Many companies don’t maximize their software offshore outsourcing-related return on investments (ROIs) because they don’t make the organizational changes needed to ensure the success of their offshoring campaigns. Offshoring involves more than simply moving a portion of a company’s software development functions offshore. It involves communication channels, modifying IT processes, creating new roles and learning to work collaboratively with team members who aren’t simply down the hall.
Often, companies take what they consider to be the easy way out. They bring 25% to 30% of the offshore service provider’s team onsite. But that squeezes the ROI. While there’s great value in having people from the service provider onsite at the client company (as we’ll explain shortly), it does little to promote team-building and bonding across shores — critical aspects of offshore outsourcing.
This article shares two valuable lessons we’ve learned in working together as a client and offshore service provider in software offshore outsourcing projects.
–> Lesson #1:Assign an Offshore Champion
When adjusting your organization, the first step to realizing optimum return on the offshoring investment is the creation of new roles within the company. The most important role in this proposed model is the offshore champion, who acts as the conduit between the offshoring company and the offshore team. This evangelist coordinates training initiatives, assigns tasks, facilitates communication between the offshore teams and becomes the point of escalation for team members.
Experience shows that the most effective approach is to assign at least one champion for every business area, which may include product families, IT functions and business domains. Traditionally, the functions that these individuals perform are carried out onshore by both the client and service provider (Figure 1), with counterparts offshore who actually execute the activities.
The offshoring champion plays a crucial part in the success of offshoring communications, described in the next section. He or she is always present to escalate issues that arise from either organization, at all levels. When identifying a champion internally, assign an individual who possesses strong communication skills, believes in the principles of offshoring and has interest in international work. This individual will preferably have experience in the identified business area. The role of the offshore champion is an additional responsibility to the current profile that person holds in the identified business area.
–> Lesson #2: To Crank Up Communications, Use the Developer-to-Developer Model
Another key aspect of adjusting your organization is building the communication channels between the onsite developer and offshore developer. The D-D model embraces direct communication between people at each level of the company and their counterparts offshore. Development leads in the United States would work directly with their development leads offshore, as would project and program managers. It also fosters more of a single-team environment when team members in all locations are able to interact directly with one another. Your offshore partner is treated as an extension of your own team.
Principles of the Developer-to-Developer Model
The D-D model’s underlying philosophy is to trust the offshoring partner. This is done by treating the offshore team as an extension of the organization, which involves putting in place mechanisms to monitor the progress of the offshore partner and mentoring the team as if its members were your own. For instance, in the early phases of the relationship, when the learning curve of the offshoring partner is high, proactively sharing information on the domain is critical. Team members need to be accessible to the offshore team by providing solutions to the simple problems and guiding the team to the source of updated information.
Trust is achieved with regular communication and face-to-face interaction. One way of doing that is with weekly teleconferences. Depending on the complexity of the problem, it may need to be daily or every other day. Use email to help clarify topics and get answers to quick questions. The pivotal point in such communication is that this has to be bidirectional with equal vigor and engagement. Also, travel at all levels by both organizations should be encouraged.
Mentor and Monitor
The D-D model will promote ongoing mentoring and monitoring of your project. One common fallacy of offshore outsourcing is that work can be moved overseas with little to no guidance after the initial knowledge transfer phase. Ongoing mentoring is essential, as offshore outsourcing is no different from having new hires who have just joined your organization.
One of the most critical mentoring mechanisms will be face to face interactions through travel to either location. Of course, this starts at the executive level, where senior level managers get to know each other on the client and service provider teams. But it shouldn’t end there. We believe that staff members should also participate in a mentoring program.
At a minimum the mentor and the person being mentored should have face to face visits once a quarter. This is the best way we know for enabling client-side employees to teach service provider employees the domain and intricacies of the work that needs to get done.
Monitoring the team’s progress is equally important. The D-D model promotes early identification of risk and issues. Monitoring can include structured metrics, performance metrics, volume of tasks completed, schedule overruns and quality and domain knowledge improvement. The analysis of metrics allows the client to take proactive action to aid the team in improving performance by training, closer mentoring in transferring domain knowledge and guidance towards improving skills. The result would be mitigation plans, which could include increased training, providing more detailed specifications or changing out of a team member. All of these factors can have an impact on your ROI.
Cost of Operations
The D-D model reduces the total cost of operations by reducing the cost of onsite presence. How does this work? Figure 3 explains the commensurate reduction in relative cost with the increase in offshore percentage. Fostering direct interaction increases negligible communication costs and travel expense. No dispute there. However, the total cost of operations is reduced. An increase in offshore percentage from 70% to 95% reduces the relative cost of operations by about 30%.
Benefits of the Developer-to-Developer Model
We’ve seen many benefits from the application of the D-D model.
- Reduction in cost of operations. Fostering direct interaction between companies and their offshore counterparts reduces an offshore partner’s onsite presence and, thus, the cost of the engagement.
- Absolute transparency. The offshoring organization and the offshore partner share a relationship that is totally transparent at all times. Communication and expectations are managed at all levels with no intermediary points of communications.
- Information transacted directly, thus, no loss. Information and requirements are communicated directly. This improves the understanding of the requirements and the subsequent quality and effectiveness of the deliverables.
- Team-building and bonding. Building relationships with offshore teams ensures their commitment and willingness to go the extra mile.
- Free idea-sharing. With a strong team relationship, innovative ideas are more likely to flow freely at all levels and in both directions.
It Works for Us
Offshore outsourcing can deliver tremendous business value. It provides resource flexibility, process improvements and cost advantages that drive major improvements in price and performance. An increase in the offshore percentage from 70% to 95% reduces the relative cost of operations by about 30%. Short-term outsourcing reaps tactical advantages from cost reductions obtained through labor rate arbitrage.
However, to achieve these optimal results, companies must be willing to change in order to leverage fully the relationship with the offshore partner. Adoption of the D-D model can help you do just that. The D-D model promotes effective, transparent communication to build trust, and regular mentoring and monitoring for early risk identification. Use of the D-D model minimizes the onsite team and ensures an effective offshore program that delivers quality, which is a big step toward maximizing the return on your company’s offshoring investment.
Landmark Graphics Corp.
Tata Consultancy Services (TCS)