Communication Failures in Outsourcing

It was Malcolm Gladwell who introduced me to Geert Hofstede’s concept of the Power Distance Index (PDI). After I read the chapter seven of Outliers I had to stop to catch the breath, it was just too exciting. Implication of PDI on cross-cultural communications is immense and it has direct relevance to outsourcing, and I’ve observed over the years. It’s something that you most likely dealt with as well. I did a bit of research and realized that I am far not the first to discover PDI’s impact on outsourcing, for example, this post offers great insights on PDI implications in the world of software development.

The idea behind PDI is quite simple, a perceived “distance” between a boss and an employee varies dramatically based on culture, biases, heritage, etc. The “distance” is defined as measure of how a person would generally react / respect / deal with a person of authority. The PDI is a measurement of that “distance”; it ranges from 1 to 120, the bigger the number the bigger the distance separating a boss and an employee. Small distance puts both boss and employee on very much the same floor of a corporate pyramid. As the distance grows the boss moves in a corner office or on the top floor, becomes master and commander, royalty and at some point a divine authority. While in cultures with small PDI an entry level employee can have a chat with CEO in a cafeteria, even just a single step in a corporate ladder can create master / slave relationship in cultures with high PDI.

In cultures with low PDI communications between a boss and an employee are quite different from countries with a high PDI. If you, an employee, are very much at the same level as your boss in terms of cultural hierarchy, you do not perceive any significant distance or differences with your boss and you tend to collaborate. A straight forward question gets a straight forward answer. If your boss is wrong you tend to have no qualms about pointing it out. And your boss expects you to. There are of course variations based on company settings and individual preference, someone might say to the boss “I respectfully disagree” and someone might use much less politically correct language. Moving up in PDI would convert collaboration into discussion akin to a military style of orders. Going higher in PDI changes a conversation into a dialog that for most of people from the Western world would be impossible to decipher as instead of a straight forward answer a response comes in a form of hints surrounded by layers of polite blabber, well, at least that is how people from low PDI cultures see it.

Interestingly enough high PDI doesn’t create too many communication issues between people from the same country. The traditions and unwritten rules of communications are well understood and do not present obstacles. Not always though, see some examples in Outliers, they are stunning and illustrate how high DPI drives catastrophic outcomes. And situation gets substantially worse when it comes to cross cultural communications, that’s where miscommunications and mutual frustration proliferate.

When we consider a typical IT outsourcing initiative in this country we face significant differences between buyer (boss) and supplier (service provider) – USA (40) vs. India (77) or China (80). It is not surprising that communication issues in all forms and shape plague the vast majority of outsourcing engagements. Even though I do not necessary agree with conclusions of The Real Reason Outsourcing Continues To Fail, blaming it all on PDI is an unjustified simplification, I believe PDI-related issues contribute a great deal to many of outsourcing engagements failures.

To minimize the damage that PDI difference can inflict on your engagement you need to deal with it on several levels:

  • Educating your staff, in particular local low-PDI employees.
  • Developing communication vehicles that inhibit PDI-related miscommunications.
  • Adjusting SDLC to minimize potential damage and inserting elements minimizing the impact.

That might be easier said than done, but there is no way around it. Left to themselves things tend to go from bad to worse.

5 Rules of Luck with your Potluck

The month of October is almost over and I have not written a single post. Well, I do need a day job and it’s been incredibly demanding over past few months. A number of projects that kept roughly 50 people working over a half a year are in the finishing stage. Multiple systems that have been developed over that period have to integrate and start talking to each other in production in just a few days.  No surprise it keeps me away from blogging, yet I’ve committed to at least one post a month and there is no way around it. By the way, talking about distributed projects, why are they so… insane?

Have you ever tried to setup a potluck with say 10-15 families? Everyone needs to come in at approximately the same time, bring the food they committed to making, warm it up, set up table, and party on. Pretty simple task isn’t it? So let’s throw in some complications, typical in IT world. The families have to fly in from  different parts of the world. Some of the families never met each other. Some of them do not like each other. Some speak different languages. You have disagreements on menu, confused about dietary restrictions, and the place of meeting is in flux. Your – the organizer – have to deal with your own waterfall of issues – mortgage refi, kids school troubles, broken plumbing, in-laws arriving unexpectedly, less than encouraging results from the last physical, and a recent escalation of tension with your boss… And there are only a couple days to the party. OK. Now I think we have a good metaphor for what my team have to accomplish.

As a matter of fact that is a good metaphor for many complex SI projects I’ve been through. Are there any recipes for avoiding a disaster? Any medicines to take? Well, there is no panacea or silver bullet. Maybe just a few basic guidelines:

  • ‘Too many cooks spoil the broth, and half-a-dozen gentlemen aboard one ship are as bad as two kings of Brentford.’ [1855 C. Kingsley Westward Ho! II. vii.] There are more quotes and proverbs stating the same point that I can possible number. And the guidance in this case is very simple; it was clearly stated in ’86 movie Highlander – “There can be only one”. There can be only one head of the engagement with authority across all troops involved.
  • Collaborate or die. That’s almost a truism when it comes to distributed engagements. Yet, I am still looking for a team, an engagement, or at least a project on which all stakeholders agree that they have no communication issues and nothing can be possibly improved. So do you best and of course when it comes to communicating use common standards, common language, common tools – or should I just say “Remember the Babylon!” ;)
  • Eliminate the waste. When it comes to final stages of engagement the troops are tired, the deadlines are tighter, pressures are higher, and inevitably, the team’s ability to employ common sense deteriorates. I have seen unnecessary testing cycles, stupid mistakes, round about ways to address the issues, “group grope” meetings and other wasteful activities proliferate at astounding rate as engagements get closer to the end. A JavaScript error triggers call to a DBA who engages in hours of troubleshooting at database level. Configuration change pushes QA Manager to request a full round of regression testing. A tag naming discussion turns into 2 hr long all-hands. And so on. Stay on look out and eliminate the waste with the vengeance.
  • Don’t change horses in midstream. Adjusting your methodology, changing processes and procedures are better left to discussion on full stomach, when all the potluck meals have been served and consumed. Implementing even most brilliant SDLC improvements does not belong to the final stage of engagement.
  • Watch the clock. I am not talking about counting the minutes left till the launch press conference, no, I am talking about hours your best performers put on the project. There are limits to what even the strongest members can continuously put in without deterioration in productivity. A minor mistake by a release manager who has been working 70 hrs a week for past two months will throw you back completely destroying the gains built to date by all that overtime.

Boy, I’m looking at the list above and I see that we broke all these rules… no wonder the only time I have to write this post is 4 AM ;(

PO Trip Adviser: China

And now a brief list of travel tips for one of my favorite destinations – China, the country that changes with amazing speed right before our eyes.

If there is anything that I regret about traveling to China it is not spending enough time there, not meeting enough people, and not seeing enough places.

I remember sitting on the Great Wall looking at the hills that look exactly like those on ancient paintings and thinking that for many Americans visiting China could be experience equal to visiting a different world, another planet… Well, that’s also changing rapidly.

  • A Visa is easy to get, but it may take a few weeks so allocate sufficient time. Also make sure that you have the travel plan worked out before you apply for Visa as you may need several entry authorizations as cities such as Shenzhen require special handling.
  • The most difficult aspect of traveling to China is language, very few people speak any English and you won’t find too many signs in English either. As a result public transportation even inner country air travel becomes challenging.
  • China is a reasonably safe country, and when it comes to main outsourcing destinations within country is very safe.
  • With petty crime on a raise you should be aware of environment and follow common sense practices such as not carrying large amount of money, protect your passport and valuables, etc.
  • The police in China are generally very friendly, though they speak very little English except in Beijing, Shanghai or Shenzhen, where some police can generally speak simple fluent English. If you are lost then ask for directions as they will usually be happy to help.
  • Stay in 4-5 star hotels remains relatively affordable. That will also ensure English speaking staff, access to tours, restaurants, etc.
  • Driving in China is somewhat strange experience – on one hand I was surprised with how closely some laws are followed, e.g. the speed limit – most of the cars travel ~5 mph below it. On the other hand I saw a lot of erratic moves and turns that were not aggressive just plain dangerous.
  • Sightseeing in China can be easily arranged with the help of the vendor or hotel staff. Keep in mind that most of professional tour guides are in cohorts with retailers specializing with ripping off tourists selling you “traditional” china, tea, souvenirs, etc. at 3-5 times the price you can get them elsewhere.
  • Eat only in good restaurants or at your hotel. Avoid eating buffet meals, even in high-end places. Not only drink bottled water, but also brush your teeth with it. Most of hotels provide bottled water for free. In restaurants I recommend boiled water / hot tea.

PO Trip Adviser: Russia

While working on a outsourcing destinations chapter for my book I realized that tips for travel in many countries could be helpful to those not accustomed to traveling to third world countries and other outsourcing destinations.  Of course there are plenty of books, websites and forums covering travel to any place in the world.  I am not planning on competing with them in any way, my goal is create a simple list of items to keep in mind when visiting a vendor far away from your home becomes necessary.   I am planning to put a couple posts covering few countries that I have a fortune to spend time in and let me start with the one that I lived in for 30 years…

So, here we go – a few tips on traveling to Russia – one of the top Eastern European outsourcing destinations:

  • Visas are required and getting one can be a tricky process. Make sure you allocate at least one month for processing the paperwork.
  • Unfortunately terrorism and street crime are a part of daily lives in many parts of the Russia. Still, on a relative scale, Russia, and especially the tier-one cities, are safe and great places to visit.
  • Shop around for tickets. If you know any Russians who stay connected to their motherland, ask them for help. There are many Russian travel agencies that can find great deals on tickets.
  • Staying in nice hotels can be price prohibitive, particularly in tier-one cities. Ask your vendor for help with travel arrangements.
  • You can rent a car and drive in Russia. Be prepared for a manual stick shift and very aggressive driving styles. You may face very serious traffic and won’t see any signs in English, so finding your way can be a challenge.
  • Ask your vendor to arrange sightseeing for you. Due to large distances and complexities in city navigation, you would be much better off on a guided tour. And I assure you Russian cities and their suburbs have a lot to offer a curious visitor such as architecture, landscape and even shopping.
  • Ask your vendor for recommendation when it comes to restaurants. Nowadays, especially the big cities, offer a great variety of styles and cuisines but the cost can be astronomical. Just like many other destinations, not only drink bottled water but also brush your teeth with it.
  • Prices are generally quoted in rubles. Currency can be freely converted at banks, hotels or kiosks specifically for tourists.

If you have any suggestions, ideas or tips on travel to Russia please comment or email me, I’ll be happy to update the list.

Five levels of customer satisfaction

A few days ago Sathya, an onsite offshore coordinator aka account manager working with my company, stopped by to discuss what he and his company could do to earn my trust and to make me happy. I wish more people in my life would ask the same questions, in particular women. And I tell you, in many cases the answers would be exceptionally simple. Well, not when it comes to making me happy as a CTO managing multimillion dollar technology budget. In this case earning my trust and keeping me happy is a very tall order. I am sure that many of you are dealing with the same question (either asking or answering it), so I think there is a value in sharing what I told Sathya…

There are at least 5 levels / horizons of customer satisfaction that the vendor has to achieve. There is a natural order to these horizons and there is no reason even to approach fifth level till you are done with the first one. And of course reaching just one horizon doesn’t give you much. You need to maintain all five in perfect state to achieve that illusive customer sat…

The first horizon is the company / corporation itself. The company engaged you as the vendor in order to achieve certain objectives. The company has specific metrics it wants you to comply with – financial, quality, productivity, etc. Before your go any further you need to meet the expectations established by these metrics. In case the company did not establish the metrics you should do it yourself and bring them to the company. Show us, the corporation, that you are contributing to the overall success of the company, helping us with the bottom line, delivering to the benchmarks of quality that are same or better than internal personnel, meeting deadlines and staying under budget. Even though that appears a difficult horizon to reach, it is actually the simplest one. Catering to the organization is a high level task, it allows you to be generally correct, meet expectations in most cases, etc. you do not have to be always perfect. Some failures and individual mishaps do not appear on executive radars and could be averaged out by successful projects and other money saving initiates. Continue reading

How to say Thank You in your provider’s language?

Thank you, спасибо, gracias, dziękuję, спасибі, धन्यवाद, آپ کا شکریہ, obrigado, 谢谢… How do you say it? Do you even need to say it? What if you want to say more?

In general, motivation of your offshore team should not be your responsibility. Your vendor should make sure that the team members are jazzed up with working for you. As a matter of fact washing hands off the HR headaches is one of the reasons many company consider outsourcing. Yet when you find yourself working through thick and thin with resources based in some third world country the ability to influence their morale and productivity becomes very import. Of course there are plenty of ways you can influence third party resources that fall in the “stick” category, and what about the “carrot”?

Dealing with both the carrot and the stick I look at relationships with third parties at three levels – corporate, team, and individual. Unsurprisingly, each level requires a different methodology; an approach that you use to award an individual team member varies drastically from recognizing the corporation. Motivation at each can make its contribution to overall impact on your initiative. Sometimes you need all three and sometimes you are most effective when using just one. You could be using a stick at one level and carrot at another. There are a plenty of combinations, 27 to be precise :)

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10 Rules for your First Outsourcing Project

Last week I had a chance to connect with an old friend of mine – a serial entrepreneur, a pioneer of electronic commerce and outsourcing survivor. His first outsourcing initiative turned out a complete disaster and almost cost him the company. The human memory works in very peculiar way – we look back through pink spectacles – most of the negative events of the past do not seem nearly as painful as they felt at the moment. Yet John did not have any sentimental memories about his outsourcing attempt or anything good to say about the experience his team went through. He, as most successful business people, doesn’t blame someone for it, learned from it, and I am certain that if he ever goes through another outsourcing deal it won’t be anything close to the ordeal he went through. That’s if he ever tries outsourcing again…

So, what do you need to do to make sure that your first outsourcing project doesn’t become the last one?

1. Do your homework. You wouldn’t attempt to fly airplane without learning how to do it first? Outsourcing is a very sophisticated tool and using it without understanding is certain to backfire.

2. Start small. Was your first driving experience a trip around the country? Most likely not. Consider it when picking your first project.

3. Minimize risks. I do not mean to state blindly obvious. What I mean is that outsourcing is a risk by itself, so minimize every risk that you can. Learn about risks and cons of outsourcing and eliminate as much as you can. For example time difference introduces a high risk – so go with a nearshore vendor to eliminate it.

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Oh, Those Russians

Am I dating myself? “Oh, those Russians” was the last line of “Rasputin”, ’78 hit by Germany-based pop and disco group Boney M. Well, of course that’s not what this post is about. A few days ago I talked with an old friend of mine once a VP of engineering for a s/w startup in the Bay Area and now a successful entrepreneur and owner of a small offshore outsourcing firm with a development center in St. Petersburg, Russia.

We started to chat about two sides of outsourcing, challenges of trying to do things right and make money in the process, and then found ourselves locking horns on a portrait of a Russian developer. Both of us are originally from Russia even though from two “competing” cities. Both of us have tons of experience working with outsourcing teams from all over the world. Both have been working with Russian developers for years. Yet with my friends’ past years of provider experience and my experience being mostly on consumer side we found ourselves on different sides of the barricade. Since we’ve known each other for years we could also take the gloves off and beat each other to pulp. At the same time there were not much difference in opinions and we could easily shift the sides. Well, I guess you would have to take my word for it. So, what makes Russians special, different, easy / hard work with? What to expect when you find yourself outsourcing with Russians?

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Be careful what you ask for

Too much of a good thing?

A few days ago I had to make a couple flight reservations. I had two canceled trips credits, one on United and one on American, that could be applied to the oncoming trips. Unfortunately, I could not do it online and had to navigate through the phone menus to get to customer service reps. BTW, I don’t like that voice recognition software, it often chocks on my accent and it takes me much longer to go through it than traditional “press zero to talk to a representative”. Anyway, I got to talk to the reps. With United the reps’ name was Chris what is probably, judging by the background call center noise and strong Indian accent, was short for Krishnamurthy. For American the reps’ name was Linda who judging by her southern drawl and jokes she cracked was very much local.

Chris was exquisitely polite calling me Dear Mr. Krym, asking for my permission to put me on hold, thanking me profusely for staying on hold while he was doing some research (most likely asking for permission for every tiny change I needed to make to my itinerary). Linda cut to the chase and while cordial was not particularly overwhelming. Anyway, less than an hour later I had both of my trips setup. There was a slight difference though. The transaction on American took roughly 5 minutes. Ticket change on United took about 45 minutes, and when I received confirmation I discovered that instead of returning on Wed night I was set for Tue morning and instead of non-stop I was on a ridiculous route with two hour layover. Continue reading

Of Frogs and Wrestlers

So you found a new vendor, negotiated a perfect deal and established relationships with key players. The team starts its work and shortly you can realize the savings you’ve been looking for. A year passes faster than you could ever imagine. Reports coming from the vendor showing good compliance with the benchmarks you established. You about to give yourself a pat on the back for being such an incredible offshore manager. And just to be a good sport you take a few business users for a dinner to share with them the wonderful achievements of incredible you.

Unfortunately even before you are done with the first round of drinks the conversation takes a rather unpleasant turn. No, they are not happy with both the quality of work your offshore team has been providing and their productivity. They are afraid of changes to be done to the systems your offshore team supports, they do not submit bugs because they are afraid that fixing one new bug would re-open a dozen of old ones; they do not enter RFEs because they do not believe they would ever be delivered, and so on.

What just has happened? All that rain on your parade is coming from a completely left field. Continue reading

Outsourcing SMO

Search Media Optimization / Outreach has become one of the most popular traffic building activities to outsource. And paraphrasing comment on my previous post, when it comes to finding a qualified needle in a freelancing haystack SMO is even more challenging than SEO and others activities alike. First, a couple words on typical aspects of SMO, here are just a few things that you can consider:

  • Building Twitter follower crowd and posting ongoing tweets to the community you’ve created
  • Creating Profiles on Social Networks, generating “friends”, update of status / spam friends with info
  • Creating SM advertising campaigns using follow / vote / fun tools
  • Bookmaking the target using sharing engines such as StumbleUpon
  • As well as traditional resources such as forums

Each of these activities present a fairly easily outsourced task, at least it appears to. For example you can create a mascot for you’re your service. That mascot can have its own twitter page. Using variety of available tools and offshore labor you can

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Outsourcing Blog SEO

I had several interesting discussions about blog SEO outsourcing with a few of my friends a colleagues. I think some highlights of those discussions deserve a full size post or two. Since we are talking about blogs I just have to start with some classic points. Trisha Okubo did a phenomenal job covering those in her almost classic “Blog Your Brand”

In case you did not read the presentation, here are the main points:

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Updates to the List of Freelancing Sites

In case you found Best Places to Find a Freelancer helpful you may want to check out the updated list. It now has 42 entries and also includes Google PR and Alexa ratings. These two numbers are quite helpful indicators of traffic. Google rating is a mystery number that measures from 0 (I guess “O” is for obscurity) to 10. Sites with PR 0 are typically brand new, inactive or have been penalized by Google for applying “black hat” SEO techniques. Sites with high PR are active members of web community, with a lot of traffic, popular content, and large number of quality back links. There are a lot of theories and speculation behind what determines PR, ask any SEO expert and you will get an ear full. How much of that would be true is a big question though. Many of PR rating aspects are kept secret by Google for a very good reason.

Alexa rating is much more strait forward measure, it goes from 1 – top rating to I do not know how many gazillions or zero, what apparently means the same. The higher the number the lower the rating. So there is practically no limit to how bad the could rate on Alexa. With Alexa rating being fairly simplistic there are plenty of ways a company can increase it by buying traffic and other means, that to a degree decreases the value of rating, however it’s still one of the best, easy to understand measures. Generally, Alexa rating consider low and a site practically irrelevant if the site doesn’t appear in Alexa 100,000. I would not recommend dismissing the sites with low rating though. Low Alexa rating means a bad news for the company’s traffic. On the other hand it could mean less vendor competition / niche market / and so on for you. However, for you convenience I will soon add a list sorted in Alexa rating linked from the table header, stay tuned :)

Here are the top five by Alexa rating (as of 2/1/2010)

Site PR Alexa Brief Description 7 37 Oh should I say anything here? 6 628 Elance is an online workplace where businesses find and hire people “on demand” to get work done quickly and cost effectively. Founded in 1999, Elance was established to help small businesses easily and efficiently hire freelance talent. Today, Elance is the leading workplace for hiring and working on demand. Elance is privately-held and
headquartered in Mountain View, California. 6 709 oDesk enables buyers to hire, manage (that’s different from many other similar services), and pay technology service providers from around the world. The service is fairly well organized, fast and reasonably priced – that’s if you are prepared to pay fees. Last time I looked at it the brokerage fees were 10% of the contract. 6 844 claims to be one of the largest sites of its kind. It indeed earned a decent reputation in freelancing community. You can find a large number of freelance programmers, web designers, copywriters and translators at that site. 6 1,908 The site has about 20,000 registered buyers. When you get a project done through Rentacoder you put the entire project fees into an escrow account. You don’t release the fees until the project is complete. This is good because it gives reassurance to the coder that they are going to pay you

Best of luck and let me know if you find sites that are worth including in the list.

Search for SEO Experts

Search for SEO under Hire professional in eLance returns about 12,000 results, search under Projects returns about 600. So it’s roughly 20 providers per SEO project. Similar stats are on Guru, oDesk, GAF, etc. One would assume that I should have zero problems finding a professional for my SEO project, especially in this market and being a buyer with good standing… The project started a couple weeks ago and in theory, I should have found the provider by now, in reality I have not. In theory there is no difference between theory and reality, in reality there is… Well, here is a brief of my recent project:

I decided to see what a couple standard SEO operations would to my blog traffic put a project on eLance, Guru, and oDesk. These sites have very different community of suppliers and I expected responses different in multiple aspects. Considering cumulative value of decently designed SEO campaign I was prepared to pick several suppliers. My project was very simple, here is its slightly abbreviated version:

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Microsoft and Plurk outsourcing debacle

If your goals are not achievable you can use them as targets. Sounds like a strange proposition? Well, look at Microsoft – everyone and their brother love to use it as a target of hate, criticism, etc. It’s human nature – to consider success of others as own failure. Fortunately, Microsoft never ceases to offer opportunities for harsh and well deserved criticism.

This time it’s quite amazing: as Plurk, a startup in micro-blogging sense, pointed in their blog “Imitation may be the sincerest form of flattery, but blatant theft of code, design, and UI elements is just not cool, especially when the infringing party is the biggest software company in the world. Yes, we’re talking about Microsoft.”

As it turned our recently launched Microsoft service Juku borrowed much more than inspiration from Plurk, it used very much everything including source code.

Initially Microsoft seemed uncertain about what happened yet shortly after the news hit the blogosphere suspended Juku and issued apologies to Plurk. “Because questions have been raised about the code base comprising the service, MSN China will be suspending access to the Juku beta feature temporarily while we investigate the matter fully.” see more here.

Stuff happens, even with the best of us. No reason to beat the dead horse here. What is interesting and particular important for the topic of my blog is that the code theft appears to be linked to Microsoft outsourcing practices, see Microsoft Statement Regarding MSN China Joint Venture’s Juku Feature “The vendor has now acknowledged that a portion of the code they provided was indeed copied.”

I am sure that we’ll never know exactly what exactly happen. In my opinion the chances are that Microsoft outsourcing partner did something that we call R&D – rob and duplicate, and under pressures of budget / timelines / etc. did not even make efforts to cover its tracks. The theft most likely happen at a very low level of the food chain – maybe just a few developers removed from the MS headquarters by 100s of layers of corporate hierarchy, maybe a product manager making a misleading request “make it like Plurk”, it might have been simple translation error … never the less the giant company is now have to accept responsibility for the mistake that in its relative size to the company decision volume would be equivalent to a drop of water in a sea. I would not even attempt to put a price tag on this debacle… well someone in MS will have to.

Anyway, there is an important lesson here: do you know what your vendor is doing? Do you know whether code came from? Was there any lines borrowed from a competitor, innocent bystander, or open source? That issue is relevant to all your employees (something borrowed from a prior employer?), yet by far is much more serious when it comes to outsourcing.

I came across it on multiple occasions – from code to “research” produced by consultants. In many cases finding plagiarism was not difficult, I am sure that in many cases I missed it as well, especially if the contributor was smart enough to remove comments, or paraphrase.

As you can see from MS example that issue is of very serious of nature and should be of grave concern. Make sure that you educate your team and include plagiarism analysis in your code review process, at least on an occasional audit basis.

Too Much of Good Thing

A few days ago starting from a comment to my post I found a very interesting discussion of metrics on 360° Vendor Management. In his post Tony covered a few golden rules that are important to consider when introducing metrics in vendor management. I agree in general with most of the principles covered in the post and highly recommend looking at it as well as other materials publish in the blog.

While reading the post I came across of one phrase that triggered a serious of thoughts that I want to cover today. (Metrics allow you “Moderate expensive overperformance that the vendor need not do. Remember – you pay for the extra quality, which may not be tangible.” )

There are multiple negative aspects for vendor over-performance that you should consider:

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First Metrics

For some reason this month turned out the highest traffic in the history of this blog. It is particular interesting considering that I have not been doing a good job keeping it updated. So I feel obligated to add at least one post before December.

Let me cover some progress I made with my offshore provider I inherited through the M&A process. In particular let me cover some metrics we have established in order to control the relationship. This set of metrics is a preliminary set based primarily on what my vendor could easily retrieve from the tracking systems they already have in place.

A couple months ago we agreed on several metrics and established high level benchmarks. I believe that you can not enforce benchmarks on day one. You should setup goals and see whether they are reasonable to achieve considering multiple factors ranging from abilities of vendor and your own organization to quality of the tools that are used to collect the info.

Here are the metrics we have collected so far:

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People Factor

I do not know how many times one of my managers or I said something like “Darn employees… Can’t live with them, can’t live without them either…” Almost all issues one faces in management career come from employees, well, very much all the issues are solved by employees as well. Every time when you deal with yet another personnel issue you throw your hands in air asking why it can’t be simple at least once in a while. Well whether you want it or not Murphy rules and if everything appears going well that only means that you are missing something.

For some reason (premonition?) I was thinking about this the Saturday before Thanksgiving week. The thought was so strong and persistent that I decided to sit down with my notebook and take a quick walk through the list of ongoing projects and open issues. The timing, from some twisted standpoint, was perfect – approaching long weekend, many people on vacation traveling, end of month, oncoming deadline for a number of high visibility projects. Nope, neither the list of projects nor the list of open issues, nor any other list I looked over gave me any reason for extra concern. Relived to the point of complacency I went on with my usual weekend chores.

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Invisibility Cloak of MSA

A Master Service Agreement (MSA) is intended to create a contractual framework for relationships between parties involved. Unfortunately way too often MSAs are used to protect intentional incompliance with a spirit of the agreement. When MSA is written and negotiated the parties bring to the table their knowledge of the domain, in this case offshore outsourcing services. The party more experienced in the space can predict certain behaviors and relationship patterns and appropriately protect themselves from liabilities they bring. More so that party can take advantage of less experienced negotiating partner and create an invisible cloak that will be used to hide issues and drive higher profit from the contract.

I am afraid that sounds very theoretical, vogue and convoluted… Let me suggest a couple of examples:

  • As a service provider I know that customer is likely to be late on their deliverables and my team would be spinning wheels waiting on those deliverables. To protect myself from that potentially serious issue I will put a clause in MSA that would state that if I am waiting on the customer I am still getting paid. That’s just fair, isn’t it? Now, consider what I can do during negotiations – I can downplay the probability of customer delays (most likely using customer’s ego) and shape that clause in a manner that gives me a lot of flexibility. Then, when the opportunity presents itself I can induce waiting period and rip the benefits that already embedded in the MSA.
  • Another, probably most common area, is related to provider dealing with the resources on their side. There are many areas where supplier can negotiate “reasonable” terms that have nothing to do with reality of the situation. For example, if a software developer quits another developer would be put in his/her place and ramp up period should be the industry’s standard 2 weeks. Industry standard? When I bring onboard a new developer it takes 2-3 month for him / her to become fully productive how come it takes four times less with an offshore guy? That’s not the point though, no matter how many weeks of shadowing you might negotiate the realities of delivery against the item in MSA remain practically unknown, and thus could be manipulated to fit provider’s objectives.
  • Even a very straightforward items like “body count” becomes pretty vogue and unenforceable. Imagine that you are trying to count people in organization and people always move from one office to another. Getting the numbers right would be quite challenging. Just a few weeks ago i spend almost a week trying to figure out how many QA engineers I have on staff with my Indian offshore operations. The numbers varied greatly depending on who I’d ask. Most precise figures came from the vendor, in that light resorting to MSA as a lifesaver is only natural. Yet, if you think that if my development manager thinks that there are 2 QA engineers on his project while my provider tells me that there are 5, something is seriously wrong here. I bet it means that I get the work of 2 while paying for 5…

In general what makes an MSA an invisibility cloak is not bad intentions of the vendor, but buyer’s inability or lack of desire to enforce it by staying on the top of engagement. If you do not control the deliverables each step along the way, if you do not verify timesheets and assignments, if you hope that the MSA will prevent me from issues and problems of malicious or delinquent nature you will most likely fail. In that case the MSA will become opaque and impenetrable defense mechanism for the vendor. I guess Invisibility is in the eye of the beholder.

Steps to making an MSA transparent are obvious – focus on execution, control of deliverables, etc. Considering an example of team turnover. A realistic ramp up for a developer in terms of productivity would be 25% first month, 50% second, 75% third and 100% from that point on. In that case over 12 months developer produce 1050% of the monthly allocation. Suppose a developer quits after 6 months and spends one month training a shadow resource (it’s reasonable to assume that that between two of them productivity for that month is 100%). In that case total productivity over the year will be 975% or ~7% less. If we have two replacements over the year the figures would be 900% or ~14% loss of productivity.

That could be easily translated to the rate impact – if your rate for the developer was negotiated at $25 per hour in the second case you paid roughly $27 and $29 in the third. Of course not controlling these figures makes the difference invisible… The magic spell to make the cloak transparent would include linking turnover baseline to rate and more important watching it over the case of the engagement.

A Few Words on UAT

This post continues with the topic I started a few months ago – using QA to prevent serious issues with offshore deliverables. In particular I’d like to cover User Acceptance Testing (UAT).

For many software professional UAT has a very clear definition and lucid goals and objectives, yet this understanding at most foundational level varies a lot between different professionals and organizations. In professional services engagements UAT I had pleasure to participate in UAT used to be a final sign off by buyer of the software deliverable. In my new organization UAT has been playing a key role in SDLC acting as a final gate before release to production. In many organizations UAT is interpreted as a smoke test performed by users at each milestone to make sure that the users’ requirements were properly understood.

Whatever the test performed in your organization with a UAT label it is probably an important part of your SDLC and I am not disputing its value. I am also not an abbreviation fanatic demanding that UAT term is only used its original purpose. I think it would be quite important to cover participation of users in the acceptance of deliverables from offshore, and just for the sake of this post let me call those testing activities UAT.

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