Traditional software offshoring is dead! Long live distributed innovation!!

“I can’t understand why people are frightened of new ideas. I’m frightened of the old ones.”

– John Cage

I received numerous responses to my earlier blog, Biggest threats to IT services offshoring are internal, not external’, broadly concurring with my views, and also seeking to learn how we overcame these challenges. In this blog, I wish to share some of the best practices that we adopted over the years, which enabled us to overcome the inherent challenges with software offshoring and better serve our customer needs.

Invest before you harvest

The customer will always be in a rush for a solution or a service that will help them overcome their challenges and add instant business value. The sales organizations of service providers tend to overcommit and promise anything that the customer wants, in order to win or retain business. The typical justification for these practices is either ‘customer focus’ or that the ‘business climate is making us overcommit’. Whatever may be the rationale, this only leads to mismatch in expectations and outcomes, and results in perennial crises. This also erodes the trust and credibility between the customer and the service provider.

Instead, the service providers must resist the temptation to ‘please the customer at any cost’ and condition them to the reality that they need to invest before reaping the harvest. They must encourage the customer to invest in the right people and right team; facilitate training and knowledge transfer in a structured manner, adopt appropriate process and work flow to ensure quality uniformity in a distributed environment. The onus is on the service provider to ensure that the new team is properly onboarded and well integrated with the customer’s organization in every aspect. The customer must also understand that the gestation period could appear longer, but is needed for developing high quality software.

We advise our customers to play an important role in selecting the kind of people they want working for them, which means actively participating in the recruitment, training, and onboarding process. If the customer participates in this process, they will have an opportunity to evaluate and select the kind of people that they feel will best serve their needs, and will also help them build a team with a complementary skill set and the right balance. The right people suited for you will be out there, and the service provider must make the customer understand that it takes time and effort to onboard and make them productive.

As I have outlined in my earlier blog, there is a huge pressure for the service providers to indulge in upselling rather than right selling. We firmly believe that every customer is different with varying business, technology roadmap, and organizational landscape, and the service providers must make genuine efforts to understand their true needs. The customer must be equipped with a well-designed team, with the right roles and skills, as opposed to the current practice of pushing a bunch of people from a pre-recruited pool or bench, very often with a very narrow skill-set.

Just like a farmer will prepare the land, sow the seeds, and nurture before harvesting the crop, customers must be prepared to make the knowledge investments, and give the teams time to integrate, before expecting them to deliver effectively.

Dedicated teams can deliver a continuous harvest

In our experience, to build great software, it is vital to have people with passion, deep domain expertise, knowledge and insights in terms of how the solution behaves. This is only possible if you have a core team that is continuously working on your software in an exclusive and dedicated manner. The service providers must desist from deploying transient resources and offering the same personnel to multiple customers. This might help them win business and fulfill short-term goals, but will not add any enduring value to the customer. The customer must also think long-term, and realize the importance of having a dedicated team, that can continuously work on their innovation needs, and can deliver true business value.

Distributed yet tightly integrated

The prevailing practice in the offshoring industry is to restrict the customer interaction to only the top-tier of the distributed team, which severely curtails transparency into the operations and team dynamics, and is detrimental to the integration with customer’s native organization. We encourage our customers to have an open channel of communication with the entire team, and proactively manage them so that they can have real-time visibility into the team functioning, and will be in a better position to anticipate and handle delivery risks. This will also make the distributed team feel that they are important, part of a bigger organization, and lead to better integration.

Cheap is expensive

One of the most unscrupulous practices that the offshore service providers indulge in is offering low-cost and low skilled resources in large numbers, with no relation to their capabilities and the customer needs. The overriding tendency is to staff a team with lots of greenhorns with a very narrow-skill set, and add a few seniors at the top, to make it appear as a low-cost solution. Unfortunately, this is a recipe for disaster. The overwhelming experience is that these ill-structured teams don’t deliver quality software, and in fact end up costing the customer far more than what is projected. The customers must realize that ‘starting cheap could end up expensive, and what feels expensive could become cheaper over the long run’.

Different culture is not difficult culture

It is my strong perception that the service providers don’t do enough to prepare their customers to deal with the cultural aspects of offshoring. Understanding different cultures takes time and effort. I have always insisted that my customers invest the time and resources to ensure that their teams are culturally integrated and aligned. A best practice that has worked well for us over the years is frequent travel – either our customers travel to interact with their teams or vice versa. This helps enormously in ensuring cultural integration, overcoming communication barriers, and moving towards better collaboration and productivity.

Build strategic partnerships and opt for balanced risk-sharing

One of the biggest transformations that the service providers must be prepared for is the shift from being a vendor to a trusted and strategic partner to the customer. If you are a partner, then you will naturally think long-term and encourage the customer also to be prepared for the necessary investments in people, process, and supporting infrastructure that will yield continuous results. The customer will also understand that, you as a partner are also investing along with them with a long-term perspective. I strongly feel that a strategic partnership that balances the risk between the customer and the service provider is the most appropriate and viable model for the software industry.

Innovate together

The net result of adopting the above cited best practices is a cloned organization with the same level of domain and technology expertise, and a common organizational process and culture across the native and distributed teams. Yet, the distributed teams offer a diverse perspective, and literally double the innovative capacity, which is the true value addition that both the service provider and the customer should aim for. When the native and distributed teams are well integrated and are in tandem, the spirit of collaboration and collective innovation will supersede any contract. Instead of a master-follower or customer-supplier model, both teams will be poised to take a leap together.

We practice what we preach

What I have shared here is neither high-minded theory, nor empty rhetoric. This is an amalgamation of the insights, and expertise that we accumulated over the years in helping numerous companies across Netherlands, UK, and Australia realize their technology and business goals. A glimpse of what we have accomplished at coMakeIT over the past decade:

• • Low employee attrition of < 7%
  • Continuous growth
  • Average customer engagement > 5+ yrs
  • Tested and retaining its niche for over 10 yrs

I strongly believe that, ‘we cannot use tools of yesterday to solve the problems of tomorrow’. I have no doubt that software offshoring industry will die, if it persists with  current business model of maximizing profits at the expense of the customer. The industry must transform itself, adapt a business model based on collaboration and distributed innovation, and truly become an integral part of the customer value chain.