Enabling the Digital Enterprise - Arrk Group

thirteen great ways to make your offshore project fail... Enabling the Digital Enterprise

Thirteen Great Ways To Make Your Offshore Project Fail April 2009, Revised November 2015

Julian Howison Executive Chairman Arrk Group

© copyright Arrk Limited | 2015

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STARTING WITH THE WRONG END IN MIND Although it doesn’t happen that often nowadays, we still come across organisations that set totally unrealistic goals and objectives for offshoring projects (usually based upon little or no direct experience) and as a result their approach

The following is typical of the sort of statement that

is totally insensitive to the challenges of offshoring.

makes our blood run cold: Some of the problems encountered include: “Our CEO has decided, in his great wisdom, that we must start offshoring before the end of this quarter.

ɴɴ

He wants to save 65 per cent of development costs

They have not done it before but are suddenly experts

this year so we are sacking all UK contractors across

ɴɴ

They are trying to do it all too quickly

all projects and replacing them with a team based

ɴɴ

They have no idea of the suitability of the impacted

in Mumbai who will report directly to our project managers in Birmingham and London. They will work

projects for offshoring ɴɴ

as a virtual team using our standard processes. Can you please send us some CVs by close of play.”

They have over ambitious, short-term cost saving targets

ɴɴ

They think that they are competent at managing a remote team

ɴɴ

They assume managing a remote team is possible

ɴɴ

They seem happy to have a fragmented offshore team

ɴɴ

They are not intending to engage with potential suppliers to get their input

ɴɴ

They think that buying these services is a price-based commodity purchase

ɴɴ

They think they will learn something from CVs

ɴɴ

The IT management are not bought in and are hostile to the offshoring

All in all, this is a disaster waiting to happen. The individual points listed above are all covered further on in this paper so we won’t go into the detail now. Suffice to say that this approach breaks just about every rule in the book and is bound to fail – big style.


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IT’S ALL ABOUT THE MONEY STUPID! Although often the primary driver for offshoring has been access to lower cost resource in developing countries. However, a great many of our customers tell us that problems such as a lack of availability of qualified staff in their locality, limited flexibility to ramp-up/down resources combined with a need for access to a wider skill base are at least as important when it comes to drivers for engaging with a company like Arrk Group, if not more. Done properly, offshoring will result in cost savings, perhaps not the 40/50 per cent some claim (at least not in the early stages or on small-scale initiatives), but there are real savings to be had. However, if you are focused only on aggressive short-term cost saving and as a result try to save too much, too soon, then you will starve the new offshore capability of investment which will sooner or later cause it to fail. It is essential that companies embarking on offshoring have a balanced set of objectives that consider a much broader horizon than the current financial year. It is also very important to discuss your goals with your potential suppliers. Canvass them for input and make your own judgements about their ability to understand your goals and constraints, to give you constructive feedback and to adapt their proposals to help you achieve your objectives. But don’t just assume that the ones that just nod and say yes are the best ones to work with!


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DON’T BELIEVE EVERYTHING YOU READ IN THE PAPER Despite what some people might say not everything is suitable for offshoring, at least not right away. Some things are best left where they are, others have to be carefully prepared prior to offshoring and the majority can’t be moved offshore until the new combined customer/supplier organisation has been designed, appropriate knowledge acquisition completed, infrastructure set-up and processes

“YOU CAN’T OUTSOURCE A PROBLEM BUT YOU CAN OUTSOURCE A SOLUTION...”

adapted and synchronised. Choosing the right things to offshore in the right sequence are critical decisions that very few, if any, first timers to

Believe it or not we sometimes come across people

offshoring are qualified to make. Not that that stops them

who think that somehow offshoring, and by definition

doing it. Unfortunately there seems to be an inherent distrust

outsourcing, a problem project will magically fix it or

between customers and suppliers in the UK IT industry

that at least it will somehow suddenly become the

(research conducted by Intellect in the early 2000s identified

supplier’s problem and not theirs!

a disturbing lack of trust between UK organisations and IT suppliers) and previous bad experience can sometimes poison customer’s minds when interacting with suppliers. What organisations ought to understand is that it is very likely to cost your supplier a lot of money to engage with you for the first time. New customers always require lots of love and attention particularly from senior people who are a scarce commodity. A good supplier company will be very focused on achieving a successful outcome for the customer, otherwise the supplier is likely to lose money. So listen to your supplier’s views, after all offshoring is their business and they probably know more about it than you do. If they are a successful company they will have been doing it for years and will have learnt the hard way ‘what works and what doesn’t work’ in the offshoring world. Better to benefit from their mistakes rather than making your own. Most competent suppliers will have tools and techniques for evaluating options for offshoring. At Arrk Group we have a set of ‘opportunity assessment’ processes and tools that enable us to work together with our customers to explore which projects and services are most offshore friendly.


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TOO MUCH, TOO SOON This problem is related to the one described above about being over zealous about short-term cost savings. But what is the impact of pushing things offshore before they’re ready? The previous section contained a clue. Although it sounds a bit hackneyed, the truth is that commercial software development is a knowledge industry. Software professionals acquire and combine two distinct knowledge sets. On the one hand is business knowledge (industry, markets, competition, company products, services, brand, processes, policies, organisations, culture, etc.) and on the other hand technology knowledge (IT strategy, application portfolios, technical architectures, IT processes and policies, systems designs, generic technologies and processes, etc.). Let’s assume that it goes without saying that a lack of business knowledge is an obvious handicap for offshore personnel working for a particular organisation for the first time. However, it is very likely that staff from your offshore supplier will also be hampered on the technology knowledge front. Whilst their knowledge of generic technologies and IT processes will be good, the particular manner in which these are applied in your business will be foreign to them. Building and maintaining a complete, accurate, up-to-date knowledge base across both business and technology domains is vital if the offshore teams are to be able to work productively and efficiently to produce high quality deliverables. We believe that nine times out of ten it is a weakness in this area that is the #1 reason why offshoring doesn’t deliver. Both the customer and the supplier should view such a knowledge base as a critical asset worthy of specific investment. The problem with driving things offshore too quickly is that often the knowledge base hasn’t matured before the new team has to take over. There maybe gaps in the knowledge. Some areas maybe well covered whilst others are only superficially dealt with. Some might be completely untouched. Once the work has moved offshore the team’s ability to acquire new knowledge will be significantly reduced, when working as they are remote from the business. They will be particularly handicapped in their ability to acquire the implicit intangible tacit knowledge that so often glues everything together (more on this later).


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TOO LITTLE, TOO LATE In the early days the offshore story was dominated by large multinational companies, often with existing in-country presence in places like India, doing deals with big established Indian players. However, as the market has matured more medium-sized organisations are being drawn to offshoring, if nothing else to ensure they remain cost competitive compared to their larger rivals. The needs of medium-sized businesses are very different to those of large players. They are often domestic rather than international businesses and have little or no experience of working with other cultures. As a result they need a greater degree of hand-holding and want a closer relationship with a trusted partner who can help them make difficult decisions. And of course they work on a different scale. We regularly come across organisations that want to build an offshore development capability with an average headcount of five or so. The big problem here is that five people, particularly in the hierarchical Indian context, give little room for movement.

The best approach is to find the right partner and work with them to formulate a credible strategy. Then

The relatively immature IT industries in places like India,

act decisively to build up the team size as quickly as

Vietnam, China and Poland tend towards teams of people

possible to an average minimum team size of 8-10

who are more specialised than in the more mature markets,

team members.

like the UK, where people tend to be more multi-skilled and multi-tasking. Very small teams with specialised roles place great emphasis on particular individuals and as a result allow very little room for error. At Arrk Group our general rule of thumb is that 8-10 people is a minimum size for a stable productive offshore team. We have had many smaller teams (our smallest being a team of three who worked very productively for a customer for three years) but such situations are unusual and we have come to the conclusion that the risk of failure in such small teams usually outweighs the benefits. One of the other dangers here is that associated with having protracted decision-making processes. Although we’ll cover it later, the offshoring project with no detractors or doubters is a very rare thing. Spending too much time prevaricating over a move offshore (perhaps following a mediocre performance of an ill conceived pilot project) can create unexpected HR/ stakeholder management issues. Such delays can play into the hands of those stakeholders who would like to see the whole offshoring thing fail.


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IT’S NOT “IS IT RIGHT FOR YOU?” BUT RATHER “ARE YOU RIGHT FOR IT?” “Our offshore project failed miserably, the damn supplier let us down” - we all like to blame somebody else when something goes wrong and failed offshoring projects are no different from any other of life’s little disappointments. But understanding what really went wrong and who is really to blame can be a much more difficult task than our hypothetical irate IT director above might like to suppose. If you want your offshore initiative to really flourish then you will need to create a tightly integrated, virtual jointteam with your supplier. This team will need to operate at multiple levels, both technical and managerial. Your people will have to learn to work alongside people from a different cultural and educational background and the key behaviour characteristic will be collaboration. If your company or organisation has little or no experience of working overseas or has a culture that is competitive rather than cooperative, then you may be heading for troubled waters. Inflexible, opinionated and arrogant cultures don’t excel in this context. Interestingly these negative culture traits tend to be more prevalent in large companies and hence this ought to be an area where the medium-sized organisation has an opportunity to outperform larger competitors. Open-mindedness is the watchword and organisations should be mindful that there is probably a large amount of ‘we don’t know what we don’t know’ in play here.


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IS THERE SUCH A THING AS A MATCH MADE IN HEAVEN? In his book, Paul Davies (‘What’s this India Business?’, Nicholas Brealey Publishing, 2004) devotes a whole chapter on offshore supplier selection and the soporific effects of being subjected to the same presentation over and over again, each time from a different supplier and each time containing the same endless lists of quality certifications, pictures of humongous office campuses, diagrams showing gigaflops of bandwidth, massed ranks of eager programmers, etc. Choosing a partner for an offshoring project is never easy, particularly for medium-sized companies who have little experience of operating in Europe let alone the developing world. In our experience supplier selection questionnaires all follow similar themes. We have completed many and have written quite a few ourselves. Generally they cover the basics well but miss out on the one area that we believe is vital, namely finding a supplier with whom you have real cultural synergy. You need to look deeper than just the personality of the sales person. You should aim to gain a pretty deep understanding of the organisation and meet at least one senior person (hint: finance director probably isn’t that relevant). Try to establish their capability as managers, their corporate values, how they work, and what their personal values are. Then look to see if these are reflected in the organisation. Don’t be shy, ask for evidence! References can be very helpful here, ask the difficult questions about how the potential supplier behaved when things go wrong (we guarantee they will). But remember there is no right or wrong here, just good and bad matches. A collaborative supplier trying to work cooperatively with an inflexible, competitive, arrogant customer will also end in tears. We know, we tried it and bought the tee-shirt. It is also very important to ensure that your supplier is properly motivated to work with you. Just because you are a customer doesn’t necessarily make you valuable in the eyes of potential suppliers. “What’s wrong with my money?”, we hear you cry. Sophisticated buyers of services such as offshore outsourcing know that only win-win relationships will deliver sustainable value. So work hard to really understand what is in it for the supplier. Look beyond just revenue and profit.


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TO PILOT OR NOT TO PILOT THAT IS THE QUESTION “Pilot projects, don’t talk to me about pilot projects!”, these days it seems that everyone has to have one. Seriously though, it’s easy to see the temptation. You think you’ve found a partner, they’ve said all the right things and the references worked out well. You’ve met the CEO and they seemed like a decent chap but you’re just not quite sure. There is so much at stake and you’ve got some saboteurs in your team who are just itching for it to all go belly-up. Maybe you should test them out with a pilot. Then you’d have some concrete proof. Proof that the supplier is capable. Proof that offshoring works! So what do you do? You find a small project, say a few weeks or months for a handful of people. You get the chosen supplier to pitch in with a proposed approach. They don’t know you and you don’t know them. You want to be able to sit on their shoulder with a magnifying glass and watch what they do. So you want it to happen on your site, anyway they don’t know anything about your business, your systems, processes, etc. so you guess they’ll have to be helped a bit, better make it onsite. This will be a good test of their people so you don’t want too much interference from their management. Maybe you’ll manage their team yourselves then you’ll really know what they’re capable of. OK, back to basics. You’re ultimately trying to build a virtual joint team with a professional global software services company. The target team will comprise of say 15 to 20 people, 8 to 10 of which will be from the supplier’s team working 7,000km away in India under the supplier’s management. They will work with your processes but these will have been adapted to work in an offshore context. The supplier’s team will have gained knowledge about your business and IT system and as importantly will have built up good working relationships with key people in your team on whom they will depend. They will have a colleague or two working on your site acting as an intermediary/fixer. Their management will be able to bring to bear their considerable experience of making “Don’t compare apples with pears, be clear what you want to prove and how” offshore work to control what happens in real-time


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and immediately intervene and escalate to you if problems start to arise. At this point, however, you know nothing of India and have probably never been there. You and your organisation have little or no experience of offshoring. Half of your team are on board, the other half (probably the technical staff on whom the supplier’s staff will depend) are against. So you’re going to tell your supplier to throw some of their people (probably their best people) into the lion’s den. It is difficult to see what this is going to tell you. Not really very representative of the end game, is it? We know. Not all pilots are like this, but many of the ones that we come across are depressingly similar. Time and time again we see organisations commissioning pilots that have very little hope of success. They demand the supplier perform a minor technological miracle whilst their every move is being watched under a microscope. Performance during the pilot (quality, productivity, timescales) will be benchmarked against the internal team who have built up their capability over many years. Often, the supplier doesn’t have a hope in hell of succeeding and only a super-human effort by the supplier’s team (by now much experienced in such foolhardy pilot projects) can save the day. The really sad thing is that everybody loses, not just the supplier. The customer learns virtually nothing from this exercise, except perhaps that the supplier has a few very talented and very committed people who are willing to sacrifice countless evenings and weekends to achieve the virtually impossible. There is a simple way out of this mess. Just start the offshoring project. Working closely with your supplier, define an offshoring roadmap that provides you with a number of predefined go/no-go decision points along the way. Make sure that the critical success factors for each of these decision points are clearly defined and understood by your team and your supplier. Then get on with it. Our experience at Arrk Group is that 90 per cent of all pilot projects are a waste of time and money. Nevertheless 90 per cent of customers want a pilot project. You can take a horse to water, but you can’t make it drink!


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WHAT’S BEST, HANDS ON OR HANDS OFF? This brings us to one of our favourite bug-bears, organisations that want to offshore/outsource but still want to manage everything. Smarter organisations seem to sense that some sort of joint-team is required, blending customer and supplier people as one team. After all, their team does have a bunch of people who have tons of knowledge about their business and IT systems, knowledge that the supplier’s teams desperately need. And what’s the best way of getting that knowledge into people’s heads? – why it must be direct interaction. Well, yes, up to a point. The problem is that it is often a very short step from such ‘direct interaction’ into ‘direct interference’. The one critical piece of value-add you must insist that your offshore supplier provides is that they bring to bear their expertise in making offshoring projects work to make sure that your offshoring project works. If they are to do this they must remain in control of their team. Whilst they will fail without your help, on the other hand you must not dis-empower them by trying to manage their team or, worse still, insisting on designing their team or choosing individual members. By all means contribute to the process but if you don’t give them the authority to manage you can’t expect them to take responsibility for the outcome.


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NOT TOO HOT, NOT TOO COLD A fact of life in the offshoring world is that no matter what steps you take, no matter how hard you try, it is inevitable that the offshore knowledge base will be incomplete and out of date. No doubt your business environment is increasingly challenging and as a consequence the knowledge base supporting it will be constantly changing. Some of the new knowledge can be transferred easily to offshore teams but much of what happens is either too intangible or ‘tacit’ or too fast moving to be captured and documented. As tacit knowledge refers to knowledge that people have in their minds, this in particular is difficult to share and generally requires extensive personal contact and trust. Often people aren’t aware of the knowledge they possess or how it can be valuable to others but this can be very useful as it provides context for people, places, ideas and experiences. Regardless of these problems, the success of offshore teams relies very heavily upon them having access to an up-to-date knowledge base. The keyword here is access. The offshore team doesn’t necessarily need to hold this knowledge (although a certain amount of tacit and explicit knowledge is essential) rather they need to have the know-how and means necessary to enable them to access the onshore, and often in-house, knowledge base. The principle tool here is the onshore component of the offshore team, acting as a conduit for transferring knowledge back to their offshore colleagues. It is worth noting that high quality relationships between customer and supplier, at all levels, is another critical success factor. Such relationships have a direct bearing of the efficiency and effectiveness of knowledge transfer and dissemination. Representatives of the offshore team working onsite are well positioned to build and maintain relationships with key members of the customer’s team. In our experience, the optimum onshore/offshore mix is around 25/75 although a smaller onshore presence will work, at least for short periods of time. However, serious problems start to occur as this dynamic is disturbed. Relationships break down, the currency of the offshore knowledge base starts to deteriorate and very quickly productivity and quality start to suffer.


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AVOIDING US VERSUS THEM Successful offshoring requires tightly integrated joint teams that blend customer/supplier, onshore/offshore as one seamless unit. If you’re already working with Arrk Group we should have at least drilled this into you by now! Nevertheless, one of the problems we often experience is customers who have a real hang-up about the need to maintain an arms length, competitive relationship with their suppliers. Although this attitude almost always rears its ugly head when the procurement or legal teams get involved, for some organisations this anti-collaborative culture seems ubiquitous.

We

believe

that

such

companies will find it very difficult to gain optimal value from offshoring. Let us be clear. It is not that we don’t think that crystal clear roles and responsibilities, detailed

fact

based

reporting

and

management and regular service quality reviews are important – quite the opposite. They are essential for healthy joint teams. The problem occurs when ill-conceived contracts set in an uncooperative, untrusting environment start to drive behaviours and attitudes amongst both customer and suppliers teams. Goals start to deviate and people take sides, as individual organisations start to manage their individual commercial risk. Joint goals evaporate and the focus shifts from collaborative working to the taking of positions. Not only does this damage relationships, knowledge management and productivity but it will also create a culture that will stifle creativity and innovation. Most creativity and ‘out of the box’ thinking requires people to take individual or corporate risk. In an environment where there is a background context of adversarial risk management people simply clam up. As an aside it is our view that this culture, unfortunately only too prevalent in large mature UK companies, is a major source of competitive disadvantage for those businesses that suffer from it.


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MIND YOUR OWN BACKYARD The challenges faced by a supplier working with a customer for the first time are significant. Building new relationships, acquiring new knowledge, adapting their organisations, creating teams, synchronising processes, and establishing infrastructure, all require the supplier to change. In fact companies like Arrk Group and the people working within them live in a constant state of change. Not always so for the customer’s organisation. In our experience customers often underestimate the amount of change they will be required to undertake, whilst at the same time overestimating their ability to affect such change in an efficient and timely manner. There is an Indian saying that roughly translated says, “it takes two hands to clap”. Change is required by the host organisation as much if not more than the supplier’s organisation and, when choosing a supplier, their ability to assist you with the change process should be an important part of your selection criteria.


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REVOLTING PEASANTS SPOIL THE VERY BEST LAID PLANS This issue of change management is a fitting segue to the last of our thirteen - stakeholders. But first, stepping back a bit before we get into all that, it appears to us that offshoring projects come in three different flavours. Each of these different types of offshoring project requires a different degree of and approach to change management. All require some change. A crucial part of managing change of this nature is communication with the various stakeholders who, to a greater or lesser extent, must be enrolled into the process. This paper is not the right place to embark on a long treatise about the different approaches to change management but, in short, it is our experience that communication about offshoring usually needs to include a much wider audience than most Customers think. The cultural repercussions can often be felt across a surprisingly wide spectrum of people. You might find those who, despite the fact that they work for a relatively distant part of your organisation, have concerns that result in them taking a negative position. Indeed, in the current climate even

THE THREE FLAVOURS OF OFFSHORE PROJECTS

people’s political views can influence their view of offshoring and this can create unexpected issues. Better to be safe than sorry. Draft simple messages and deliver them consistently. Put yourself in the stakeholders’

WHOLESALE | The outsourcing of all or a significant

shoes and consider how the communication will sound when

part of a given IT capability involving radical change

heard from their perspective.

to the Customer’s organisation and often resulting in redundancies.

One question we are often asked is the extent to which such offshoring projects should be driven as ‘top-down’ change

STRATEGIC | The creation of a new capability designed

programmes

as

opposed

to

consensual

‘bottom-up’

to augment and complement an established in-

initiatives. The answer depends to a great extent on the

house capability that, in size at least, remains largely

type of offshoring project you foresee. If you are planning a

untouched.

wholesale outsource then you probably have little choice but to work in a ‘top-down’ manner, whereas the other two types

TACTICAL | The ad-hoc addition of new capability to

can both lend themselves more to a consultative approach

work alongside the permanent in-house team, usually

with stakeholders.

to address specific ‘point’ needs for skills or to deliver more manpower to specific projects.

Having said that, our advice is that, no matter what your technical people say, never assume they are 100% on board. It only takes one rotten apple to spoil the barrel. We have never yet come across an IT function that has engaged in


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offshoring where 100 per cent of the people were 100 per cent behind the offshoring initiative. Even in the case of tactical augmentations in-house teams may see the offshoring as the ‘thin end of the wedge’. “If this projects succeeds what is to stop them doing more, it will be our jobs next”. Staff often seem to assume that once started, offshoring is an inevitable one-way street to the virtual organisation where everything from software development to car-parking space allocation is outsourced to unfamiliar faces working in some far flung corner of the globe. These communication and enrolment issues can always be addressed even in the most extreme situations. Again, find a supplier who can add value here. A company who has credible experience in helping their Customer navigate this rocky terrain.

ABOUT ARRK GROUP Arrk Group builds award-winning digital solutions, leveraging its core competency in user centred design, lean software engineering practices, and using distributed teams. Our innovative approach delivers high quality working software as quickly as possible to maximise business results. Founded in 1998 we have built solutions for a range of customers from innovative startups to corporates and public sector, in financial services, retail, high tech, publishing and not-for-profit. Our SpArrk Community Programme drives research and development in leading edge technologies and processes to deliver the right digital solution. We have offices in Manchester, UK and Mumbai, India.

GET IN TOUCH



+44 (0) 161 227 9900



www.arrkgroup.com



[email protected]



@arrkgroup



UK: Greenheys, Pencroft Way, Manchester Science Park, Manchester, M15 6JJ India: Building 5, Sector 2, Millennium Business Park, Mahape, Navi Mumbai - 400 710


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