nesma autumn conference - outsourcing, agile, function points - alex van den bergh

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© 2016 Quint Wellington

Redwood

v

Outsourcing, Agile, Function points a wonderful cocktail or recipe for disaster?

Alex van den Bergh – November 2016



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Redwood

Who am I to talk about this?

Alex van den Bergh

• Partner Sourcing Advisory at Quint Wellington Redwood

• Insourcing, Outsourcing, Shared Services, Software

Engineering, Agile and DevOps

• Speaker and publicist at conferences, universities etc.

Quint Wellington Redwood

• Implementation & Advice on all IT, Digital transformations

• in NL, US, India, Spain, Italy and various other locations

• World’s Best Outsourcing Advisor since 2014



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Redwood

IT Outsourcing and Offshoring is in decline….?

Agile and Outsourcing do not mix....?

Function Points and Agile do not mix...?

IT Outsourcing Study 2016 Netherlands © 2016 Whitelane & Quint Wellington Redwood 5

More than 200 participants of the top IT

spending organisations in the Netherlands

that have evaluated over 550 unique IT

outsourcing contracts

Whitelane Research has been responsible

for the data collection via an online survey

questionnaire. Participants are CIOs, CFOs

or their direct reports.

Both Whitelane Research or Quint

Wellington Redwood are completely

independent organisations

Let’s look at some numbers in the Netherlands based on reasearch by Quint

Wellington Redwood and Whitelane Research

19%

18%

13% 8%

8%

7%

7%

5%

4%

3% 3%

3% 2%


We don’t know yet There will be no change We will outsource less We will outsource more

2016 2015

49%

39%

7%

5%

49%

36%

6%

9%

IT Outsourcing in the Netherlands continues to grow What are your organisation's plans for the next years with regard to outsourcing?


‘Focus on core business’ is #1 reason to outsource more; cost the #2 What are the reasons that your organisation is planning to outsource more?

11%

24%

26%

31%

32%

50%

54%

68%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

More transparency on costs

Business transformation

Access to resources

More financial flexibility

Improvement of service quality

Cost reduction

Focus on core business


N=552

88% of contracts have satisfied clients

Very unsatisfied

Unsatisfied

Somewhat unsatisfied

Somewhat satisfied

Satisfied

Very satisfied

1% 3%

8%

28%

50%

10%



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Outsourcing Lessons Learned

Sourcing decisions are strategic:

• More than a tactical business case

• It is a long-term (5 year+) change.

• Senior management commitment is key

Transition and Sourcing Governance implementation should start early on

• It is a big step from defining ‘the how’ to defining ‘the what’

• It is a big step working with other organizations, locations, cultures

Sourcing is more than procurement

• Services, Architecture, Legal, Finance, Governance, HR is all involved

• Most of the work is in defining the service (servcie levels, PDC, architecture)

Only an agreement that is beneficial to both parties, will last

• Understand the provider’s business case



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Redwood

About function points and outsourcing….

Function points are rarely used continuously in outsourcing relationships

They may serve as a way to benchmark in incidental cases.



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Redwood

About function points and outsourcing….

Function points are rarely used continuously in outsourcing relationships

They may serve as a way to benchmark in incidental cases.

Why?

1. The investment into counting function points (time, money)

2. Discussions about operational issues e.g. “functionality was not well defined” or

“technical quality of existing system was below par”

3. Clients prefer to see detailed hours and planning

4. Clients transition to agile ways of working



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Redwood






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Step 1: choose the right demarcation point between the (outsourced)

utility and the integrated (verticalized) teams.

How to outsource in an Agile/DevOps

environment (1/3)?

Utility infrastructure: managed (virtual)

server capacity. Often outsourced.

Domain 1

Development

Maintenance, Mgt

DevOps & Agile.

Typical IT service (ITO) model

Domain 2

Development

Maintenance, Mgt

DevOps & Agile.

Application, middleware and possibly business

operations are integrated per domain.

Any outsourcing in these areas will be done using

blended teams, scrums etc.

Virtualized infrastructure is a ‘utility’ service.

Any outsourcing in this area will be “standardized,

automated like hell”.



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Redwood

Utility

platform


environment (2/3)?

Vertical Domain with

outsourcing

Utility infrastructure: managed (virtual) server

capacity. Possibly outsourced.

in blended team

How to deliver?

1. One team with daily stand-ups,

sprints, retrospectives

2. One set of tools

3. Functionality is determined by

product owner

4. Actual ‘production release cycle’

may be slower than sprints; also for

Continuous Delivery

How to contract?

1. Shared KPIs means shared

blame/fame/bonus/malus…..

2. Time & Material contracts may not

stimulate productivity and require

clients to manage individual directly

App or Business

Services



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Redwood


environment (3/3)?

Some challenges require case-by-case solutions:

1. Dependencies with other services / teams (internal / external)

2. Multiple providers in one team may lead to ‘body shopping behavior’

3. Current outsourcing contracts require changes

4. Culture change impacts client organization but must extend to provider’s

team

5. Typical version and lifecycle management challenges like:

(utility-) infrastructure may not be 100% utility after all

patches may need to be part of one shared change calendar/management



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Redwood






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A good mix?

Fu

nc

tio

n P

oin

ts / T

rad

itio

na

l O

uts

ou

rcin

g

Ag

ile P

hilo

so

ph

y

One standard measure

for size / productivity

Measure fixed to one team

Velocities should not be compared

How to measure productivity when outsourcing?



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A good mix?

Fu

nc

tio

n P

oin

ts / T

rad

itio

na

l O

uts

ou

rcin

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Ag

ile P

hilo

so

ph

y

Functionality determines effort Effort determines functionality

What effort should be planned when outsourcing?



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A good mix?

Fu

nc

tio

n P

oin

ts / T

rad

itio

na

l O

uts

ou

rcin

g

Ag

ile P

hilo

so

ph

y

KPIs

measure quality and retain control

Empowered teams

not burdened by KPIs

How to retain control when outsourcing?



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A good mix?

Fu

nc

tio

n P

oin

ts / T

rad

itio

na

l O

uts

ou

rcin

g

Ag

ile P

hilo

so

ph

y

Separation of responsibilities Shared responsibility

Multi-disciplinary teams

So how can I show it is the vendor’s fault?



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Redwood

A good mix?

Function Points mix reasonably well with ‘traditional outsourcing’…

….but encounter serious challenges in Agile.



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Redwood






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Redwood

www.quintgroup.com

Alex van den Bergh

[email protected]


N=552

We have evaluated 550 outsourcing relationships

Other; 142

Capgemini; 50

KPN; 46

Atos; 34 Vodafone; 23 Centric; 20

IBM; 20

CGI; 19

HP; 18

Ordina; 18

Accenture; 17

BT; 17

Fujitsu; 15

Cegeka; 14

TCS; 13

Infosys; 12

Tele2; 12

Cognizant; 11

T-Systems; 10 Wipro; 9

AT&T; 8 HCL; 8 Orange Business Services; 8 Verizon Business; 8


8% is unhappy about nearshore 23% is unhappy about offshore

How satisfied are you with the nearshore and offshore component?

1% 7%

2%

15%

6%

21%

14%

37%

46%

4%

6%

15%

26%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Offshore component

Nearshore component

Very unsatisfied

Unsatisfied

Somewhat unsatisfied

Somewhat satisfied

Satisfied

Very satisfied

I don’t know


Less near/offshoring

No change

More near/offshoring

N/A – We don’t know yet

Nearshore and offshore will continue to grow

Are you planning to use more or less nearshoring and/or offshoring?

13%

7%

8%

17%

62%

76%

70%

44%

21%

7%

17%

33%

4%

10%

5%

6%

0% 20% 40% 60% 80% 100%

End-user services (workplace, helpdesk...)

Network & telecommunications

Data center / application hosting

Application development / maintenance /testing