A maturity model for offshore software development centres

Again,fora whollyownedsubsidia ry centre,repor ti ng linesoftheirdevelopment teamsgo uptothe respectiveonshoreteams.Forathird-partycentre,onshoreteammanagersdonotseetheircounterpartsasth

AMaturityModelforOffshoreSoftwareDevelopmentCentres

HanHongLuH u

ng PhiNguyen

NationalTaipeiUniversityofTechnology,Ta

iwan

Abstract

Softwareoutsourcinghasproventobeagreatsuccessformanycompaniesworldwide.CIOsfromt heseorganizationsdevelopITstrategiestosupportthevisionofanenterpriseintermsofgrowingtheirbusi nesses.D e l i v e r i n g qualityprojectsont i m e a n d w i t hinbu d ge t i s a C I O ’ s pr o m i s e t o t

h e o t h e r seniore x e c u t i v e s Assessingandselectingmature

offshoredevelopmentcentres(ODC)duringtheirannualreviewsbecomesac r i t i c a l itemonaCI O’sagenda.Inthispaper,wearegoingtointroduceamaturitymodelf o r anOffshoreDevelopment Center.Itmakesnosignificant difference whetherthecentreiswhollyownedbytheorganizationiniti atingsoftwareprojectsoritisa3rd

-partypartnerofthisorganization.Themodelhasbeend e v e l o p e d basedonbestpracticesof3

well-knowninternationalbanksmanagingoffshoresoftwareprojectsa c r o s s countriesandtimezon es.ThismodelworkswelltoservetheaforementionedWallStreetfirms’ ITstrategies.Fornon-bankingindustries,thismaturitymodel worksjust aswell,asthesebestpractices are notindustry-specific

Keywords:SoftwareOutsourcing,OffshoreDevelopmentCentre,ODC,MaturityModel

1.Introduction

Outsourcingisthebusinesspracticeofhiringapartyoutsideacompanytoperformservicesorcreategoodstha

tweretraditionallyperformedin-housebythecompany 's ownemployeesandstaff [1].Nowadays,tos u r v i v e andexcelinthefi ercecompetitioninanybusinessrequiresentrepreneursandseniorexecutivestobeonaconstantsearcho

fnewwaystodobusinessthataremorecost-effectiveandmoreproductive.Intheearly1 9 9 0 s , softwareoutsourcingstartedgainingpopularity asastrategytosavecostsinitially.Eversincethen,goingoffshoretofindsoftwareproviderstosu pporttheirbusinesshasturnedouttobeasuccessstoryformoreandmoreorganizationsworldwide Workingw i t h a n offshored e v e l o p m e n t centre,a l s o knowna s a n ODC,h a s thebenefitofr

e d u c i n g operationalcosts.Additionally,acompanycanalsogetaccesstoalargertalentpoolbyoutsourc ingsoftwareprojects.Withthisdifferentapproachofconductingbusiness,companiescanstaymorefocus edontheircorecompetencieswhilekeepingupwiththenewesttechnologiestomaintainacompetitiveedg e

Atthesametime,however,manypossibleissuesmayariseduringtheprocessduetothewayoutsource dsoftwarep r o j e c t s a r e d e v e l o p e d –

t h e y a r e managed,designed,constructeda n d testedbyemployeesofanothercompanyataremotelo cation

Withthismodel, communication wouldbecomemorecriticalfortheonshore stakeholderstounderstandprojects t a t u s , buildtrustwitht h e offshoreteamsa n d h a v e controli n te rmsofqualitya n d timelineso f

deliveries

Therefore,partneringw i t h a matureoffshored e v e l o p m e n t centrethatf u l fi l s a l l then e e d s determinesthesuccessofanorganization’soutsourcingstrategy

Int h i s p a p e r , w e a r e g o i n g tointroducea m a t u r i t y modelf o r a n ODCe i t h e r w h o l l y own edbytheo r g a n i z a t i o n

initiatingsoftwareprojectsorasathird-partypartnerofthisorganization.Themodelhasbeend e v e l o p e d basedonbestpracticesof3wel

projectswithdistributedteamsacrossLATAM(LatinAmerica),EMEA(Europe,theMiddleEast,an dAfrica),andA P A C (AsiaandthePacificRegioncountries)

Thism o d e l w o r k s w e l l t o s e r v e theaforementionedW a l l S t r e e t firms’I T s t r a t e g i e s Forn

o n -bankingindustries,thismaturitymodelwould workjustas wellbecausemostofthesebest practices arenotbankingindustryspecific

2.KeyfunctionsandbestPRACTICES

Fig.1

TheorganizationalstructureofanODCcanbedefinedaccordingtoitsoperationalmodelandmanagementst yle.However,necessaryfunctionshavetobeputinplaceforthecentretofunctionwellandserveha ppyclients.With thethreeglobalbanksIhaveworkedwithas adepartment headattheiroffshorecentres,thesekeyfunctionsincludetheSoftwareDevelopmentDivision,thePr ojectManagementOffice(PMO),Finance,H u m a n R e s o u r c e s , VendorManagement,Billing,C o m

p l i a n c e , L e g a l , InformationS e c u r i t y , a n d AdministrativeSupport,etc.PleaseseeFig.1abovefora visualstructure

Fora

bank-ownedo ff s h o r e softwared e v e l o p m e n t c e n t r e , thesef u n c t i o n s r o l l u p theirr e p o r t i n g l i n

e s w i t h i n t h e b a n k ’ s t e c h n o l o g y g r o u p Fora t h i r d

-partycentre,theird e v e l o p m e n t teamsa r e structureda s extensionsoftheonshoreteamswhilehavin gtheirownorganizationalchartfortheotherkeyfunctionswithinthecompany

Inthisse c t i o n, w e a r e goingtolooka t thesek e y functionsa nd highlights o me ofthemostimpo rt

a nt programs,processes, and submodelsthatare considered as attributesofa

‘mature’ODC.Pleasenotethatallthefollowingdis cuss io ns a r e b a s e d

onmyfirst-handexperienceworkinga tt he banks’offshores o f t w a r e d e v e l o p m e n t centresbetween2 010and2013.Myrolewasabusinessunitmanager,supervisingbetween80a n d 280offshoretechnic alresources.The3banks’namesarenotdisclosedasIwasneitherforbiddenfromnorgivenexplicitper missionforsharingthisinformationwiththepublicaudience

3.TheDevelopmentDivision

Structure

Thedevelopmentdivisionisthebodyofalltechnicalresourcesprovidingsoftwaredevelopmentservic es.N o r m a l l y itisdividedintodifferentdepartments,businessunitsorteams.Foracentrethats upportsglobala n d r e g i o n a l projectsa c r o s s m u l t i p l e c o u n t r i e s , thetotals i z e oft h e i r d e v e

l o p m e n t teamsindicatestheirp o t e n t i a l

capacityfordeliveringlarge-

scaleprojects.Thistypeofdevelopmentcentresarenormallythird-p a r t y scaleprojects.Thistypeofdevelopmentcentresarenormallythird-providers.Foracentrethatsuscaleprojects.Thistypeofdevelopmentcentresarenormallythird-pscaleprojects.Thistypeofdevelopmentcentresarenormallythird-portsbusinessofasinglecomscaleprojects.Thistypeofdevelopmentcentresarenormallythird-pany,thetotalnumberofdeveloscaleprojects.Thistypeofdevelopmentcentresarenormallythird-persoft env a r i e s fromhundreds tothousands.Theyare normallybasedatasinglelocationorhavemu ltiple offices withinasamecountry.Acentreofthistypeismorelikelyawhollyownedsubsidiaryoftheco mpanyitself

Again,fora whollyownedsubsidia ry centre,repor ti ng linesoftheirdevelopment teamsgo uptothe

respectiveonshoreteams.Forathird-partycentre,onshoreteammanagersdonotseetheircounterpartsastheirdirectreports;yettheyh avedominantinfluencing powerontheseoffshoremanagers’annualperformancereviews,prom otionandcareerdevelopment,etc

Ata whollyowneds u b s i d i a r y centre,i t s technicalresourcesa r e composedofi t s o w n employees

a nd contractors.Contractorsare softwarede v e l o pe r s fromotherc o m p a n i e s (vendorco mp anies)thatworkonprojecttasksonacontractbasis.A t the3banks,theemployee/

contractorratiowithineachdevelopmentteamv a r i e s between15:85and50:50.Basicallythehigh ertheratio,thehighertheper-headcostis.Withineachprojectteam,a

cost-effectivemixoftheresourcesi s the1:3:6mixamongteaml e a d s , seniora n d juniord e v e l o p e

r s ThismixhasbeenmarketprovenandalsowidelyadoptedatthethreeWallStreetbanksIworkedwith

Bytheway,otherthans a v i n g c o s t , anotherbenefitforhavingcontractorso n e a c h teami s thegr eatfl e x i b i l i t y

forprojectresourceramp-upsandramp-downs.Withfrequentchangeinbusinessrequirements,projectr e s o u r c e s oftenn e e d tobea d

d e d orremovedwithv e r y shortnotices.Withcontractors,p r o j e c t managersandHumanResourc esdonothavetodealwithemploymentcontractterminationorextension,w h i c h cancauselegalis sueswithpermanentemployees

CapabilityModel

Fora softwared e v e l o p m e n t team,thetopt h r e e m e a s u r e s oft h e i r o v e r a l l competitivene ssa r e c o m m u n i c a t i o n skills,applicationknowledgeandtechnicalcapability.Offshoret eamsareoftenbasedinac o u n t r y where the locallanguageisdifferentfromthatof theonshore team’s.Theoffshoreteameitherhastoc o m m u n i c a t e inalanguagethatisthemediaofcommu nicationfortheonshoreteamortheybothhavetos p e a k aforeignlanguage,mostoftenEnglish,at work

Consequently,theoffshoreteamisoftenrequiredtohireresourcesfluentinaforeignlanguagethatall owsbothparties tocommunicate i n aprofessionalworkenvironment.Notet ha t communicatio

n sk ill sdo no t m e r e l y m e a n t h e abilitytou s e a c e r t a i n language.W i t h a s u ffi c i e n t l e

v e l oflanguagefl u e n c y , a goodc o m m u n i c a t o r shouldalsobemindfulofculturalandmindset

12 differences duringaconversation.Thisisav e r y valuableskillforalloffshoreresources,especiall yforthoseholdingmanagerpositionsattheoffshoreorganization

Intheabovethreeareas,offshoreresources’technicalcapabilitiesarealwaysassumed.Itisveryimporta

technologiesortoolsbycontinuouslearning.Onenot-so-obviousissuerelatedtothisself-improvementinthetechnologyspaceisthatsoftwareprofessionalsarea d v i s e d tor e a d E n

g l i s h t e c h n o l o g y b o o k s , u s e E n g l i s h o n l i n e r e s o u r c e s ,

a n d joininternationalonlinec o m m u n i t i e s , asEnglishisthemostdominantlanguageinthesoftwa reoutsourcingindustry.Ilearnedfrommyp e r s o n a l experiencethatnotknowingE n g l i s h t e c h n o l

o g y termsi s takena s notbeingcompetenti n technologiesbythe onshorecolleagues, whichca nbea n unfairviewoftheoffshoreteam’srealtechnical capabilities.ThekeypointIwouldliketomak ehereisoffshoredevelopersareoftenjudgedbyhowgoodtheya p p e a r tobeduringtechnicalconver sations.Forthosewhodonotparticipateactivelyinconferencecalls,e m a i l d i s c u s s i o n s ,

m e e t i n g s w i l l definitelybel a b e l l e d a s mediocreore v e n w e a k peoplebym a n a g e r s r e

g a r d l e s s ofhowmuchvaluableworkthepersonhasdonetotheteam

OnepracticalissuethoughismostEnglishtechnologybooksarefairlyexpensiveandyethaveacom parativelyshortshelflife.Formanysoftwaredevelopers,itisanexpensethattheywanttoavoidbearing.On eprovensolutionisasmallcollectionofthemostrecenttechnologybooksownedandmanagedbyeac

hd e p a r t m e n t withinanODC’sdevelopmentdivision

CommunicationModel

Communicationisthemostsignificantelementthatinfluencestheoverallclientsatisfaction.Thismay

bealittlecounter-intuitiveinthatwenormallybelievedeliveryqualityshouldinfluenceclientsatisfactionthemost.T ounderstandthispuzzle,weneedtoknowthatdeliveryqualitydoesnothaveamathematicalformulatocomp utewith.C o nv e r s e l y , it isgreatlyinfluencedbyhumansubjectivity,whic hi sheavilyaffectedbyc

o m m u n i c a t i o n s ondifferent levelsbetweentheonshoreandoffshoreteams.Havin gsaidthat,wedonotm e a n thatdeliveryqualityisunmeasurableandunimportant.Communicationc annotchangeafactthatlowqualitysoftwarewon’tsupportanybusinesssuccessfully.Butinreality,aprojectdelive redontimeandwithinb u d g e t canbestillconsidered‘unsatisfactory’ifcommunicationsdonotgowelldurin gprojectdevelopment.C o m m u n i c a t i o n modelsbetweenonshoreandoffshoreteamsoftenfallintotwot

ypes– acentralizedmodela n d aparallelmodel.Acentralizedmodelheavilyreliesonoffshoremanagersan dteamleadsforc o m m u n i c a t i o n s o n a l l i s s u e s b e t w e e n t h e t w o g r o u p s Offshore

d e v e l o p e r s don o t geti n v o l v e d i n a n y d i s c u s s i o n s withtheironshorecounterparts.Theywork closelywiththeirlocalteamleadonprogress,issues,a n d questions,etc.Alotoftimes,offshoreproject managersareaskedtoworkonshoreonarotationbasis.T h a t way,eachoffshoreteamhasonecomm unicationchannelwiththeironshorecolleagues.Foracentralizedmodel,managersofbothsidesreceiveproj

ectstatusupdatesbyweeklyreports,conferencecallsand/orface-to-facemeetings

Aparallelmodelrequiresdirectcommunicationbetweenthetwoteamsoverconferencecalls,emails,an

dc o m m u n i c a t o r s Theadvantageisenhancedtransparencyandmoreresponsiveupdates.Onethi ngtonoteis,fortheoffshoreteam,thism a n y t o

-m a n y r e l a t i o n s h i p i n c o -m -m u n i c a t i o n -m a y c a u s e inconsistentore v e n c o n fl i c t i n g -me ssagesgoingthroughdifferentchannels Inthiscase,rulesforprovidingstatusinformationonproject progress,ETA,orresourcechangeneedtobemanagedproperlywithintheteam.Thisis an areathatm a y createserioustrustissuesifnotmanagedcarefully

WiththebanksIhaveworkedwith,oneofthemusedacentralizedmodelwhiletwootherbanksuseda

p a r a l l e l model.Bothworkedfairlywellfortheircommunicationneeds

CareerDevelopmentPrograms

Offshoredevelopmentteamsnormallyexperiencehighattritionratesduetothenatureofthebusines s.InIndia,attritionratesintheoutsourcingindustryrangebetween15–

50%ayear[3].InChina,onaverage,ac o m p l e t e offshoreteamg e t s r e p l a c e d bybrandn e w peoplei n 3 years,accordingt o m y o w n e x p e r i e n c e managingoffshoreteamsbasedin3Chineseou tsourcinghubs-Shenzhen,ShanghaiandDalian.Thereare

manyreasonsforthishighattritionissue, among whichhowmuchyoucareabouttheircareer

developmenti s amajorone

Offshoredevelopmentteamsshouldhavecareerdevelopmentprogramsthataddressthewholet eamasw e l l asitscoret ea m The c o r e t ea m, al so knownas the‘middlelayer’at manycentre s,isconsi deredthebackboneofthewholeteam,whichincludesresourcesstrongincommunication,appl icationknowledgeandtechnicalskills.I t i s c o m p r i s e d ofp e r m a n e n t s t a ff a n d contractorsi n d i

ff e r e n t rolesthati n c l u d e p r o j e c t managers,teamleads,seniordevelopersandjuniordevelopers

Buildingastrong‘middle-layer’withineachd e v e l o p m e n t teamorabusinessunitiscriticalformaintainingteamstability,t alentretention,clientconfidence,etc.Toeachindividualwithinthecoreteam,thereisaclearcareerpathlaidinf rontofthem,whichmotivatespeopletostaylongerwiththecompany

Careerdevelopmentprogramshavesimilar sub-programsamongdifferentODCs.Mostof themfocusontheseaspectssuchasupskilling,worksiterotation,jobrotationandmentoringetc

TechnicalresourcesatanODCcommonlyhavestrongertechnicalskillsthantheircommuni cationandpresentationskills(inEnglish).Thisisoftentrueevenforseniorresourceslikeoffshoreproject managersandteamlea ds Improvingt he se softskillsre quir es co nt inuo us pr a c t i c e overa longe rperiodoftime.A l l my previouss u p e r v i s o r s a t t h e bankssuggestedthatk e y resourcesi n myd e p

a r t m e n t c o n d u c t biweeklyormonthly teachingortrainingsessions ontheapplicationstheyweresupporting

IthadtobedoneinEnglishu s i n g PowerPointslides.Theaudiencewasallresourcesinthedepartmentschedu ledbyeachteammanagersforeachsession

Givingpresentationsnotonlyimprovesone’sabilitytopresentyourworktoonshorecolleagues,achievingrec

ognition,butitisalsoanimportantpartofsharingknowledgetoco-workers.Theabilitytodosoeffectivelyc a n greatlyenhanceone’scareersuccess.Theaudiencereceiv esknowledgehelpfultotheirdaytodayworkbutalsoprovidesfeedbacktothepresenteronthecontentan ddeliveryofthepresentation

Worksiterotationmeansoffshoreresourcesgetachancetoworkonshoreforacertainperiod oftime.E v e r y year,a rotationp l a n i s m a d e w i t h o n s h o r e p r o j e c t managerstos e c u r e a bud getfora numberofresources.Duringtheyear,resourcesfromtheoffshorecoreteamaredeployedtotheo nshoresitesotheywillbew o r k i n g f a c e tof a c e w i t h otherwiser e m o t e colleagues.I t p l a y s a keyro lefortheirl e a r n i n g , m a k i n g personalconnectionsandbuildingtrustwithonshorecolleagues

Jobrotationisoftenorganizedatthecompanylevel,notdepartmentlevel.Itispartofacorporateinitiativefo

re m p l o y e e s ’ c a r e e r d e v e l o p m e n t a d d r e s s i n g t h o s e w i t h e x c e p t i o n a l p e r f o r m a n c

e r a t i n g s I t i s a s u p p l e m e n t a r y programforcareerdevelopmentasitonlyaddressesaverysmallper centageofemployees

Thementoringprogramisoftendrivenbytheheadofadepartmentwithinthedevelopmentdivision.Itisn ormallyconductedmonthly,focusingonadifferenttopiceverytime.Theaudienceisthewholedepartment.H

e r e areexamplesofsomegoodtopicsforsuchmentoringsessions–

 Howtocommunicateeffectively(inEnglish)attheworkplace?

 Howtochoose/buildacareerpathrightforyourself?

 Howtomakeyourselfcomfortableattheworkplace?

 Howtobecomeaverytechnicalpersonhere?

 DoIneedinternationalwork/studyexperiencetobesuccessfulonthisjob?

AtonelargeoffshoresubsidiarycentreIhaveworkedfor,statisticsprovidedbytheHumanReso urcesD e p a r t m e n t showedthatdepartmentswithmoreregularongoingcareerdevelopment programshaveclearnegativecorrelationswiththeirattritionrates.Adepartmenthavingacoreteam developmentprogramhassubstantiallowerattritionratesontheirpermanentemployeescompar edwiththosethatdonothavesuchone.Forinstance,thedepartmentIwasheadinghadlost2perman entemployeesoutofatotalof45during2 0 1 1 –

2013,includingoneinternaltransfertotheregionaltechnologycentreinSingaporeandtheotheroneater

minationofemploymentcontract,alsoknownas‘AttritionNon-Regret’.Apeerdepartmentthatdidnot