Managing success in offshore software development

High-end functions like software development are rapidly gaining acceptance as off shore candidates. And as the pattern of off shoring migrates from low-end to high-end work, the challenges faced by the management have moved from dealing with political backlash to more operational issues like retaining managerial control and gaining operational efficiency. As application development becomes increasingly dispersed, those running these projects face a new twist to the age-old challenge of managing distributed software projects. Traditional team management techniques, like scorecards and site meetings, are ineffective and impossible to scale in a world where teams span vast physical, temporal, cultural, and organisational barriers. Managers are finding it increasingly hard to get the facts needed to build a reliable picture of projects and to make informed decisions. Building software in a flat world, characterises this loss of control as a major obstacle to working in a globally distributed environment. I suggest that this problem is experienced by 35 per cent of organisations engaged in off shoring today.

The Duke Booz Allen study agrees with this assessment, suggesting that loss of managerial control has trumped cultural and political issues as the primary challenge for offshore projects today. Absence of factual insight can lead to missed deadlines, budget creep, and a fundamental erosion of trust and goodwill in relationships. The result? Companies waste billions of dollars each year in project overruns, cancellations and missed business goals. This white paper outlines a way for organisations to build a modern framework for managing distributed teams that overcomes the structural challenges of working across far-flung locations, and ensures projects come in as expected—on time, on budget and on target with business goals. This framework reuses your existing development infrastructure to restore visibility and empowered decision making within your globally distributed software development projects.

A tale of two models

Recent hype has blurred the distinctions in offshore development models, making anything offshore nearly synonymous with outsourcing. While offshore outsourcing has garnered most of the attention, customers are also beginning to engage in a model Gartner Group calls ’offshore insourcing’, where companies own and operate the staff, infrastructure and processes by way of organic growth or through acquisitions in offshore locations. While both approaches have different costs and benefits, both are united by the same challenge in maintaining visibility, trust and control when traditional management techniques are applied. The challenges inherent in managing a global team have driven some customers to altogether rethink the notion of outsourcing to offshore third-party suppliers. The number of customers planning to use offshore suppliers is at its lowest in two years: 64 per cent compared to 85 per cent in 2004, according to the Diamond Cluster International 2006 global IT outsourcing study. Customers are breaking outsource contracts in record numbers because of discontent with suppliers’ performance and a feeling that outsourcing deals fail to live up to the anticipated benefits. In fact, 47 per cent were terminated prematurely during the last year, as compared to 21 per cent two years ago. But the reality is that adopting an offshore in sourcing model doesn’t necessarily resolve these challenges. The physical distribution of teams—in source or outsource—negatively impacts visibility and control, making it considerably harder to lead, manage and make informed decisions. "You can’t manage what you can’t measure" is the famous mantra of author of the book Metrics – Reclaiming Visibility and Control. This message is profound in its simplicity, and it has inspired many to adopt a metrics-based approach to management. However, many organisations were ultimately disappointed with their early metrics initiatives. It’s not uncommon to hear managers lament about metrics programs gone awry. Metrics are said to be artificial, inaccurate, costly to collect, and even unethical. And despite the tremendous importance of metrics, many organisations have resigned themselves to failure because of a negative experience with first-generation initiatives. Some of the key limitations of first-generation metrics programs include:

Manual – All data is hand-keyed by people, which is time-consuming and distracting.
Static – Provides a snapshot in time, but doesn’t reflect the dynamism of a project. Subjective – Data input is based on individual interpretations, assumptions and biases.
Coarse – Provides high-level information, but limited detail or context at the process level.
In comparable – Data collection approaches vary from project to project, which limits comparability.

Inaccurate, inconsistent or unempirical metrics can lead to poor project performance and damaged relationships. The key to making offshore projects work is process transparency; transparency brings more predictable outcomes and higher levels of trust. Without process transparency, those running distributed teams are effectively blind, Companies whose instincts have gone stale are like patients with local anesthesia let free to wander the world. They are rational, coherent and aware of their predicament, yet numb. They can no longer sense the world around them.

Company automatically and unobtrusively collects activity-based data from developer tools and delivers on-demand analytics to individuals and teams. These analytics deliver insight into the time spent on specific activities, and provides a basis for understanding team effort and overall project velocity.

Offshore challenges

The following challenges excerpted from Diamond Cluster’s 2006 global IT outsourcing study reflect five of the top challenges managers need to overcome to successfully manage offshore projects. For each of these challenges, there is a relatively simple metrics-based solution:

Limited visibility into day-to-day delivery status

Accurate project data enables you to see where development team members are spending their time, whether there’s a skills shortage, or whether best practices and processes are being followed. Outsourcers who share this sort of data with their clients witness higher levels of trust and lower attrition rates.

Slippage in project deadlines

Accurate and up-to-date visibility into the effort and investments being made provides powerful insight into the focus of individuals and teams and a basis for ensuring alignment with overall project goals

Inadequate work estimation capabilities

Too often, estimation is based on artificial units of measure such as elapsed time. But the reality is that elapsed time is a very inaccurate proxy for estimating the time it will take to build software. Elapsed time estimates typically over or under account for multi-tasking and environmental distractions. Organisations need an empirical basis for estimating the effort required to complete a work effort based on the actual ’active’ time it take to complete a work effort.

Ensuring use of best practices

Best practices ensure you can consistently replicate successful work patterns. But the reality is that measuring best-practice adherence is very difficult in a distributed environment. Activity-based metrics can help you achieve visibility into process alignment and work patterns.

This provides a basis for managing the blend, pace and sequence of work. Inadequate skill proficiency and experience, understanding the breadth, depth and location of specialised skills is easier said than done in large organisations. Use activity-based metrics to document individuals’ experience with tools, technologies and activities in the development life cycle.

Inadequate skill proficiency and experience

Understanding the breadth, depth and location of specialised skills is easier said than done in large organisations. Use activity-based metrics to document individuals’ experience with tools, technologies and activities in the development life cycle.

source:- merinews.com/

Beyond BPO and into knowledge process outsourcing

Organisations have been outsourcing and offshoring business processes for many years now, to take advantage of the lower cost of labour in developing countries such as India or China. Many of these Business Process Outsourcing (BPO) contracts have focused on large scale transaction processing, frequently in 'non-core' processes such as accounting or human resources, or in areas of perceived lower value or complexity.

Recently this trend has begun to change.

Low-value, 'lift and drop' contracts have run into some severe and well-publicised problems. In the UK, most of us have either had, or heard about, a bad experience with an offshore customer service agent usually suffering from inadequate language skills or a lack of knowledge. On the other side of the fence, the offshore call centre agents themselves often face daunting overnight shifts (to field daytime calls from the other side of the world) and a job offering limited professional challenges to skilled graduates. Under these circumstances it's not surprising that offshore staff attrition rates per year can routinely be over 50% and that serious questions around customer satisfaction and operational stability have become common.

As these problems have hindered the development of offshore call centres and even prompted some organisations like LloydsTSB to use their onshore call centres as a selling point, other factors have led BPO providers to offer more complex, knowledge-based services that sit far closer to the core business. These higher-value processes, while still offering reduced cost, also take advantage of the wider availability of qualified talent in developing countries, exploit the benefits of operating in different time zones and allow added flexibility for ad-hoc or short-term projects.

Moving up the value chain
The issue of global talent is key - onshore availability of skilled graduates, say in the UK, is small compared with a country such as India with an estimated 2.5 million new graduates and 500,000 postgraduates entering the job market every year. The price of this offshore talent is far lower than the UK too. In fact, the wage differential between near and offshore skilled professionals with significant experience is greater than that of the graduates with lower levels of skill and experience traditionally hired into the transaction processing operations like call centres. Bearing this in mind, the higher knowledge-based BPO presents a better business case than low-value deals, albeit on a smaller scale. Crucially, higher-value BPO arrangements give offshore workers a far greater degree of job satisfaction and potential for career progression - helping to address the high attrition rates and customer service issues associated with transactional and support processes. Tasks are typically analytical and require staff to be highly qualified, professional and mature.

With many organisations now operating on a global scale, using third-party talent sourced from worldwide locations also means that business can respond and serve customers regardless of the time zone they operate in. The flexibility of using a third-party BPO provider also allows organisations to easily and quickly scale operations up or down in line with seasonal or otherwise predictable peaks.

Challenging underlying business assumptions

The cost savings offered by high-value BPO deals are important, but arguably of greater significance are the strategic opportunities that were not available with the traditional onshore models. Most human capital-intensive business processes within corporations were designed and based on certain underlying assumptions: about the supply, the demand and the price for talent in the geography where the process was originally based. When this underlying constraint is relaxed through global sourcing, the results can be dramatically different.

The idea is that by applying new knowledge, skill-sets or business savvy that were not previously affordable or available, organisations can enable new services or capabilities that, in the past, could not have been considered feasible. For example, one customer of Cognizant in the healthcare insurance industry has been taking advantage of skilled Indian labour to improve the effectiveness and extent of its investigation of fraudulent claims. Previously, with onshore employees the company wouldn't investigate any cases below $1,000, as the costs involved would outweigh that of the potential fraud itself. Taking advantage of the lower cost of labour has allowed the threshold to be brought down to $500, allowing more leads to be chased and reducing margin leakage.

This 'knowledge process outsourcing' approach should also have benefits for providers - involvement in these areas of a client's business brings greater understanding of business issues and the opportunity to serve clients better. For those outsourcing vendors who also offer IT services, there are opportunities to bundle together different services and offer complete packages to their clients, taking increasing accountability for delivering business outcomes.

Cost remains a strong motivator in outsourcing decisions, but the ability to source global talent to deliver business processes brings new challenges and opportunities. Organisations have to change their decision process to make the most of this worldwide knowledge base. They need to ask themselves, not how much more cheaply and efficiently a particular process can be done, but why they are doing it in the first place and whether they could achieve a different customer 'experience' if they had access to skills, expertise and talent at price points which were not previously possible.

source:- financeweek.co.uk/

How Offshore Outsourcing Affects Customer Satisfaction

The outsourcing of customer service to offshore providers has gotten a lot of bad press in the U.S., with reports citing language problems and the exporting of jobs. But, despite the potential for such reports to alienate consumers, this offshoring continues to grow, driven mainly by the lower labor costs overseas.

Are companies that send customer service abroad making a mistake? It's hard to answer that question without knowing offshoring's actual impact on customer satisfaction.

Our research indicates the effect in most cases is significantly negative -- but similar to the effect of outsourcing customer service domestically. That suggests companies shouldn't necessarily forgo the savings they can reap from offshoring. But if they're going to do it, they'd better do it right.

Negative Numbers

We analyzed the offshoring and outsourcing activities of 150 North American companies and business units from 1998 to 2006. As a group, those that outsourced customer service saw a drop in their score on the American Consumer Satisfaction Index, or ACSI, a measure created by the National Quality Research Center at the University of Michigan. The declines were roughly the same whether companies outsourced customer service domestically or overseas.

ACSI scores tend to move in the same direction as companies' share prices. Based on the historical data showing that connection, the average ACSI decline we found at companies outsourcing customer service is associated with a drop of roughly 1% to 5% in a company's market capitalization, depending on what industry the company is in.

That's a steep price to pay. But there are ways to make outsourced customer service more palatable to customers or to mitigate its negative effects, and in some respects that may be easier to do with offshoring. And there are offshoring alternatives that can save a company money without damaging its relationship with its customers.

An important step companies can take to improve the quality of outsourced customer service is to ensure that the provider has all the information necessary to help the customer and full authority to do so. Sometimes, because a company wants to protect information about its customers, the customer-service provider isn't given complete customer histories and profiles. Or the provider's authority to resolve complaints is limited; for instance, the provider may not be permitted to grant credits to customers. Companies need to weigh their concerns about information security and financial control against the damage that such arrangements can do to customer satisfaction.

Tapping Technology

Companies can also make customer service more effective by taking advantage of the technological innovations that some providers offer, and here there may sometimes be an advantage in offshoring. That's because some foreign outsourcing providers have offerings their domestic counterparts can't match in terms of technologies that help guide customer service by recognizing patterns in consumer behavior.

One way to mitigate the damage from outsourcing customer service is to invest the money the company saves to improve the quality of the company's products or services, or to cut prices, rather than simply pocket the savings as extra profit. Our findings suggest that this isn't happening in most cases. Among the companies we studied that had outsourced customer service, there was no increase in the perceived-value component of their overall customer-satisfaction score: Their customers didn't feel that they were getting any more for their money than they did before the company started outsourcing.

Here again there may be an advantage in offshoring. If a company can save more by sending customer service overseas, it will have more opportunity to devote at least some of that money to upgrading its business.

In addition to considering whether or not to offshore customer service, companies should consider whether back-office functions such as information technology may be suitable for offshoring. Our study found that back-office offshoring had no effect on overall customer satisfaction. So the savings a company garners this way aren't offset by dissatisfaction among customers.

source:- online.wsj.com/