way to come through Allies platform to Finland.

Tomi [00:29:24] Yeah. So we've touched upon like how the model was built. Started with the Slack and the supply and stuff. What were the next steps on building this model?

Priit [00:29:38] Next steps, I think to build a model on both sides. It has been about like productizing in both sides. So the way we, so the customer buys how the customer buys. So every customer has a certain particularity on how they buy. Like whether they do it through their portal or whether they send you an email or whether, you know, there are so many different options. But the way you respond to that can be very different. So we think that we respond in a way that makes their life very easy in order to sell these people. And that is focus on the quality of the input they get when they receive talent from us, the speed and some more elements. And on the other side, I think the really big leap for us was that we had developed an internal tool for us to do this business quite fast. And at one point we realized that, you know, this could be rolled out to our partner or vendor network. So now we have out of all the companies that we work with, we have more than 20 companies by now that use the Allies talent management platform to manage their whole talent pool, their entire CV process, which gives us the data to all their teams, which gives them a better way of managing their talent, plus getting tapped into the deal flow that comes in, in through us. And now that we have actually companies with biggest one, more than 100 people using our product, it's like it's a whole new level of responsibility in a way you like. And that's that's what we're working on really heavily.

Tomi [00:31:33] So, yeah, yeah. So you're actually making, uh, making and making other things easier for the supply side so that they get hooked into your system?

Priit [00:31:43] Yes, for the supply side. And we like to think that also from the for the demand side. So, yeah.

Tomi [00:31:50] And how did this partnership then evolve? You started getting the sales meetings and all of the sudden I think you're now an investor in the company or owner in the company.

Petri [00:32:00] Yeah, small owner. So supporting that way also. So we started collaborating so we made a deal that half of it was consulting. Half of it was option that for my company. And that way we collaborated. I helped growth journey, then there was a funding round. So then I invested back all that money that I had received from Priit but also I put some own money or should I be honest and say my wife's money. I was in the company and that way as an Angel investor, also now supporting the growth journey.

Tomi [00:32:49] Do you have other investors, too?

Priit [00:32:52] We have other investors too, Petri joined in the second round. So first of all, to get the company going in the initial phases, we have gone through all the phases. So Friends, Family first, we did that.

Tomi [00:33:04] You managed to do that safely?

Priit [00:33:06] No, not at all. Like I would say that I'm happy that I'm still with my wife partner that it worked out that the first one and a half years was not too easy. Then we got in the first real round Guerrilla Capital from Finland onboard together with three really good angels. And then the next round where Petri joined, he joined also with some very strong angels from with a very strong product background from some unicorn companies from Tallinn.

Tomi [00:33:45] You have a lot of those in Estonia.

Priit [00:33:47] There are a few and for some reason we are not one, I don't know why.

Tomi [00:33:53] Yet! You forgot to add yet. But now I need to digress because you live in you live in Tallinn, Estonia. You're brought out. You are from there originally. Tell me your theory of why the hell is Estonia kicking our ass in Finland?

Priit [00:34:14] It's a really good question. And of course, the simple story is that it was all catalyzed by Skype. And from there you have like different schools that came out and that's produced, I think, you know, I don't know, 11 unicorns, but I think that's really the tip of the iceberg. It's really like the amount of like growth that comes from this sector and the value it creates to the economy. It's really, like, spectacular in a way, and that's really good. And I think that we were also right now Estonia is not a good place for software services supply not very good place because that most of the people the talent rather takes a job in a like very promising startup which gives them an option package. But it's not only the case, maybe our like partners would not be too happy that I said it. But if they are in a really tough competition for talent and maybe even more so than here, so the services companies in that way are not, you know, the most attractive employer on the market. The most attractive employer on the market usually is this very well growing startup or scaleup.

Tomi [00:35:37] Yeah. And that's what I what I'm what I'm thinking because we, I think we have similar problems in Finland with Supercell and we had Rovio and everybody just wanted to go work, work there. So I mean, this is probably a horrible thing to say, but did the software service company get kind of the people who actually really wanted to go somewhere else?

Priit [00:36:01] I would even say like this that yes, it would. I think there are some people that are better suited for this kind of work. And there are two things. I think on the first side, these kind of companies are great employers, but they're really not great customers for software services companies and Estonia the same way as Nordics. I think Estonian services sort of drive comes mostly from the public sector and it's not a really bad like when we go and talk to our partners in Poland, they say we don't touch the public sector. You know, it's not a good thing to work with the public sector for different reasons, but here it's different. I think that you have so many interesting projects people do together with the public sector for the public sector. And when you look at the Finnish companies and many of them, their growth is reallt realiant on the.

Tomi [00:36:57] Gofore I think is one example. They work very closely with municipalities I think and.

Petri [00:37:05] Yeah yeah something like the latest numbers two third of business what Gofore is reporting is coming from the public sector.

Tomi [00:37:13] So what's the why is that because why do we like it here? And we because we see like long deals, long time and, you know, money.

Petri [00:37:26] We are quite a great market. Our healthcare system is one of the biggest in the world so even the US companies, they struggle. Healthcare is fragmented in US so the US companies want to come to Finland to learn about, we are the big customer for many companies. So in healthcare for example, and there are many companies that have built a good growth around healthcare like Gofore also Siili, Codeman, this kind of, these are just the tip of the iceberg.

Tomi [00:38:12] Yeah. So how do you convince someone from Poland or something that doesn't want to work public that there is a pretty great sector in Finland that that could be utilized?

Priit [00:38:22] So so one thing maybe I will also mention is that maybe I'm doing a little bit harm to the services companies in Estonia in that way that, you know, the things that have been achieved together with the public sector by services companies like Nortal Helmes like these are really like, you know, they are being used as a model for other governments. And it's really like innovative and good stuff they can do together. And it wouldn't happen without the services sector, I think. So there as well. It's seen as a very good industry I think, but not knowing the specifics but I feel that in Poland it there are a certain number of large companies that win most of the tenders and the let's say a company up to 500 people in Poland would see right away that we have to go abroad to make it or, you know, to make it, their rates are better. That that's the first thing. Then we can attract talent better. It's not only local language speaking projects, and there are many aspects like that. And for some reason, public sector maybe is not being seen as the most attractive employer. And then you have to somehow. Yes, stress that in the Nordics it's no shame working in the public sector.

Tomi [00:39:45] Yeah, exactly. Exactly, exactly. But, you know, this talent shortage never seems to end. Now, is there going to be an end to this?

Petri [00:39:54] No. It's a huge market. If you study European situation and the goals that European has in digitalization, so, so end of this decade or 2030, we should have 20 million ICD professionals in Europe. And at the moment we are just about 10 million.

Tomi [00:40:20] So we double up and what was the time?

Petri [00:40:22] In ten, eight, seven years.

Tomi [00:40:25] You're going to double up in eight years?

Petri [00:40:28] Seven years actually, it is almost end of 2022 already.

Priit [00:40:31] And the problem is that it's not only Europe, you know what I mean?

Petri [00:40:36] It's a whole global issue. Of course, this is coming from many sources, like digitalization is having a huge trend. So it requires talent. At the same time, aging is cutting the demand we have so, so in many industries automation is seen as a tool to manage the talent shortage. Like in Finland some mid cap industrial companies I have interviewed and met. They tell that because they are not able to get the right kind of people working on warehouses and on factory floors, they are starting to look at automation solutions that could help and cut time from other people so that they could run the factory with less people. And this is because of talent shortage, this is not because of greedy capitalists.

Tomi [00:41:43] Yeah, yeah.

Petri [00:41:44] But it's they don't get the people and that's a problem.

Tomi [00:41:51] So is this is the future bleak or is it positive?

Petri [00:42:00] Future, look always the bright side.

Priit [00:42:02] Yeah, it depends on the viewer. I guess.

Tomi [00:42:06] Yeah.

Priit [00:42:06] Quite, quite positive but there are things always you can make better. And, and I think that in a way, Europe is in a more tough situation than some, let's say, than EU compared to the UK when it comes to talent, the UK very easy. Everyone can speak English. In the Nordics you have so many you still have sectors where you have a lot of legacy, which is written in the local language, where you have a lot of processes that are in the local language. And that of course is changing. But you have to really like strategically make this choice because you open up the talent market like this. If if you if you stay stuck with, you know, your local language, you are going to limit the talent market, simple as that. And you may somehow find the talents, but you're definitely going to pay more.

Petri [00:42:56] To our pockets talent pockets still in Europe also.

Tomi [00:43:01] Are they are in the east?

Petri [00:43:03] This Baltic area is one of these, Poland is huge source of talent. And I think east, so-called Eastern Europe as we know it, it has strong mathematical culture.

Tomi [00:43:18] Yeah. Yeah.

Petri [00:43:19] So and that's the thing of course there's other areas and regions where coders happen but I think EU so European Union and how easy we can transfer people inside European Union also I think all Allies projects have been remote delivery.

Priit [00:43:39] They are remote and also adding to that, what Petri said, yes, there are talent pockets, but it's not like Polish developers are now waiting that hey when we can get a project? They are all occupied. They're all in projects. Yeah, best people are all in projects.

Petri [00:43:55] Yeah. And the Polish companies are the best companies. It's not like in maybe old times we used to think about that they are offshoring and nearshoring and, and I would say that very soon we will see leading brands that are both from Poland and from Czech.

Tomi [00:44:14] Yeah.

Petri [00:44:14] So this whole, this mathematical talent and the business drive that Poland has is, is going to change this year.

Tomi [00:44:24] I totally hear, because in my own start ups I had when I was looking for developers, I obviously was super hard to get, just developers. We couldn't get any Finnish ones so all our developers from the back end to the front to you know the server side was from the east. So we had from Slovakia, we had from Ukraine, from Russia, all only east. We didn't have a single developer coming from like the Western European side, everything from these. And as you said, they all were like really knowledgeable in mathematics. They understood logic and, you know, could do this stuff. And some had been like physics teachers and that is awesome. So I was through my own recruitment. I was really like could hire only Easton. I have no problems at all because they have shown me that they are really good.

Petri [00:45:19] Finnish engineers are good as well. So we have to keep a strong respect to Finnish software industry. So we have done a lot of things good and also of course we have been lucky we had Nokia that has been for helping us to build up the education system. And then Nokia difficulties have released the skill and talent and also when Nokia had difficult times, all that, they gave a lot of funds and they helped building new companies like Haltian one of my customers in Oulu is a whole team from Nokia and now €50 million growth rate is 70 plus percent a year. So amazing stories in Finland also so we have a lot of talent here.

Tomi [00:46:14] So the talent shortage is real. We need 10 million new developers. You are a part of helping companies with that. So I mean, what's the? What would you say? You mean we're not going to get 10 million developers probably?

Petri [00:46:28] Priit will deliver 2 million.

Tomi [00:46:31] But coming to you like are you going or do you have your talent pool only in Europe or is it India as well? If Pakistan or these countries.

Priit [00:46:39] Our talent pool is only in Europe and it's like maybe part of that you listen to customers or something it's our customers would not buy non EU non like resources from us mainly it comes down to GDPR mainly then it comes down to trust as well. And there are companies in Finland as well that are able to offer offshore resources, but then the sort of supply chain is a little bit different and we don't do that. Our supply comes strictly from the EU and I think the key here is that you find like sort of for us it's harder to sell a regular Java developer. Of course if it was a Java with Finnish skills then it would be different but it's like all about some sort of niche in which they're strong in whether a skill that is very hard to find or domain knowledge, which is required for that particular project. And then if we can bring these kind of people into projects, that's quite often are almost always like a success. But if we were to offer just generic skills, I don't know that like just PHP, just Java just .NET, then it's not really like you know, it's not there where the beef is. It's about the specialization of these talents and that. And then you bring to the talent work that they want to really do because it's really niche in their domain, they're happier, the company is happier and yeah.

Petri [00:48:18] Yeah, they know that they have options, so there's less talent than opportunities. So of course you want to take the best project for you. And that's something that's actually driving into segmentation thinking of talent market as well. So and that's that's what has happened in Finland very strongly. So that we used to have giants then we discovered that, okay, if we start doing design thinking in markets, we get close to the customers and we can locally so yeah yeah. And new companies were like across growth of Gofore has started from this design thinking also Siili, some other companies have been leaders in that and so when they discovered that there's a shortage of talent. So some players discover that it's okay hey talent is not one talent, it's a talent with many needs and we can make new salary models.

Tomi [00:49:26] Yeah.

Petri [00:49:26] And then discover that. Okay let's not have these different working models under one brand. Let's make different brand for different segment.

Tomi [00:49:38] Exactly.

Petri [00:49:39] And build the ecosystem. So ecosystems are also growing fast.

Tomi [00:49:42] Yes, I understand. But they're basically copying each other. So almost all companies soon will have subsidiaries with doing specialization, right?

Petri [00:49:49] Not all. Not all. Because the job market, there will be no one that talented. So only one kind of talent category likes this kind of job model, but they are also models for monthly salaries. Some companies are building that everybody have equal salary system and it's a many kind of.

Tomi [00:50:16] Oh my initial reaction is negative. I feel like it's very demotivating for people who are super hard workers.

Petri [00:50:24] Go and tell them so they like it. If you like bananas, you buy bananas and someone else likes apples. And so I don't want to make people and fruit, I don't want to mix them together. But the thing is like in customer market, there's a lot of segments, so some people are in different segment.

Priit [00:50:54] And and I think it brings to the point is that quite often either you would have the talent saying or you would have the kind of the customers saying that, hey, that was a bad talent or hey, that was a bad customer. But most likely neither of them were bad, the sort of they just didn't have the right fit. And, you know, that's the that's what usually happens so but it comes to really like good segmenting to understand as a talent what you want and them to understand as a company, what kind of people who want to bring into your projects. And then if you do that really well, both sides are going to be really happy. Yeah and as many as there are people there will be models.

Petri [00:51:36] Yeah. Actually, actually it is surprising that it has taken so long to discover this kind of talent market segmentation, because if you think about talent, market is by nature microsegmented, so old job advertisements. So this talent C++ in this kind of industry, blah, blah, blah, this, these many years of experience.

Tomi [00:51:57] Yeah.

Petri [00:51:58] That's a micro segmenting, is it?

Tomi [00:52:00] Mmhmm. So what are the next steps now for Allies.

Priit [00:52:05] On the product side, and that's a little bit more on the demand side we really want to become this sort of in a way for our industry. It's a maybe not the best example, but for this industry.

Tomi [00:52:19] Well, that's a good analogy. It's a good thing.

Priit [00:52:23] That if you run a dev house and then there are many levels, you start really small and then you can go really big. There is no plug and play system which helps you in your processes and in your sales, in your in your recruitment, in everything that actually brings you growth. And there are so many things that you can do and Allies platform is step by step, like addressing these issue. We have more companies that start using our talent management platform and we have more companies that start using the talent from our platform. We even have now the first cases where sort of what we initially saw as vendors, so let's say, an Estonian company using another Estonian companies talent. And we initially thought this kind of linear that market that but in reality there are one company at any given moment can be either a client or a supplier. So and you have to have a system that facilitates that. And our product is more and more able to facilitate it. And there is a lot of work to be done in that area.

Tomi [00:53:34] But it's a process. And the more you understand, the more you get in depth, the more of an competitive advantage you will gain, which going to make it very, very hard for other companies to enter. Because the knowledge you have had, there's a reason why we only have basically and The entry barriers are huge.

Petri [00:53:51] Yeah. Allies is a platform business model.

Tomi [00:53:54] Yeah.

Petri [00:53:55] So but then and yes, so its future looks bright. Allies has actually quite strong advisory board. So there are many kind of talents from many markets in Allies sports. So I think that's helping Priit a lot. And then another good point is that Allies is running cash flow positive.

Tomi [00:54:23] Oh that is.

Priit [00:54:23] Not yet, lie, almost.

Petri [00:54:27] Okay. You say okay.

Tomi [00:54:30] Black numbers that's, that's, that's music to my ears.

Priit [00:54:34] But I don't want to lie. But we are, we are on our way there and we think it's quite important at this stage. And then we have again a chance to look around and maybe, maybe think about how we boost our growth. And there is a lot to be done. So, yes.

Tomi [00:54:52] Now we have we jokingly talked before we started this campaign that the sign for running out of time would be showing my middle finger but I hope that I'm not going to that but now you know. Jokes aside I mean, we have only we have talked for quite a while already. I'm very sorry to have to cut this at this point. I could keep going. Maybe we'll do it again sometime.

Tomi [00:55:21] Yeah.

Priit [00:55:22] Try calling Petri. It will take some time as well.

Tomi [00:55:26] All right. Thank you Petri Niiranen and Priit Pavelson for this one. We'll see you next time. In the Allies podcast, I'm Tomi Kaukinen and Goodbye.