MANAGEMENT OF OUTSOURCED SATELLITE

PHONE DEVELOPMENT PROJECT:

SASKEN’S EXPERIENCE

TEACHING NOTE

CASE SYNOPSIS

Though the Indian IT industry is well known for its software services business capabilities,

product development still eludes the sector. This case illustrates the five-year journey

of Sasken Communication Technologies – a mid-sized communication services company

located in India – to design, pre-build, test, integrate and certify a complex end-to-end

satellite phone for a global satellite communication company. Knowing very well the

inherent risks and uncertainties associated with such technology intensive project, the CEO of

Sasken signed the contract with Inmarsat with immense belief in his team to execute the

project successfully. The case highlights the challenges encountered by the program and

project managers of Sasken in acquiring the technology knowhow, integrating hardware and

software components, managing globally distributed teams, overcoming regulatory barriers,

and mitigating unforeseen risks inherent in such off-shore outsourcing projects.

The case can be used in courses examining global software development, IT outsourcing,

product development, and telecommunications management to illustrate the challenges in

managing technology-intensive outsourcing projects. The areas of decision making and

management factors that can be discussed are shown in Figure 1.

 

CONCEPTUAL FOUNDATIONS

Cost arbitrage is one of the main objectives of IT outsourcing, especially by firms located in

the U.S. and Europe to India. However, augmenting capability and meeting time-to-market

are other important considerations in the case of Engineering Research & Development

(ER&D) projects. In such projects, the outsourcing firm manages partially or in full, the

product life cycle of the client. The risks and uncertainties are transferred from the client to

the outsourcing vendor, depending on the contractual terms and conditions. The CEO of the

vendor should carefully analyse the costs and benefits of such projects based on various

factors. Once the CEO makes the choice of taking up the project, it is up to the program and

project managers to dutifully layout the scope of the project, optimize the use of engineering

resources, and carefully navigate the risks associated with the projects for successful

completion of the same. Though references such as Project Management Body of Knowledge

© (PMBoK) are available (PMI, 2013), it has always been a challenge to apply theory to

practice in software projects, as is evident in the failure rate in such projects (Cerpa &

Verner, 2009). The decision making during the course of the project should often be

analytical and calculative in nature considering the trade-offs involved.

LEARNING OBJECTIVES

1. To understand the complexities of managing distributed Information Technology (IT)

projects

2. To understand IT and ER&D outsourcing business models and contracts

3. To understand technology, business and regulatory risks in technology intensive

offshore outsourcing projects and possible solutions for mitigating the same

4. To understand the strategic reasons behind undertaking risky projects.

POSITION IN COURSE

This course can be used to teach concepts of project management in an higher level

undergraduate or MBA degree programs in the following courses:

1. Core Management Information Systems course;

2. Elective course on Project Management;

3. Core course on Strategic Management.

SUGGESTED STUDENT QUESTIONS AND ASSIGNMENTS

1. What are the factors that CEOs should take in to consideration when deciding on

whether to take-up or not a technically intensive and risky project?

2. How should outsourcing vendors manage the product life cycle while building

products for distant markets?

3. What are the methods to do scope management when dealing with ambiguous

requirements?

4. How was the global vendor management done in this project?

5. How can unforeseen risks be mitigated in projects?

6. How and why is communication management important in distributed projects? How

can communication gaps be overcome?

7. What are the different Human Resource Management practices the project managers

can use to retain highly skilled engineers in projects and in turn within firms?

8. Why knowledge management practices are important in technology intensive

projects? Suggest few knowledge management practices for such projects.

9. Discuss conditions under which a software outsourcing vendor prefers a Fixed Price

(FP) contract versus Time & Material (T&M) contract? Was the decision of Sasken to

sign the FP contract for this project correct?

10. Are reputation and brand important for outsourcing vendors who are involved in

Business-to-Business services? And if so, how can they promote the firm’s

reputation?

TEACHING PLAN

This case is best presented by assigning it to student teams and asking them to come up with

possible solutions in dealing with the various challenges. Each team’s proposed solutions

may then be evaluated and compared with the benchmark solutions provided in this teaching

note for evaluation.

Expected time for class discussion: 90 minutes

ANALYSIS

1) What are the factors that CEOs should take in to consideration when deciding on

whether to take-up or not a technically intensive and risky project?

a) Technical capability and confidence in the project team: Though Sasken had not

done many projects for satellite phone development such as this it had more than a

decade long history of creating Intellectual Property (IP) components some of which

were patented. Hence Mr. Rajiv Mody banked on the wealth of engineering expertise

available in the company to bet on this technology intensive project. He would not

have made his choice if it were not for the highly experienced hardware engineers

available at its Finland site who played a crucial role in executing the project.

b) Profitability of the project: In Fixed Price projects, though a threshold profit margin

is included in the calculation of the quoted price, cost escalations during the execution

of the project can erode profitability. While large firms can leverage economies of

scale to reduce costs of projects, for mid-size firms it is often difficult. Hence it was

important for Sasken architects and program managers to estimate the effort involved

and accordingly calculate the estimated cost of the project at the time of signing of the

Statement of Work with the client. Though it is easier to do mid-course correction if

there are any cost deviations in large projects, it is a risk the CEO and CTO should

consider while taking up a project. While Time & Material (T&M) projects have

lower profitability in general, the risk of realizing the estimated profitability is often

less compared to fixed price projects. However, if executed well, the profitability of

fixed price is often a double digit percentage increase over that of T&M projects.

Hence the CEO needs to carefully review the risk assessment done by the cross

functional representatives to either take up such risky project or to direct engineering

resources to less risky T&M projects.

c) Building reputation: For outsourcing vendors, reputation does matter (Banerjee &

Duflo, 2000). Ex ante contracts, as well as the outcome after ex post renegotiation,

vary with reputation of the vendor. One way to build reputation is to take up

technology intensive project and show case its capabilities. Building reputation for a

mid-size firm such as Sasken was of paramount importance to withstand competition

from giants such as TCS, Wipro and Infosys.

2) How should outsourcing vendors manage the product life cycle while building

products for distant markets?

a) Keep up to date: Keeping in tune with market and technology trends is very

important for successful product development. While India virtually bans the use of

satellite phones even today, Sasken was building one. Hence the engineering team did

not have the requisite technology-in-use view. Moreover, due to government

restrictions on the use of satellite frequencies for testing, the team was using an

imported satellite emulator. Emulation was not real. Hence it was possible to miss out

certain critical functionalities and software faults. One of the possible ways to

overcome this deficiency is an in depth understanding of the associated technology

standards based on which software and hardware implementations were carried out.

Since Sasken was involved in standard development process in the Third Generation

mobile communication technologies, the technical architects could understand the

technology specifications and associated standards.

b) Involve the client and project sponsor: The best solution is to be visionary in

defining requirements. A crack team consisting of a technical architect, a delivery

manager, a business portfolio manager, and a financial manager should be formed to

meet the client and detail the scope and requirements as exhaustively as possible at

the beginning of the project. The project director should explain to the client the

importance of requirements and define the scope of the project, which will ultimately

dictate the project’s health. By having a Resident Manager of the client at Bangalore,

Sasken was able to involve the client right from the beginning of the project and

especially during the drafting of the detailed Statement of Work. This improved trust

and collaboration between Sasken and the client and resulted in a healthy relationship

during the tenure of the project.

c) Process Discipline: There is a complex relationship between quality, time to

complete the product, cost and process maturity [see the causal relationship shown in

Figure 2]. As process maturity improves, so does product quality; however, this

results in longer cycle times for completing development and necessitates greater

effort. On the other hand, an improvement in product quality reduces the cycle time as

well as the effort required for subsequent customization. The question is whether a

firm should invest in process improvement, given its positive and negative effects on

cycle time and effort. It has been proven by researchers that reductions in cycle time

and effort due to improved quality outweigh the increases resulting from higher levels

of process maturity. Thus, the net effect of process maturity is reduced cycle time and

development effort.

3) What are the methods to do scope management when dealing with ambiguous

requirements?

a) Agile Methodologies: Since product development involves incomplete or unspecified

requirements, it is imperative that new approaches be explored to deal with evolving

requirements. Agile software methods advocate accommodating change at the

product/project level by dividing the development into small features and short

iteration cycles with product quality releases in each of them (Schwaber, 2004). The

philosophy underlying the agile method of software development welcomes changing

requirements, even late in development while maintaining product quality releases at

all stages. One should expect uncertainty and manage it through iterations,

anticipation and adaptation. One possible option is to use the agile model in the

beginning to quickly get customer acceptance regarding basic requirements, then

freeze the requirements and negotiate with the client under a time-and-materials

model over any augmentation of requirements. Though Sasken did not use agile

methodologies in its first phone project, it used its variants in the subsequent projects.

b) Clearly defined project milestones: This was very important as software

development often can continue for a long time without showing tangible progress. In

this project, each milestone was separated by about 3 month duration and was

constructed to result in a demonstrable feature. This method of defining a milestone

resulted in client seeing tangible progress on the project and enabled the client to sign-

off requirements as the project progressed.

4) How was the global vendor management done in this project?

When Tim Cook was appointed as successor to Steve Jobs at Apple, many wondered why a

Supply Chain executive was given the overall responsibility of running the marquee

company. The strength of the company (and arguably its competitive advantage) has been in

building and managing a complex network of suppliers that the company has successfully

leveraged to produce ground-breaking technology products. Put simply, without the supply

network, there is no product (Procurious, 2016). It was Tim Cook who managed more than

748 listed suppliers, 600 of them in Asia round the clock to build those wonderful gadgets. In

this project, a number of component suppliers were distributed throughout the globe. Hence

vendor management required a substantial attention. The positioning of vendor management

as one of the key vertical in the project organizational structure was a key decision taken by

the Program Director to ensure smooth coordination and orderly delivery of components.

5) How can unforeseen risks be mitigated in projects?

It is not possible to plan for risks due to natural calamities such as the volcano eruptions cited

in the case. The team has to overcome the consequences as and when it happens. In fact, the

Finland team had to hand over the prototypes at one of the international airports to the Indian

team to hand carry the same since the airspace at certain locations were closed. However, this

involved extra time, effort and cost. It is often required to have contingency allowance built

in to the cost structure of projects to pay for such unforeseen risks. On the other hand, a risk

management framework is essential for assessing planned risks.

6) How and why is communication management important in distributed projects?

How can communication gaps be overcome?

The importance of communication and coordination cannot be under estimated in off shore

projects involving virtual teams. Researchers have shown that communication and language

barriers among team participants are factors that influence the effectiveness of Global Virtual

Teams (Edwards & Sridhar, 2005). Though most of the Finnish speak good English, there

can be differences in written communication. According to Angelica Jansson, the Project

Manager at Kaustinen, Finland, there were instances when teams in Kaustinen and Bangalore

would go back and forth for more than 3-4 days in order to understand the position and views

of each other on some technical issues. One way to bridge this communication gap across

distributed project teams is to have a detailed communication plan wherein the teams across

sites synchronize project issues and milestones periodically.

Project communication between vendor and client is also very important. In FP projects,

since vendor does the complete project management, the Client at times may not have much

idea about the progress of the project except to find unresolved issues at the project

milestones. To minimize such communication problems, Srinivas Prasad set up a

communication plan as per Figure 3 wherein the peers at Sasken and Client were in touch

periodically.

7) What are the different Human Resource Management practices the project

managers can use to retain highly skilled engineers in projects and in turn within

firms?

In any industry, retention of talent is critical to foster business growth and it is all the more so

in knowledge industries such as Information Technology (IT). Tacit knowledge is gained by

employees who are engaged longer in the development lifecycle and increases as they are

engaged in multiple programs. It is well known that such tacit knowledge cannot be easily

codified and hence is not easily transmitted to other team members. Therefore, employee

retention is all the more important for IT companies and has been a challenge especially in

India with high employee turnover levels. Firms often assign more trained personnel to FP

contracts because they bear higher risk in these projects and hence the risk of turnover is

exacerbated for Sasken (Arora & Asundi, 2000).

Monetary compensation is only one of the components contributing to employee satisfaction.

Since Sasken much like other software firms in India has organization wide and industry

benchmarked compensation policies, it is often not in the interests of the organization to

tweak it for select projects. Sasken, much like other firms, has organizational strategies to

effectively manage and motivate software professionals, such as moving them up the value

chain (e.g. widening their competency in technology or platform dimensions; moving them

from a testing role to development role), creating learning opportunities, providing conducive

work environment and offering work-life balance programs (Agrawal & Thite, 2003).

The project managers used various “Rewards and Recognition” programs available within

Sasken to motivate the engineers throughout the project life cycle. Team of the Quarter

Award, Spot awards for immediate recognition, Virtual Marbles to convey appreciation of

work were many of the methods the project managers used to recognize and hence motivate

the 125 engineers in the project. Since the teams were from different cultures (e.g. India,

Finland and Germany) the recognitions were executed taking in to consideration the different

geographical and cultural settings.

One of the challenges in human resource management in Indian IT firms is low-skilled nature

of the work (Agrawal et al., 2012). However, Srinivas Prasad never had to encounter this in

his project as it involved technical and managerial complexities to excite everyone in the

project team. The inherent nature of the project coupled with the motivation methods as given

above, kept the employee turnover close to zero in this project.

8) Why knowledge management practices are important in technology intensive

projects? Suggest few knowledge management practices for such projects.

Knowledge and skills are gained by employees during the development lifecycle of projects.

In ER&D services where platforms and technologies continually evolve, it is important to

preserve the knowledge so gained and disseminate it appropriately through the organization.

Organizations use Knowledge Management Systems (KMS) for capturing, sharing and

reusing knowledge. Researchers have done extensive analysis on capturing technological,

organizational, individual and social factors influencing the usage of knowledge management

systems in organizations (Subramanian & Soh, 2009). While it is relatively easier to capture

structured knowledge such as documents, cases, white papers, templates, and tools in KMS, it

is difficult to capture, codify and store tacit knowledge retained within individuals.

For this project, a unified collaboration platform based on Microsoft SharePoint was created

and all the project documents were posted in the site. The program director, program

manager, project managers as well as the 100+ engineers that worked on this project across

sites had access to all the documents in the repository thus providing a one-point access.

This method kept each member up to date on project specificities. Some parts of the

project site and tools, especially those related to bug repositories were also visible to client

project managers to ensure transparency of progress on the project.

9) Discuss conditions under which a software outsourcing vendor prefers a Fixed Price

(FP) contract versus Time & Material (T&M) contract? Was the decision of Sasken

to sign the FP contract for this project correct?

Contracting practices in the software industry have been well studied since contracts

determine how risks are shared between clients and vendors (Lacity & Hirschheim, 1993).

Figure 4 illustrates the framework used by researchers to analyse the outsourcing projects.

However, research outcomes on the profitability of the FP and T&M contracts are divided. It

is also reported that capable and reputed vendors prefer higher risk FP contracts for some

projects because the returns can be higher (Gopal & Sivaramakrishnan, 2008). For

maintenance and support type projects, vendors prefer to opt for T&M. However, pure

development projects of long tenure such as this, FP contracts are preferred. The main reason

is that the complete project management is with the vendor and hence it has more control

over the project compared to T&M type projects. If the firm has the requisite project and

process management skills, such FP projects tend to yield higher profitability compared to

T&M projects6.

Hence decision by Mr. Rajiv Mody to go in for FP contracting was a better decision for the

following reasons:

a) Higher profitability if the project is well managed

b) Confidence on project and process management capability of Sasken managers

c) Successfully deliver on such a complex project with complete ownership enabling

customers to focus on macro level details of the product development and deployment

10) Are reputation and brand important for outsourcing vendors who are involved in

Business-to-Business services? And if so, how can they promote the firm’s

reputation?

The case mentions Sasken as a “dark horse”. The reason is that outsourcing service providers

are bound by contractual terms and conditions, and Non-Disclosure Agreements (NDA) that

they have with the clients. Hence in a Business –to-Business (B2B) outsourcing relationship,

promotion of the brand of the contractor is often tricky.

However, reputation of the contractor is important when an American or European client

decides whether to outsource to a firm in India or to one in their home country, Ireland or

Israel. It is due to this reason that the National Association of Software Services Companies

(NASSCOM) was established as a united industry body to show case India’s software talents

and capabilities to outside word. Various certifications and accreditations from agencies such

as Software Engineering Institute Capability Maturity Model Integration (CMMI), and

International Standards Organization (ISO) are methods to improve reputation of vendors

(Oza et al., 2006). Though ER&D firms such as Sasken are not directly involved in selling

their products to end customers, it is important to establish its brand and reputation as the

leading and trustworthy ER&D vendor. This can be done only by taking up large technology

intensive projects and creating enhanced value for clients. Subsequently through referrals,

and repeat engagements, vendor’s brand as a reliable partner spreads across the industry.

WHAT HAPPENED

The success of the project helped Sasken win another contract from the Client for the second

variant of the phone. This model included many enhanced features compared to the previous

model. On 24th March 2014, the Client launched the second model much to the delight of

Sasken and its employees. Sasken continues to support the two models from India support

centre and expects the relationship with the Client to continue in future as well.

Communication service provider such as Sasken is a ‘dark horse’ in the technology industry.

Unlike a pure-play IT services project, ER&D outsourcing projects are technically complex,

including creation of IP components, diverse engineering and project management

capabilities, and often are dotted with numerous risks and challenges, only to be subsumed

under the brand of the product they create.

REFERENCES

Agrawal, N., and Thite, M. (2003). Human resource issues, challenges and strategies in the

Indian software industry. International Journal of Human Resources Development and

Management 3(3): 249-264.

Agrawal, N., Khatri, N., and Srinivasan, R. (2012). Managing growth: Human resource

management challenges facing the Indian software industry. Journal of World Business

47(2): 159-166.

Arora, A., Asundi, J. (2000). Quality certification and the economics of contract software

development: A study of the Indian software service companies. NBER Working Paper

No. W7260.

Banerjee, A., and Duflo, E. (2000). Reputation effects and the limits of contracting: A study

of the Indian software industry. Quarterly Journal of Economics 115(3): 989-1017.

Boehm, Barry. Software risk management. Springer Berlin Heidelberg, 1989.

Cerpa, N., and Verner, J.M. (2009). Why did your project fail?. Communications of the ACM

52 (12): 130-134.

Edwards, H. K., and Sridhar, V. (2005). Analysis of software requirements engineering

exercises in a global virtual team setup. Journal of Global Information Management 13(2):

21-41.

Gopal, A., and Sivaramakrishnan, K. (2008). Research Note-On Vendor Preferences for

Contract Types in Offshore Software Projects: The Case of Fixed Price vs. Time and

Materials Contracts. Information Systems Research 19(2): 202-220

Lacity, M., and Hirschheim, R.A. (1993). Information systems outsourcing; myths,

metaphors, and realities. John Wiley & Sons, Inc.

Oza, N., Hall, T., Rainer, A., and Grey, S. (2006). Trust in software outsourcing

relationships: An empirical investigation of Indian software companies. Information and

software Technology 48 (5): 345-354.

Procurious HQ. (2016). Tim Cook: From supply chain management to CEO. [WWW

document] https://www.procurious.com/blog/trending/from-supply-chain-management-to-

ceo (accessed 26 May 2016).

Project Management Institute (PMI). (2013). A Guide to the Project Management Body of

Knowledge (PMBOK® Guide)—Fifth Edition, PMI.

Schwaber, K. (2004). Agile project management with Scrum. Microsoft press.

Subramanian, A., and Soh, P. (2009). Contributing knowledge to knowledge repositories:

Dual role of inducement and opportunity factors. Information Resources Management

Journal 22(1: 45

ADDITIONAL SUGGESTED READINGS

Carmel, E. (1999). Global software teams: collaborating across borders and time zones. New

Jersey: Prentice Hall PTR.

Gonzalez, R., Gasco, J., and Llopis, J. (2006). Information systems outsourcing: A literature

analysis." Information & Management 43(7): 821-834.

Jorgensen, M., Boehm, B., and Rifkin, S. (2009). Software development effort estimation:

Formal models or expert judgment?. IEEE software 26(2): 14.

Gopal, A., Sivaramakrishnan, K., Krishnan, M.S., and Mukhopadhyay, T. (2003). Contracts

in offshore software development: An empirical analysis. Management Science 49(12):

1671-1683.

Nath, D., Sridhar, V., Adya, M., and Malik, A. (2008). Project quality of off-shore virtual

teams engaged in software requirements analysis: an exploratory comparative study.

Journal of Global Information Management, 16(4), 24-45.

Niederman, F., Tan, F. (2011). Managing global IT teams: considering cultural dynamics.

Communications of the ACM 54(4): 24-27.

Sridhar, V. and Vadivelu, S. (2011). Challenges in Developing Products for an Advanced

Mobile Market: Sasken’s Experience. Asia Case Research Centre, University of Hong

Kong, Case Reference No: 09/459C. Also available at Harvard Business Publishing.

FIGURE 1. TEACHING AREAS COVERED IN THE CASE

Source: Authors’ own

Technology Management

Scope and Requirements Management

Schedule Management

Cost Management Communications Management

Knowledge Management

Risk Management Capability Management

Human Resource Management

Logistics Management Vendor Management

FIGURE 2. RELATIONSHIP BETWEEN VARIOUS FACTORS AFFECTING

PRODUCT QUALITY

Source: Authors’ own

Process Maturity Product Quality

Cycle Time

Effort+

+

+

-

-

FIGURE 3. COMMUNICATION PLAN ACROSS INDIA AND FINLAND

Source: Authors’ own

CXOs Product Director

Programme Director

Programme Manager

Project Managers

Project Managers

Team Lead Engineers

Team Lead Engineers

Quarterly

Monthly

Weekly

Daily

Sasken Client

FIGURE 4. FRAMEWORK FOR ANALYZING IT OUTSOURCING PROJECTS

Source: Authors’ own

External Factors•Bargaining power of

clients

Value Realization•Profit Margins

•Project’s performance on quality, cost and time

Contract Terms•Fixed Price

•Time & Material

•Contract Type

Internal Factors•Perceived requirements uncertainty•Project size•Risk of availability of skilled manpower•Perceived project importance

•Technical capabilities•Project Management capabilities•Customer Specific capabilities