Making Outsourcing Work

I attended a great conference this week called the International Software Development Outsourcing Conference. The panels comprised of engineering executives from companies like Symantec, Siperian, Intuit, OfferTap, and EA and discussed everything from Outsourcing in Startups to Choosing a Partner to Making Outsourcing Work.

I gauge the value of a conference or talk from how many notes I take, and how many actionable insights I walk away with. I have about 10 pages of notes from this one-day conference. Here are some of the insights shared by the panelists:

• T&M is a broken model and customers are starting to move away into a more balanced model, where both partners share some risk -models like Fixed Price/Fixed Time engagements, or a T&M arrangement with ratchets for meeting KPIs (Key Performance Indicators)
• The more partners are aligned on a risk model, the closer you are culturally - the more you have a common understanding.
• Waterfall methods in outsourcing assume that your partner is just like you - which is rarely the case, and why throw-it-over-the-wall outsourcing usually ends in overruns.
• One of the best ways to describe requirements to an outsourced team is through wireframes, storyboards, and UI mockups
• Five years ago, 50% of respondents in an outsourcing survey said they outsourced to India to reduce costs, about 40% said for quality, and less than 10% said they outsourced to India for innovation. 5 years later, those stats have flipped.
• You can find pockets of specialized skills all over the world. If you outsource to a large vendor, on the other hand, for a specialized skill - you are very likely paying them for on-the-job training
• CMM is no longer a selling point. When the customer is CMM level 0.2, working with a CMM level 5 company is somewhat pointless. There is also a healthy skepticism about CMM - being CMM level 5 doesn't necessarily mean that every person or ever team is folllowing the process
• One of the best-practices cited was to use T&M for the scoping and requirements gathering phase of the project, where there is a high degree of unknown, then a Fixed-Price/Fixed-Time arrangement for development and QA, then back to a T&M project for the user acceptance testing and integration, where again there is churn while the customer organization lines up the right resources.
• There is a growing backlash in Silicon Valley against being on calls from 7 pm-12 pm every night with overseas teams. Some new hires are making this a condition of employment - that they will not take a job where they will need to be on calls every night when they should be spending time with their family.
• Local, and on-site presence is becoming increasingly important.
• Take termination fees off the table. As an outsourcer, you have to earn the right to stay.
• The next generation of outsourcing arrangements will shift from bottom-line focused (how can I get there cheaper) to top-line focused (how can I get there faster, better, and smarter). Customers will expect outsourcers to work with high-level requirements, and are becoming less interested in paying for effort, which may or may not translate into value. Think of developing software like how Apple sourced the iPod - "I want it to be 2x3, weigh 3 oz, and have 40gb of storage - you figure out how to get there. I don't care of you use 1000 man hours or 10,000. And I want you to share in the risk".
• A successful outsourcing relationship comes from mutual trust. Trust is built on openness with information, competence, honesty, follow-through, and benevolence.
• If you want success with a distributed team, humanity comes first. It's not the Golden Rule, it's the Platinum Rule: "Do onto others as they would have it done". Not "as they would do onto you". If the team was all like you, they would be sitting beside you. Did you hire the guy sitting next to you because he was the cheapest you could find? Do you talk face-to-face with them once a year?