Lamri 2005 Experience of using CMMI in IT procurement and outsourcing/off-shoring Andrew Griffiths...
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Transcript of Lamri 2005 Experience of using CMMI in IT procurement and outsourcing/off-shoring Andrew Griffiths...
Lamri 2005
Experience of using CMMI in IT procurement and outsourcing/off-shoring
Andrew Griffiths and Andy Dunham
Institute of Directors – April 2005
Lamri 2005
Objectives
• Provide an understanding of trends, lessons learnt and challenges
• Feedback from the recent Lamri out-sourcing and off-shoring survey results
• Help you to avoid some of the pitfalls
Lamri 2005
The Survey
• To keep you awake….– We will be asking you a series of questions
– This survey is anonymous
– We hope you have already completed the company profiling questions
• The results you see– Are from a survey conducted at a Lamri Offshoring Seminar
– Provided by 32 respondents
– The report is available (and free!) from the Lamri stand
Lamri 2005
3
4
4
9
8
21
Exec Management
IT Manager
Quality Assurance
Senior Management
Project Management
Project Delivery
Other
Which of the following best describes your position within your current organisation?
4
9
10
5
3
£0 - £999,999
£1m - £4.9m
£5m - £49m
£50m - £199m
£200m+
What is your organisations approx IT expenditure?
10
6
4
3
6
1
5000+
1500-4999
500-1499
200-499
50-199
<49
How many employees are in your organisation?
04
6
8
5
75000+
1500-4999
500-1499
200-499
50-199
<49
How many employees are in software delivery?
About the Survey: Demographic Results
Lamri 2005
Banking /f inance/ insurance Law /accountancy Distribution/logistics/transport
Government/local authority Public sector agency equp't or softw are Manuf'g/engin'g/ marketing/advertising/broadcasting
Medical/healthcare/pharmaceutical Oil/gas/mining/const/agric Service prov/ASP/w eb host/ISP/w ireless SP
Utilities: energy and w ater Business services/property Computer dealer/reseller/ VAR
Education/training Consultancy Manufacturers of computers/IT
Media/leisure/travel/entertainment/PR Netw ork integ/ systems integ Retail/w holesale services
Telecommunications/cable/satellite Other
Which of the following best describes your organisation sector?
This survey provides a reasonable spread of results to provide a “temperature check” analysis
About the Survey: Demographic Results
Lamri 2005
Question 4
Is your organisation delivering your software projects today:
• Entirely in-house• Mix of in-house and UK providers• Mix of in-house and off-shore providers• Mainly on-shore providers• Mainly off-shore
Lamri 2005
Question 5
Does your organisation intend to deliver software within 2 years:
• Entirely in-house• Mix of in-house and UK providers• Mix of in-house and off-shore providers• Mainly on-shore providers• Mainly off-shore
Lamri 2005
Survey Results
5
7
17
2
2
Entirely in-house
Mix of in-house and UK providers
Mix of in-house and off-shoreproviders
Mainly on-shore providers
Mainly off-shore
There has been a clear move towards using outsourced & off-shore suppliers that is active in industry today.
Is your organisation delivering your software projects today?
05
22
0
6
Entirely in-house
Mix of in-house and UK providers
Mix of in-house and off-shoreproviders
Mainly on-shore providers
Mainly off-shore
Does your organisation intend to deliver software within two years?
Two sectors have “disappeared”: Mainly on-shore & Entirely In-House
Lamri 2005
Question 6
What has driven your organisation to this view?:• Drive down costs• Increase productivity• Improve quality• Reduce time to market• Provide a flexible resource pool• Provide access to new skills and capabilities• Provide a vehicle to drive improvement• Other
Rate 0-55 being most highly relevant0 being not relevant
Lamri 2005
Survey Results
• The strongest drivers are:– Drive Down Costs– Increase Productivity– Reduce Time to Market – Provide a Flexible Resource Pool
• Process and quality oriented drivers were not as strongly indicated
• Does this mean that UK industry believes that UK software development is too expensive, slow and inflexible?
Lamri 2005
CMM L5 for marketing offshore providers
Good questions to ask you potential CMM L5 supplier?1. Do you have plans to achieve a CMMI level?2. When was your last appraisal completed?3. What was the scope of the appraisal? 4. Was it an official appraisal?5. Will I be working with the CMM L5 team?6. Would you be prepared to be independently assessed for this contract?
Lamri 2005
Using CMMI to assess key suppliers and alter the profile of work given to them to match their capabilities
A Ltd B Ltd C PLC
CM
MI A
ppraisal
Dependant upon objectives other appraisal methods could be used ITIL, ISO15504
“CapabilityReport”
“CapabilityReport”
“CapabilityReport”
New contracts are issued based on identified strengths and weaknessesof the suppliers
CM
MI A
ppraisal
CM
MI A
ppraisal
Lamri 2005
Using an off-shore contract to drive improvements internally
RequirementsAnalysis &
DesignBuild Test Operate
As Is
To Be
RequirementsAnalysis &
DesignBuild Test Operate
Requirements
Analysis &Design
Build Test
Operate
Off-Shore to highercapability team
Execution of this kind of contract has included the future “in-source” of the off-shore team at contract completion
Lamri 2005
Question 7
Which of these trends have you observed in your organisation?
• Identifying potential suppliers based on CMM or CMMI maturity levels
• Blending off-shore, near-shore and on-shore• Using CMMI to assess key suppliers and alter the
profile of work given to them to match their capabilities
• Using an off-shore contract to drive improvements internally
Tick all observed
Lamri 2005
Survey Results
No of attendees who identified the trends
14
20
54
0
5
10
15
20
25
Identifying potentialsuppliers based on CMMor CMMI maturity levels
Blending off-shore, near-shore and on-shore
Using CMMI to assesskey suppliers and alterprofile of work given to
them to match theircapabs
Using an off-shorecontract to drive
improvements internally
Blending the use of different types of supplier is a key trend with 60% of attendees identifying this as a trend, CMM/CMMI is a key qualification
gate for off-shore suppliers
Lamri 2005
Scope of an off-shore contract is difficult to establish
RequirementsAnalysis &
DesignBuild Test Operate
Process Scope
A Ltd B Ltd Internal IT
Operating ScopeOrganisational Scope
Sales & Marketing
Business Operations
Finance
Executive
Lamri 2005
Scope of an off-shore contract is difficult to establish
RequirementsAnalysis &
DesignBuild Test Operate
Process Scope
A Ltd B Ltd Internal IT
Operating ScopeOrganisational Scope
Sale & Marketing
Business Operations
Finance
Executive
Often processes areundefined and lack
measures
There are often no established service levels
Often roles and responsibilities are not
clearly defined
You and your potential supplierwill have different ways ofworking, techniques and
terminology
Lamri 2005
The off-shore contract costs you more than you expect
RequirementsAnalysis &
DesignBuild Test Operate
Process Scope
• In defining a contract you will define types of delivered services• Given that a clear “as-is” definition of process and service levels is rare
(in many organisations) service definition is difficult• “Catchall” time and materials clauses will be introduced to cover the
unexpected services• In running the contract for the first time issues with these defined
services will become clear (e.g. your way of working in requirements does not “gel” with the supplier) leading to T&M based corrective work
Project DeliverySystem
TestServices
Lamri 2005
Underestimate the internal business process change
Internal Process
There is more change herethan you think….
The processes to:Initiate a deliveryTrack deliveriesAccept goodsHave ALL changed(even if the people remainthe same)
Other changes arerequired in operating scope and organisation scope to make thiswork
Internal ProcessOut-sourced Process
Lamri 2005
Lack of executive level involvement
• The executive must be setting the goals, without this initial involvement engaging them in the business change, political and staffing aspects of an off-shore will be difficult
• The off-shoring project is often passed to the department that will be most affected to set up the contract. Without executive management engagement driving this how can it hope to be successful?
• There are corporate social responsibility and “bad press” implications of an off-shore without the engagement of the executive how can these risks be considered in an appropriate way?
Lamri 2005
Suppliers have more experience of off-shoring than customers
Suppliers regularly negotiate these deals you probably do not
Lamri 2005
Cultural issues are more significant than anticipated
Language
Social Values
Non-VerbalCommunication
differences
Work Ethic
ManagementStyles
BusinessEtiquette
Potential lack ofempathy with
domain
Time Zone
Internal CulturalIssues & Vested
Interest
Lamri 2005
Exploring the communication and culture issues further
Encode
Decode
Transmit
Receive
NativeLanguage
DifferencesCulturechanges
Encoding & Decoding
Lamri 2005
An example of the hidden costsof outsourcing / off-shoring
Software Product & Services Company
Sales &Marketing
ProductDevelopment
Support
Lamri 2005
Off-shore Provider
An example of the hidden costsof outsourcing / off-shoring
Software Product & Services Company
Sales &Marketing
ProductDevelopment
Support
Lamri 2005
Off-shore Provider
An example of the hidden costsof outsourcing / off-shoring
Software Product & Services Company
Sales &Marketing
ProductDevelopment
Support
Sales Leads
Lamri 2005
Misunderstanding what a CMM / CMMI level actually means
Believing that if they have the badge it will all be alright
This ignores the issues of organisational fit,empathy and integration – the things that affect the success of
the contract
Remember the questions to ask them!
Good questions to ask you potential CMM L5 supplier?1. Do you have plans to achieve a CMMI level?2. When was your last appraisal completed?3. What was the scope of the appraisal?4. Was it an official appraisal?5. Will I be working with the CMM L5 team?6. Would you be prepared to be independently assessed for this contract?
Lamri 2005
Question 8
• If you have completed an outsource / off-shore contract which of these challenges have affected you?• Establishing the scope of an off-shore contract is difficult• The contract costs more than you expect• Lack of executive level involvement• Suppliers have more experience of off-shoring than customers• Underestimating the internal business process change required• Cultural issues are more significant than anticipated • Misunderstanding what CMM / CMMI actually means• Other
Tick all observed
Lamri 2005
Survey Results
• 70% attendees have experienced cultural issues in running outsourced/Off-shored contracts
• Business change was underestimated in 51% of cases• Contracts cost more than expected for 55% of attendees• Establishing scope was difficult for 51% of attendees
• Conclusions– Given the benefits required are mainly cost focused the contract cost
increase provides some concern, there is some clear correlation between cost and underestimating the business change required.
– Scope, cost and business change are clearly connected and Lamri suspect that insufficient investment is placed in the pre-contract scoping and negotiations
Lamri 2005
The Lamri view of Benefits achieved by clients OFF-SHORING
• Many organisations struggle getting beyond using off-shore resource @ their offices
• Off-shore in your office usually works well– Resource is much more cost effective the controls on expenditure are often lower– Lower controls can create an organisation that can be more responsive to support
issues– However in the end development schedule and effort extends
• The successful off-shore relationships require real effort to make them work
– Dealing with requirements challenges– Managing cultural differences– Building the right measures into the contract to ensure the right service is delivered
• Significant cost reductions are usually attained 20% – 30%: but sometimes at cost to delivery dates
– Is this enough? Given the huge difference in Salary and Overhead Costs the savings should be higher!
Benefits should be considered at an organisational level as many ofthe implementation risks are realized at this level
Lamri 2005
Question 9
If you have completed an OFF-SHORE deal what benefits have you actually achieved
• Lower costs• Increased productivity• Improved quality• Reduced time to market• Working Flexible resource pool• Access to new skills and capabilities• Driven improved capability in your organisation• Other
Rate 0-55 being exceeding your benefits expectations3 being meeting your benefits expectations0 being no realised benefits
Lamri 2005
Survey Results
• Given the difference in overheads and salaries in low-cost locations success in most of the key areas should be simple, however the response was weaker than expected this could be because– Underestimation of the off-shore overheads (communication,
contract management etc)– Many software projects have large visual and end-user interacting
front ends? Cultural issues do come into play strongly here.– Buying on price does not necessarily lead to the right partner– The customers own capability is not considered in scoping and
negotiating a deal– Are the actual rates paid too high?
Lamri 2005
Know your projects
Low Medium High
Lo
wM
ed
ium
Hig
h
Requirements “Toughness”Level of direct user interaction required
to make the project successful coupled withrate of change of requirements
Inte
gra
tio
n C
om
ple
xity
Nu
mb
er o
f in
terf
ace
to o
ther
sys
tem
s(o
uts
ide
of
pro
ject
sco
pe)
C
B
A
Lamri 2005
Know your programme of work
A B C
Sh
ort
Te
rm
Vie
w
Project Type
Pro
gra
mm
e o
f W
ork
Do
es y
ou
r o
rgan
isat
ion
hav
e a:
Me
diu
m
Te
rm V
iew
Lo
ng
Te
rm
Vie
w Strategic Off-shore deal “sweet spot”
RR & FP
Multi vendor off-shore supplier
arrangements
Locally basedresources on time and
materials basis
Long term call offcontract using locally
based resources
C
B
A
Lamri 2005
However… different strategies can change the type of deal you can do
RequirementsAnalysis &
DesignBuild Test Operate
Lamri 2005
Know your capabilities
Understanding your strengths and weaknesses informs the appropriatescope of an off-shore deal (depending on goals)
RequirementsAnalysis &
DesignBuild Test Operate
Get you potential suppliers participate in the appraisal teamThis helps them truly understand you as a client and frame an
appropriate deal
Dependant upon objectives appropriate appraisal methods can be used CMMI, ITIL, ISO15504
Lamri 2005
Know suppliers capabilities
Understanding your potential suppliers strengths and weaknesses informs the appropriate scope of an off-shore deal
and will help qualify a supplier in or out
If completed by independent appraisal enables you to be trulyinformed and helps create an open procurement environment
RequirementsAnalysis &
DesignBuild Test Operate
Our Capabilities
RequirementsAnalysis &
DesignBuild Test Operate
Supplier 1
RequirementsAnalysis &
DesignBuild Test Operate
Supplier 2
Dependant upon objectives appropriate appraisal methods can be used CMMI, ITIL, ISO15504
Lamri 2005
Remember….
• Not every situation needs an off-shore solution• Capable organisations are more able to make off-shoring
work• Some projects lend themselves to off-shoring some don’t• Consider how you migrate off-shore to manage risk of the
change• Understand your true capability – be honest!• In planning the contract consider all three scopes: Process,
Organisational and Operational • Your organisation will not remain static: the off-shoring
objectives will change, review them every year
Lamri 2005
Parting thought….
• Off-shoring is providing a cost reduction in the region of 30% - 40%
• Successful off-shoring requires strong capabilities in:– Requirements Management and Capture– Configuration Management– Supplier Agreement Management– Integrated Planning– Quality assurance and measurement
• These capabilities are (generally) key features of CMMI Maturity Level 2
• Organisations reaching CMMI Maturity Level 2 attain a 30% - 40% reduction in their cost base
Is doing BOTH the right answer?
Lamri 2005
What Next?
• Lamri can provide a copy of their Initial Off-shoring Survey report (which will be updated after this conference), goto the Lamri stand
• Lamri can assess you and your supplier against CMMI standards
• Lamri can advise and assist you with your off-shoring / outsourcing agenda