Outsourcing Lessons From Outsourcing Lessons From IndiaIndia

Outsourcing specialist Hugh Walcott has learned his Outsourcing specialist Hugh Walcott has learned his lessons the hard way - so you won't have to.lessons the hard way - so you won't have to.These lessons come from helping an Australian These lessons come from helping an Australian company manage a large offshore project with a company manage a large offshore project with a business partner in India. business partner in India. On the surface the decision seemed entirely soundOn the surface the decision seemed entirely sound– the Indian partner boasted strong expertise in the the Indian partner boasted strong expertise in the

desired project areadesired project area– claimed to have more than 16,000 engineers claimed to have more than 16,000 engineers

based in Bangalore, India based in Bangalore, India – operating at CMM Level 5.operating at CMM Level 5.

But…But…However, down at the project level things quickly However, down at the project level things quickly started to go wrong. started to go wrong. The project simply did not go well, Walcott says - The project simply did not go well, Walcott says - so much so that even today it still struggles in so much so that even today it still struggles in the face of that troubled history. the face of that troubled history. Key deliveries failed to be met.Key deliveries failed to be met.The veneer of commitment and ownership The veneer of commitment and ownership promoted by the outsourcer started to crumble. promoted by the outsourcer started to crumble. Problems were magnified by Problems were magnified by – distance distance – cultural difficultiescultural difficulties– accusations accusations – lies started to flow.lies started to flow.

It was even worse than that…It was even worse than that…

During the project, Indian team members During the project, Indian team members seemed so relentlessly incapable of meeting seemed so relentlessly incapable of meeting deliverables that the company felt it had to deliverables that the company felt it had to arrange short-term visas for a portion of the arrange short-term visas for a portion of the Indian team to come to Australia in the hope of Indian team to come to Australia in the hope of achieving some oversight and improved achieving some oversight and improved accountability. But if the camel's back was accountability. But if the camel's back was shuddering from the discovery that many of shuddering from the discovery that many of those so-called 16,000 engineers sported those so-called 16,000 engineers sported bogus CVs and lacked the necessary technical bogus CVs and lacked the necessary technical knowledge, the final back-breaking straw turned knowledge, the final back-breaking straw turned out to be the revelation that the much-vaunted out to be the revelation that the much-vaunted CMM Level 5 rating was only applicable on site. CMM Level 5 rating was only applicable on site.

Lesson One: Lesson One: Offshoring Taxonomy 101Offshoring Taxonomy 101

"Understanding how to structure an "Understanding how to structure an offshore project first involves offshore project first involves understanding the associated risks and to understanding the associated risks and to structure the outsource agreement to structure the outsource agreement to manage these risks. For example, if the manage these risks. For example, if the biggest risk to an organization is loss of IP, biggest risk to an organization is loss of IP, then an outsourcing agreement that then an outsourcing agreement that ensures no complete solution is ever ensures no complete solution is ever assembled offshore may be necessary." assembled offshore may be necessary."

Taxonomy Categories:Taxonomy Categories:

Top level or solution level agreements Top level or solution level agreements

System level agreements System level agreements

Sub-system level agreements.Sub-system level agreements.

Unfortunate SurpriseUnfortunate SurpriseOn the project in question, the organization thought it On the project in question, the organization thought it was going for a system level agreement, but as was going for a system level agreement, but as problems started to occur it found itself with a sub-problems started to occur it found itself with a sub-system level agreement almost by default. Inevitably, system level agreement almost by default. Inevitably, Walcott says, the vast physical distances between Walcott says, the vast physical distances between team members caused problems, not least in the team members caused problems, not least in the challenges associated with expectation management. challenges associated with expectation management. "We never had the contingencies built into our "We never had the contingencies built into our agreement from the beginning. We were stuck: Our agreement from the beginning. We were stuck: Our project deliverables were dependent on theirs and in project deliverables were dependent on theirs and in order for the whole solution to succeed we had to help order for the whole solution to succeed we had to help them out. Merging the two teams and consolidating them out. Merging the two teams and consolidating the control of ownership of the project seemed to be the control of ownership of the project seemed to be the only way to get out of our nightmare."the only way to get out of our nightmare."

Lesson Two: Cultural Lesson Two: Cultural Differences Are ImportantDifferences Are Important

When the deadlines first started to slip, the When the deadlines first started to slip, the Indian team began lying about the Indian team began lying about the progress being made, continually insisting progress being made, continually insisting all the work was on track. Walcott believes all the work was on track. Walcott believes the problem was compounded as much by the problem was compounded as much by cultural differences as by the vast cultural differences as by the vast distances between the two teams at that distances between the two teams at that point, with those lies inextricably tied up point, with those lies inextricably tied up with the concept of "not losing face". with the concept of "not losing face".

Herculean Effort: Now in OrderHerculean Effort: Now in Order

It was in an attempt to overcome these problems It was in an attempt to overcome these problems [of saving face] that a portion of the Indian team [of saving face] that a portion of the Indian team were eventually given three-month working visas were eventually given three-month working visas to come to work on the project in Australia. "That to come to work on the project in Australia. "That turned out to be a monster headache," Walcott turned out to be a monster headache," Walcott says, "but we got the visas and put them up in a says, "but we got the visas and put them up in a hotel in Sydney. With the visas sorted, hotel in Sydney. With the visas sorted, everything seemed perfect. [We thought:] the everything seemed perfect. [We thought:] the Indians should be here for the expected length Indians should be here for the expected length of the project. But integrating the two teams of the project. But integrating the two teams turned out not to be as easy as first thought." turned out not to be as easy as first thought."

But, … More Cultural Issues:But, … More Cultural Issues:

Different attitudes towards timeDifferent attitudes towards time

Different work ethics Different work ethics

Different attitudes toward qualityDifferent attitudes toward quality

Different attitudes toward cooperation: The Different attitudes toward cooperation: The Indian team chose to work in isolation and Indian team chose to work in isolation and not accept help when it was offered. not accept help when it was offered.

And “Status”: Maintaining the And “Status”: Maintaining the “Power Distance”“Power Distance”

Walcott says companies must ensure that Walcott says companies must ensure that everyone understands the project reporting everyone understands the project reporting structure before engaging in an outsourced structure before engaging in an outsourced project. This needs to apply from the top all the project. This needs to apply from the top all the way down the project hierarchy, including way down the project hierarchy, including developers and tester. India, in common with developers and tester. India, in common with many Asian societies where offshoring is many Asian societies where offshoring is prevalent, places greater emphasis on so-called prevalent, places greater emphasis on so-called "power distances" or status: the distance "power distances" or status: the distance between members of an organization.between members of an organization.

Bugs?!? Oh, NO!!!Bugs?!? Oh, NO!!!

The next challenge involved resolving the The next challenge involved resolving the technical difficulties. This is usually technical difficulties. This is usually managed through some form of change managed through some form of change management system, used to report bugs management system, used to report bugs or enhancements, getting it fixed and or enhancements, getting it fixed and ensuring that it works. ensuring that it works.

Lesson Three: Choosing the Lesson Three: Choosing the Right Development MethodologyRight Development Methodology

Countries like India place a much greater Countries like India place a much greater emphasis on teams over the individual. In India, emphasis on teams over the individual. In India, as in much of Asia, it is the team that gets as in much of Asia, it is the team that gets thrown a problem, not an individual. In Australia thrown a problem, not an individual. In Australia it is more likely that a trusted individual will be it is more likely that a trusted individual will be given carriage of a problem. given carriage of a problem. "Choosing a development methodology that can "Choosing a development methodology that can adapt to offshore and local working habits while adapt to offshore and local working habits while also complying to your outsourcing agreement also complying to your outsourcing agreement commitments is an important step." commitments is an important step."

This “Group” Challenge Begets:This “Group” Challenge Begets:

FDD:FDD: Walcott says Feature Driven Development Walcott says Feature Driven Development (FDD) - a short-iteration process framework for (FDD) - a short-iteration process framework for software development projects - is a crucial tool software development projects - is a crucial tool in overcoming difficulties of culture and distance in overcoming difficulties of culture and distance because it allows the project manager to break because it allows the project manager to break projects down into features, be they projects down into features, be they presentational or back-end, with each feature presentational or back-end, with each feature representing about two weeks' work. representing about two weeks' work.

FDDFDDFDD starts with the creation of a domain object model in FDD starts with the creation of a domain object model in collaboration with Domain Experts. collaboration with Domain Experts. Using information from the modeling activity and from any Using information from the modeling activity and from any other requirements activities that have taken place, the other requirements activities that have taken place, the developers go on to create a features list. developers go on to create a features list. Then a rough plan is drawn up and responsibilities are Then a rough plan is drawn up and responsibilities are assigned. assigned. Now you are ready to take small groups of features Now you are ready to take small groups of features through a design and build iteration that lasts no longer through a design and build iteration that lasts no longer than two weeks for each group and is often much shorter - than two weeks for each group and is often much shorter - sometimes only a matter of hours - repeating this process sometimes only a matter of hours - repeating this process until there are no more features. until there are no more features.

FDD: The Perfect Match for a FDD: The Perfect Match for a Multinational (Offshoring) Multinational (Offshoring)

ProjectProjectWalcott describes himself as a "huge believer" in Walcott describes himself as a "huge believer" in FDD, which is typically used in conjunction with FDD, which is typically used in conjunction with agile development methodologies. "FDD was a agile development methodologies. "FDD was a perfect match for our multinational project," he perfect match for our multinational project," he says. "By assigning feature sets according to a says. "By assigning feature sets according to a project reporting structure, a project is able to project reporting structure, a project is able to maintain the correct cultural 'power distances' maintain the correct cultural 'power distances' while maintaining individuals' accountability while maintaining individuals' accountability within the team. within the team.

Lesson Four: Audit Your Lesson Four: Audit Your Progress . . . CarefullyProgress . . . Carefully

"Outsourcing your project offshore is like "Outsourcing your project offshore is like a box of chocolates, you never know what a box of chocolates, you never know what you are going to get," says Walcott. "We'd you are going to get," says Walcott. "We'd seen the resumes of the staff we were seen the resumes of the staff we were working with, but when they eventually working with, but when they eventually arrived on site they turned out to be arrived on site they turned out to be completely different." completely different."

So, whose anxious to play in this So, whose anxious to play in this sandbox?sandbox?

Audits Keep Honesty in the Audits Keep Honesty in the GameGame

Walcott says audits can be an invaluable tool in Walcott says audits can be an invaluable tool in helping an organization expose and overcome helping an organization expose and overcome such difficulties, although care is needed to such difficulties, although care is needed to maintain the business relationship. Audits can maintain the business relationship. Audits can also be used to assess other aspects of the also be used to assess other aspects of the project, including both technical and cultural project, including both technical and cultural aspects. "Running an audit allowed us to expose aspects. "Running an audit allowed us to expose shortcomings in both the resources we had shortcomings in both the resources we had assigned and how we were managing our assigned and how we were managing our project, allowing us the opportunity to rectify the project, allowing us the opportunity to rectify the problems before it was too late," he says. problems before it was too late," he says.

This isn’t easy, eitherThis isn’t easy, either

"With "With reverse engineering toolsreverse engineering tools we were able we were able to ascertain exactly what caused some of the to ascertain exactly what caused some of the problems we had experienced and what problems we had experienced and what best best practicespractices we thought were missing. we thought were missing. So we did what we hadn't done at early stages, So we did what we hadn't done at early stages, which is to say: 'We will not accept anything which is to say: 'We will not accept anything from you if it doesn't comply with best practices.' from you if it doesn't comply with best practices.' This is something we should have done at the This is something we should have done at the outset, and in future I would make that a part of outset, and in future I would make that a part of best practice agreements." best practice agreements."

Picking and AuditorPicking and AuditorIn order to best protect the business relationship, an In order to best protect the business relationship, an independent auditor should be agreed upon early and independent auditor should be agreed upon early and service level contingencies put in place as part of the service level contingencies put in place as part of the initial outsourcing agreement, Walcott says. Depending initial outsourcing agreement, Walcott says. Depending on the type of agreement, organizations should look at on the type of agreement, organizations should look at including a clause demanding an independent audit of all including a clause demanding an independent audit of all work should deliveries fail to be met. Sub-system or work should deliveries fail to be met. Sub-system or collaborative outsourced projects required most collaborative outsourced projects required most attention, as it is the long-term objective of an attention, as it is the long-term objective of an organization to own, support and hence maintain the organization to own, support and hence maintain the solution in-house.solution in-house.

Does this sound like it’s going to be less expensive?Does this sound like it’s going to be less expensive?

And the final result?And the final result?

"After the end of the three months, when the "After the end of the three months, when the Indians were about to leave, we still had a Indians were about to leave, we still had a service level agreement with them but we did not service level agreement with them but we did not feel confident from the experience that we had in feel confident from the experience that we had in even sending anything back to be fixed. The even sending anything back to be fixed. The audit had helped expose just what a mess it audit had helped expose just what a mess it actually was so a small team of us created a actually was so a small team of us created a new project called the Refactor Project to new project called the Refactor Project to rewrite almost everything they had done.rewrite almost everything they had done.

This could get complicatedThis could get complicated

Managing the flow of workManaging the flow of work between between enterprise and outsourcer is another area enterprise and outsourcer is another area where where auditsaudits are a useful tool. Areas such as are a useful tool. Areas such as change management, document control and change management, document control and build migration are all cross-cultural sensitive build migration are all cross-cultural sensitive areas and are often overlooked by business areas and are often overlooked by business audits. A technical audit can optimize these audits. A technical audit can optimize these processes while processes while – maintaining the correct reporting structure, maintaining the correct reporting structure, – power distances and power distances and – self-honor (“face”).self-honor (“face”).

Walcott’s ConclusionWalcott’s Conclusion

With offshoring likely to be around for some With offshoring likely to be around for some considerable time, due partly to the skills considerable time, due partly to the skills shortage, more and more organizations are shortage, more and more organizations are going to engage in offshore agreements. going to engage in offshore agreements. Walcott's experience leaves him confident that Walcott's experience leaves him confident that companies that have been forewarned to likely companies that have been forewarned to likely difficulties, and who adopt a rigorous approach difficulties, and who adopt a rigorous approach to audits, should be able to do so with greater to audits, should be able to do so with greater confidence in future. confidence in future.

What is your conclusion?What is your conclusion?

Cautions to consider (and plan and Cautions to consider (and plan and budget for) before outsourcing:budget for) before outsourcing:

Value of timeValue of timeCooperation/team wk issuesCooperation/team wk issuesWork ethic issuesWork ethic issuesQuality of work issuesQuality of work issuesFace-saving cultural issuesFace-saving cultural issuesPower distant issues Power distant issues complicating communicationcomplicating communicationTime-zone issuesTime-zone issuesLess flexibility due to Less flexibility due to contracted specificationscontracted specificationsRisks our I.P.Risks our I.P.No courts to control contract No courts to control contract violationsviolationsMost companies don’t see Most companies don’t see savings for 3 yearssavings for 3 years

Demoralizes local work forceDemoralizes local work forceLanguage barriersLanguage barriersLoss of control (not transparent, not Loss of control (not transparent, not directable)directable)Increased testing burdenIncreased testing burdenIncreased P.M. at detailed levelsIncreased P.M. at detailed levelsBetter specs required (more time Better specs required (more time consuming)consuming)Trust issues (honesty issues)Trust issues (honesty issues)Difficult to assess true quality of Difficult to assess true quality of offshore source due to bait-&-switchoffshore source due to bait-&-switchAdded expenses of third party auditsAdded expenses of third party audits