“Off-shoring Do’s and Dont’s” : Supplier Selection & Experiences in Outsourcing

During the ImproveQS ViK (Vakmanschap in Kwaliteit) event “Do’s and Dont’s in Outsourcing”, our guest speaker Ronald Hogenboom gave an insight in his experiences with Supplier Selection processes and attention points to consider when Outsourcing. He described the Supplier selection process, the start of Outsourcing, observations made and improvement areas in outsourcing. In this blog, I’ll share a brief overview of his presentation with you.

The need:

How was the need for outsourcing identified?

As always, Outsourcing within Ronald’s company was invoked due to some needs that were identified. These were:

  • Time to Market
  • Flexibility to ramp up/ramp down
  • Access to skilled resources
  • Cost savings (long term)

Especially getting skilled resources was an issue since it often took 2-3 months to recruit an internal resource. Hiring contractors was getting more and more expensive.

Considering these factors, outsourcing was agreed upon. A Supplier Selection project team was formed and a RFP to some shortlisted suppliers was sent out. Responsibilities were identified based on the experience of individuals and the teams where the maximum need for number of resources with the lowest risk of exposing Company confidential data was recognized. The area of choice was clear — testing activities would be outsourced.

The selection process:

Why were the candidate supplier(s) selected? Why were they considered as the best match? How were the negotiations entered?

Selection was based on the evaluation criterion, proposal evaluation, outsourcing study reports and by giving the shortlisted suppliers a pilot project to judge them. A big difference in the rate cards of the suppliers was seen and some prior experience also helped the team to bring suppliers at par with the market rate. In addition a lot of things like flexibility to ramp up/ ramp down, ramp up costs, annual increase, knowledge transition costs, payment terms etc. were negotiated. Finally, the suppliers were compared based on the following criteria:

  • Cost
  • Feedback score
  • Unambiguous metrics/KPIs
  • Adapting to Dutch culture
  • Language skills
  • Added value
  • Trust
  • Business
  • Intellectual property

and.. TESTING? Comparison of the suppliers from testing point of view

  • Established career paths for testing? Junior, medior, senior, lead?
  • Quality of internal training for testers?
  • Position of tester with the organization?
  • First rate testers or second rate developers?
  • Understanding of exploratory testing?

Deployment of Outsourcing:

Thou shalt outsource

Based on the aforementioned criteria, an educated selection for a supplier was made by the Supplier Selection team and after contractual agreements the teams involved were told to commence with outsourcing. Whilst the initial thoughts for outsourcing were still valid, the biggest issue in this transition phase proved to be the fact that the expectations of the management from the outsourcing activities tended to focus on one singular benefit: Short term Cost savings.

Ronald emphasized that 1 FTE in-house proved not to be equal on 1 FTE off-shore. The off-shore team members were not on par immediately and there were still in-house resources needed (more than estimated) for coordination of the Outsourcing tasks which was not taken in account correctly. The coordination activities required a lot of time and the inexperience of the in-house coordinators with coordination of outsourced tasks resulted in longer lead times and some issues which in turn affected the actual benefits. Also the preparing the own organisation for outsourcing proved much more difficult and time consuming.

However, the management was counting on and calculating with the projected numbers, which of course resulted in non-realistic expectations in the initial phase of the outsourcing activities. Also the duration of initial phase was not taken in account. It took much longer to get the teams up-and- running and co-operating. This caused that the ROI from outsourcing in the first year was much lower than predicted.

First steps in Outsourcing:

What to do next

Although selection of a supplier isn’t an easy task, it only forms the basic primary part of an outsourcing process. It is not about just selecting the right supplier, start outsourcing and hope for the best. You’re not buying an of-the-shelf product/service. Outsourcing is an activity that needs commitment from both sides. The company that is outsourcing has certain responsibilities towards the company that the work is outsourced to and vice versa.

  • Clear communication with low threshold, on all levels
  • Easy access to all information (roadmap, planning, scrum board, code)
  • Clear roadmap, goals and milestones
  • IT (accounts, access to tools, servers, proxies, bandwidth)

If these responsibilities are misunderstood or neglected, the consequences will be:

  • Work not done in time
  • Low quality of code and testing
  • Frustrated teams on both sides

Maturing in Outsourcing:

Improving Outsourcing

In every phase of the Outsourcing process, the partners should look for improvements areas in their cooperation. Remember that there is no shared coffee table talk. The off-shore team members  should be treated as people, not as anonymous resources. The ‘ team’ aspect should be emphasized. Not only has Ronald’s company sent the project & test leads to the suppliers location to understand the people and the local situation but also team leads from the supplier have visited the customers location. Furthermore the in-house and off-shore teams were made aware of cultural differences and soft skills.

A bit of insight:

Distance, Cultural differences and Soft skills

Managing a team with an off-shore component proved to have recurring challenges as physical distance to the off-shore component and the cultural differences. Most of the issues were related to poor communication, hierarchy, differences in cultural customs and forgotten responsibilities (assumptions).

Hard skills were easier to quantify and there were no issues seen in this area but the soft skills area needed much improvement on both sides. The key to successful outsourcing and overcoming cultural differences proved to be in healthy communication and mutual understanding. For this soft skills are necessary.

Some of the issues that Ronald has observed related to soft skills were:

  • Hierarchical issues resulting in long communication lines, preventing direct contact between peers in the in-house and off-shore teams. Sometimes the off-shore teams were strictly forbidden by the Suppliers management to have direct communication lines to the customers.
  • Saying “Yes” and meaning “No”. Dutch people are extremely direct in communication. By other cultures it even can be perceived as being rude. As a consequence, Dutch find it difficult that someone would say “Yes” to avoid being offensive. Hence, receiving a “Yes” from the off-shore team sometimes resulted in non-realistic expectations. On the other hand, the in-house team also sometimes not clear in expressing their expectations and hence only got exactly what they’d asked for.

Most of these issues were resolved by giving presentations at each others sites, having team members visiting each other, creation of team wiki pages (with photographs of the team members)

Cases from the trenches:

Despite a reasonable preparation for outsourcing, issues were observed.

Ronald gave us some examples to explain the type of issues his teams have encountered.

Case 1: Effort to manage the off-shore teams and resources was underestimated as the need for constant, clear, high bandwidth communication was not realized and no training existed to prepare Team Leads for management of off-shore people in their teams.

-Human (soft) side was neglected/forgotten at the start of the outsourcing process.

-There was a great communication barrier between the engineers on both sides – lacking  1on1 and informal (coffee corner talks) communication resulted in long communication  routes (with the risk of core information getting lost along the way)

-Physical appearance proved to be important in lowering the communication barrier.  Both teams/partners have visited each other.

-The Supplier is informed about the product/architecture/processes by means of  presentations at suppliers site. This boosted the insight of the members of the off-shore  team and got them more involved/intimate with the final product/solution.

Case 2:When a High-performing “no-worries” off-shore team was split up; split off team then was suddenly very much under-performing;

-Most of the experienced members were still allocated to the original team:  knowledge/experience was not split evenly.

-Escalation was initiated too late due to the fact that the in-house Team Lead not being  used to outsourcing.

-Poor communication towards the off-shore team with no clear feedback loops and  deadlines.

Case 3: Off-shore team members are all certified test engineers and they execute test cases and report test results in a proper way. However, when they were asked to update test cases or create new test cases, they showed a lack creativity. Test cases didn’t have the expected level/coverage. Despite review comments on 1.0 iteration, the test case design quality on 2.0 iteration was again compromised. Very obvious errors in test design were overlooked (e.g. steps for menus in SW that were no longer available, steps that described unfeasible manual input). Sometimes review comments from 1.0 iterations were just copy/pasted into test design of 2.0 iteration. The review comments were meant to trigger them to be more creative in test case design. It seemed if lessons learned and documentation were lost.

-Cultural issues: Off-shore team members were not able or afraid to say that they’re  unable to create a test case; just did what they were told to do and nothing more.

-Cultural issues: On-site team members not making clear what their expectations were  (triggering)

-Communication: Off-Shore team members did not have a direct communication line with  their peers on the customer side

-Communication:Both sides were not cooperating/communicating sufficiently on this  issue.

-Cultural issues: By incorporating review comments as test steps, the off-shore team  thought that they’d fulfilled the expectations (test cases are approved)

-Communication: Although the customer had recognized that the quality of the tests  created by the off-shore team was below their expectations, the customer had not taken  additional/preventive measures for the creation of next set of test cases.

-Communication: After a few sprints, when the next set of test cases (phase 2) was  reviewed, the same situation occured.

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