Managing and implementing outsourced projects using offshore management framework
Management of Information Technology (IT) projects executed from offshore destinations has brought a lot of attention on offshoring which is being recognized as a meg trend (John Naisbitt, 2000), in some quarters. There is an increasing focus on managing and executing IT projects with geographically and culturally disbursed teams. Best practices, theories and the Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2002) on managing projects are well established, but there is a research gap when it comes to practices on managing offshored projects. Emerging research on successful working models, practices and application of strategies and operational tactics are expected to reinforce the PMBOK® Guide.
Executing and delivering IT application development and maintenance projects involves several layers of complexity; and the chain is only as strong as the weakest link. Managing projects gets more nebulous when it involves orchestrating the efforts and schedules of individuals, teams and resources from across the globe. There are several key actors in globally distributed projects and the project manager acts as the fulcrum, orchestrating the aspects pertaining to delivery and development. Managing offshored projects entails regular project dynamics and the use of many of the tools and techniques described in the PMBOK® Guide, albeit with added dimensions of managing cross-cultural and geographic issues. We will attempt to look at some of the intricacies of offshore outsourcing with a specific emphasis on managing and executing projects and initiatives using an Offshoring Management Framework (OMF). Though there are several definitions of offshoring i, we shall define it as: Offshoring translates to a strategy of relocating business processes, services and work to overseas locations where it makes most business sense by capitalizing on the global skill pool, advances in communication technologies and the benefits of cost arbitrage.
Organizations may follow a top-down or a bottom-up approach towards offshoring. A few organizations like General Electric (GE, 2004, ¶ 3) have taken a top-down approach. When Jack Welch dictated the 70:70:70 rule to be followed across business units at the company that set in motion the organization's offshoring strategy that continued to evolve over a decade. The bottom-up approach is more organic than structured. In organizations where there is no formal offshoring strategy, IT managers are already working with existing vendors and extending their contract management systems to capitalize on the vendor's offshoring services. During my consulting engagements, I have come across several instances where line managers were unaware of the fact that their peers in different business units were also negotiating with the same offshoring vendor (or other vendors) under totally different terms and rates, using different sourcing models. Senior management at organizations are beginning to recognize the existence of such sporadic offshoring and are being prompted to formalize an offshoring strategy.
Offshoring Management Framework (OMF)
The proposed Offshoring Management Framework recognizes the existence of top-down, bottom-up and hybrid approach towards sourcing and highlights a vendor neutral framework that organizations can customize and build on top of. Most of the published Frameworks offshoring models from vendors studied during research are also extensible and will fit into the OMF. The management imperatives in global delivery of software applications include buy-in and sponsorship from senior executives, program and project management, managing the operation of development and maintenance life cycle and creating an environment of open communication across the teams. The OMF, depicted in Exhibit 1 will attempt to address four major areas of focus:
- Governance Layer
- Management Layer
- Proj ect Execution Layer
- Communication Layer
The underlying assumption behind the OMF is that the generally understood body of knowledge, industry best practices and organizational processes will continue to form a basis for most of the IT managerial and planning and developmental functions. The key extension to this pertains to aspects of globalization and global project management.
Exhibit 1: Offshoring Management Framework
Executive sponsorship of offshoring initiatives is a key to successful development, delivery and deployment of projects and programs. Governance of the steady state of offshoring may involve the typical challenges of executive management including benchmarking and ensuring that the projects and programs remain on track. Executive sponsorship is essential to facilitate global management and to resolve issues and address challenges, and access to senior management will ensure that any escalations and issues are resolved before they get out of hand. Offshoring governance teams will typically include executives from both the sourcing (onsite) organization and from the vendor (offshore) organization. Some of the common areas of focus for executives involved in offshore governance include:
- Offshore Development Strategy: Executive management of both the client and vendor organizations need to be clear about the strategic objectives of offshoring that could include reduced operating costs, shifting IT risk to a service provider, freeing IT management from operations management, and staying ahead of the technology-adoption curve among others.
- Define the working model: It is the responsibility of the governance council to ensure that the teams work towards building a flexible, collaborative work environment. Relationship and business goals change over time; therefore the executive focus should be on creating an environment that is adaptable to changes rather than on a view of the future based on the facts at a given point in time.
- Articulating, measuring and monitoring the SLA (Service Level Agreement): A clear definition and understanding of the SLA by the governance council is essential to drive the expectations of the offshore and onsite teams. The terms of the contract, legal jurisdiction and other aspects of performance including the Service Level Agreement may also form a part of a contract between an organization and the offshoring vendor. Thomas Lynch (2004) articulates five key areas of focus to avoid pitfalls of offshoring, that include Basic contract terms and conditions, Agreement issues, International issues, Sarbanes-Oxley issues and Privacy issues.
- Stakeholder Management: Offshoring is a very sensitive issue, especially since it involves reorganization of the group/department during the transition phase, and in many cases impacts the lives of people in communities where an enterprise conducts business.
- Dispute resolution: Though all the stakeholders need to be optimistic about the success of sourcing, conflicts and dissent may appear from time to time. The governance council will also act as arbitrators of disputes arising out of individual contracts or performance of projects and programs during a sourcing initiative.
Governance of an offshoring initiative includes aspects of managing, reviewing and monitoring the activities of teams and projects.
The key challenge in managing any project is communication; more so of projects spanning geographic boundaries. As there is a vast repository of knowledge on management of communication, we will not revisit the fundamentals. The focus of this layer in the OMF is on laying a foundation for communication between stakeholders and across the executive, management and Project Execution Layers. The key goal is to bridge the ‘onsite vs. offshore’ gap that surfaces in most offshoring initiatives; the focus areas may include:
- Defining communication protocols: Challenges of managing communication between individuals and teams may be magnified due to complexities of culture and geographies. A well laid out protocol for communication, including regularly scheduled meetings, publishing the minutes of meetings in different formats, including using tools accessibly by distributed teams, forms a basis of successfully managing communication across offshoring teams.
- Communication Infrastructure: There are several tools and technologies available to facilitate global communication. Emails, Voice over IP, Instant Messengers, Video/Tele-conferences, travel and face-to-face meetings and use of internet based project management tools (PMI, 2002) are already prevalent in the industry. Selection of appropriate tools and defining an acceptable mode of using them is one of the key success factors behind managing global communications.
- Optimizing Time Difference. Bridging the onsite-offshore gap, including time differences, is perhaps the biggest challenge in the OMF. Scheduling regular meetings at overlapping times and ensuring successful translating of agenda toward clear communication is just one way to mitigate communication risks.
Project Execution Layer
The Project Execution Layer details the workings of global teams and projects functioning towards execution, development and delivery of work products. Note that the Project Execution layer will primarily focus on individual projects and the term ‘execution’ in this name is different from the execution process of Project Management. The key management imperative in the Project Execution Layer of OMF is to define, articulate and manage the different roles and responsibilities of team members onsite and offshore. In the illustrative team structure (Exhibit 2), it can be observed that the team is bigger and has more technical and functional focus at the offshore end. The key actors in the hierarchy include Program and Project Managers, Delivery Managers, Business Development managers and the core technical teams comprising the Module Leaders (MLs) and Developers (DVs). Project managers and onsite coordinators manage the delivery and work products of teams, lead by module leaders.
Exhibit 2: Offshoring Team Management
The goal of managers is to abstract the interactions of end users and teams onsite and offshore. The Project managers at both sides synchronize the efforts and abstract the teams and users from the dynamics of communication. Smaller projects may only have an onsite coordinator, basically a module leader who coordinates the technical, functional and communication aspects with the offshore team. Larger projects will typically have a more intricate team structure and hierarchies. Clients with multiple projects being executed by vendors may also have program manager(s) coordinating the activities across the projects, the activities of which will be highlighted in the Management Layer.
The success of offshoring lies in the consistent and predictable delivery of projects and products. It is important to begin planning any outsourcing initiative by facilitating a strong project and program management process; application of the available body of knowledge in project management areas supplemented by an appreciation of globalization and management of disparate teams are perhaps the key success factors in any outsourcing initiative.
Global managers draw inputs from various sources including the general project management reference, books and literature. An application development the project manager also has a wide array of tools and techniques available to her as she manages the development cycle. Exhibit 3 depicts some of the key sources of input available to managers. The five key process groups highlighted in the Exhibit extend from the PMBOK® Guide (PMI, 2002) that managers may already be comfortable practicing. In the next few sections, we will examine the key inputs for global managers including aspects of General Body of Knowledge, Organizational Practices and Tools, Experience and Knowledge and Globalization and Cultural Awareness.
General Body of Knowledge
There exists a vast repository of knowledge on general management that managers can tap in order to further their knowledge and reference while planning and executing projects. The Project Management Institute (PMI®) has developed an extensive collection of best practices, also called A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Universities and academic institutions regularly provide refresher courses on specific areas including finance, marketing, operations management, technology management, business strategy and other areas of management. Books, magazines and journals dedicated to the field of study, along with inputs from professional bodies can also provide insight to managers. Internet and web search engines are gaining popularity as tools of research and information gathering. Bulletin boards, discussion groups, newsgroups and other online forums also act as bouncing boards for ideation.
Globalization, offshoring, and outsourcing, along with emerging trends in internationalization, are entering the radar screens of management thinkers and academicians. There is a lot of literature currently emerging from both the business and academic publications on practices related to the project management spanning global boundaries. Best practices are also emerging from the field and from service delivery organizations that are observing and developing practices that can be replicated elsewhere. Consulting organizations and analyst firms of various genre are beginning to provide offerings tailored towards offshoring including insightful whitepapers, templates and other reference collaterals. Case in point is the Globalisation and Outsourcing as an Area of Focus in this conference.
Organizational Practices and Tools
Organizational practices and tools play a key role in enabling managers. Use of the right tools and methodologies ensures consistent delivery and helps integrate the systems being developed faster and better. There are scores of software vendors offering tools to manage the various facets of project management and development. Finding the right tool or mix of toolkits along with adequate training and access to best practices is also essential to consistently deliver quality output. Organizations use tools and templates for different aspects of project management including:
- Project planning and tracking: Tools for time and effort tracking including time entry, tracking schedules and milestone can either be custom built or acquired commercially off the shelf (PMI, 1999)
- Contract Management: Project managers need to be aware of intricacies of contract management from both ends of the offshoring spectrum.
- Technical tools and templates: Organizations have extensive collection of tools and templates for managing projects that managers need to be aware of. Refer to the case in point section that highlights some of Infosys’ (Infosys, 2004) Tools and processes.
- Quality Assurance: Automated testing, validation and verification tools can aid productivity and help deliver quality code. Tools can also aid in bug reporting, configuration management, defect tracking, issue tracking, scripting and test automation.
Case in point: Infosys’ Tools and processes: Infosys’ processes and in-house tools help managers and project teams work towards consistent end-to-end delivery. Pankaj Jalote (2002) in his book has articulated some of the key processes and methodologies at the company including the Process Database (PDB), the contents of the Process Capability baseline (PCB), Process Assets and BOK system. The book explains the project process along with a highlight of the organization-wide process and includes sections on Requirement Change Management and Effort Estimation and Scheduling and also talks about Infosys’ Quality Planning, Metrics and Statistical Process Control (SPC). Some of the key highlights of Infosys’ tools and processes to facilitate its proprietary Global Delivery Model (GDM) include:
- Strong quality and project management processes that ensure consistent delivery.
- World class knowledge management practices and systems that facilitate knowledge sharing and cross-pollination of ideas among teams.
- Processes for interaction and communication within teams make it possible for globally distributed groups to interface and collaborate seamlessly.
- Tools that monitor projects to track defects and benchmark them against estimates
- Tools such as Influx, for scoping, requirements gathering and impact analysis
- Tools to monitor efforts, schedule adherence and slippages
- Process assets systems and tools to efficiently store and manage project documents and data
- Specialized tools to track individual service projects like application maintenance
- Tools to monitor automatic scheduling of audits based on detailed guidelines, followed by tracking of audit results, non-conformance reports, and corrective actions
- Tools such as PRISM to automate the workflow for senior management reviews, in line with engagement schedules and plans
Experience and Knowledge
Mentoring and learning from peers is a valuable technique to build strong management skills. Large service organizations employ dedicated teams of individuals who benchmark best practices in project management, review tools and recommend them for internal use. Project Managers at such service organizations have the benefit of gaining from experiential learning of their peers and colleagues. While managers at smaller service providing organizations may not have the same edge in terms of formal training and access to tools and frameworks, there exists sufficient body of knowledge, published case studies and reference material capturing the best practices across the industry.
Case in point: Knowledge Sharing at Infosys: Organizations in highly dynamic and innovation focused industries such as telecommunications and networking have long used Knowledge systems and repositories. KShop (Knowledge Shop portal) at Infosys is one of the many innovative tools the organization uses to facilitate greater reuse of best practices existing in pockets. Based on principles of Knowledge Management, the system reduces risk and helps build the robustness necessary to thrive in a changing environment. KShop serves about 20,000 requests a day, translating to an average or about one document from the portal reused every two work minutes. Content of various formats from sources across the organization are vetted, peer reviewed and added to the database. Another focus of KShop has been to minimize the overhead associated with creating content. For example, KShop generates project snapshots on the fly from existing Infosys project databases, thus minimizing the need for manual compilation of these snapshots. By institutionalizing best practices existing in pockets, facilitating greater reuse, and helping better virtual teamwork, Knowledge Management at Infosys raises the ability to deliver greater quality and achieve faster time-to-market. Within a relationship, knowledge management processes operate at three levels:
- Project Level: Teams have a project management coordinator for each project, and specific knowledge management related goals within projects. Periodic project reviews cover project management as well.
- Account Level: Customer Accounts at the company have a knowledge management roadmap drawn out for them. Teams within accounts draw heavily on the Infosys Knowledge management systems. Knowledge sharing is strengthened by a range of methods such as orientation training programs, online discussion boards and collaborative environments within projects.
- Organization Level: The KShop portal hosted on the intranet encourages organization-wide knowledge sharing and management ethos. This also ensures that the teams have access to best practices and the collected learning from client organizations.
The company recently joined the elite group of Knowledge focused organizations by appearing in the Most Admired Knowledge Enterprise (MAKE ) listings. Others who have made the list include technology focused organizations such as Lucent, Nokia, Cisco and British Telecom.
Globalization and Cultural Awareness
IT Project Managers around the world are coming to realize the impact of globalization and offshoring development and maintenance operations. It is increasingly becoming significant for managers to be aware of trends in the global marketplace, along with a good grounding on aspects of managing cross cultural and geographically dispersed teams. Managing global teams also involve emphasis on cultural awareness, nuances of language, communication media and use of technologies to facilitate remote communication.
The offshore application development model hinges on reducing costs by managing people in different corners of the globe. This also means that project plans will attempt to minimize cross-country travel during the course of the development life cycle. Managers need to be extremely empathic towards members of team who are located remotely.
Managers and executives tasked with strategizing and planning for projects spanning geographic and cultural boundaries are beginning to look for tools and best practices. The Offshoring Management Framework with its focus on the four major areas of global management – Governance Layer, Management Layer, Project Execution Layer, Communication Layer – developed by observing some of the trends and best practices in the field is expected to complement the research in this nascent area and add to the body of knowledge and practice in the field. The management layer of OMF that extends the five key process groups of PMBOK2 is expected to continue to evolve as the best practices from the field add to the general knowledgebase.
EBS (2004) Offshore cutsourcing basics. Retrieved from http://www.ebstrategy.com/outsourcing/basics/definition.htm
Jalote, P. (2002) Software Project Management in Practice Boston, MA: Addison-Wesley Professional.
Lynch, T. J. (2004, September) Avoiding Pitfalls in International Outsourcing Agreements, Inside supply management 15(9)
Naisbitt, J. (2000)Megatrends : Ten New directions transforming our lives, New York: Warner Books. Also from: Infosys Technologies (2003) Annual Report
PMI (1999) Shaping corporate strategt with internet-based project management. The future of project management, Newtown Square, PA: Project Management Institute.
PMI (2000) A Guide to the Project Management Body of Knowledge (PMBOK® Guide) Newtown Square: Project Management Institute
Exhibit 3: Inputs for managing global projects
Mohan Babu has extracted the key inputs for the paper from research for his forthcoming book on this topic, scheduled for publication in early 2005. Although the author is a Senior Project Manager with Infosys’ Microsoft Center of Excellence, the views expressed in this paper are his personally. Contact him at email@example.com
i Common definitions of offshoring include the following:
Brookings Institution (Policy Brief #136, http://www.brookings.edu/comm/policybriefs/pb136.htm )
Guru.net (http://www.guru.net )
Investor Dictionary.com (http://www.investordictionary.com/definition/Offshoring.aspx)
WordWeb Online (http://www.wordwebonline.com/en/OFFSHORING )
© 2005, Mohan Babu K
Originally published as a part of 2005 PMI Global Congress Proceedings - Singapore