Introduction
IT outsourcing is an integral part of any organizational growth plans. Organizations will outsource for several reasons—specialized skills, reduce the time to market, evaluate benefits of a new technology, and reduce overhead costs. As organizations grow, their dependency on outsourcing increases almost geometrically. Traditionally, the Vendor Relations Department within the purchasing organization played a major role in deciding the potential vendor for outsourcing. In most cases, reduction of overhead costs was the main objective of any outsourcing activity. The prospective vendors would have to qualify using several selection criteria—vendor viability, cost management, maintaining confidentiality, with the most important one being, lowest price. The business users, in most cases accepted the decision of Vendor relations department. The Internet economy changed almost everything.
The business users, who had followed the traditional vendor selection process, started seeing things differently. Business users desire a partner who adds value to their initiatives—a partner who makes technology play to the needs of business. The new criteria for partner evaluation became technology leadership, understanding client expectations, delivering quality, and managing the project to meet the dynamic needs of business. The vendor of yesterday slowly became a partner for tomorrow. A partner that is responsive to the dynamic business needs, delivering IT solutions within budgets and managing the ever-changing schedules of the business users.
IT outsourcing organizations, had to undertake a paradigm shift. Instead of focusing on maintaining the balance sheets to show stability and developing relations with the vendor management groups, now have to focus on understanding technology and business needs. The selling techniques of yesterday are still in use today, and will probably continue even tomorrow. The content, however, has changed significantly. The most effective selling tools of today are deep technical expertise, and a track record of success—how many projects have you completed, what value have you added to the clients needs. Corporate presentations that talked about the company financials and its founders are replaced by success stories and the profiles of technical wiz-kids that made technology sing and dance. Organizations specializing in undertaking outsourced projects have responded to the changes in purchasing behavior by educating both their sales and implementation teams in technology and efficient project management. The sales personnel now talk technology, past project experience and the concept of value adds. The sales presentations are full of project management concepts—iterative approach to development, timelines, deliverables, change control procedures, etc.
Project management, an area that traditionally added a small percentage to the costs of any outsourced activity, is now of prime importance. Efficient project management today is the key to developing a long and mutually beneficial business relationship.
Over the years, businesses have adopted a new approach to IT outsourcing and product development. In this age of simultaneous collaboration and competition, pace of business, complexity of projects and the vendor selection criteria and even the terminology, have all undergone changes. In the global economy, past performance is a benchmark for future success. A vendor's proven record of accomplishment is the one language that every organization looks at, before making any purchasing decision. This paper highlights the proven project management best practices forms the foundation for repeat business and an effective tool for developing new clients and a successful business relationship.
Changes and Implications
New technologies and longer business chains have undoubtedly revolutionized the business ecosystem—higher number of players in the ecosystem, global, technology driven, high emphasis on time to market, dynamic with a need for co-existence. Business organizations across the world changed their model to address the new opportunities created—for selling as wells as sourcing.
For the purpose of this paper, let's take the example of the Electronic Publishing industry, where, like in many other industries, efficient project management has formed the cornerstone for phenomenal success in using the new economy for growth. Members of the publishing ecosystem joined hands effectively and utilized the opportunities created by interactive computing for growth.
Publishing organizations always had access to content—news articles, encyclopedias, knowledge-based articles, reference books, etc. The knowledgebase existed either in multiple formats—print media in the archives of publishers or as data on legacy systems. Besides the traditional media such as paper and television, CD-ROM, with its interactive capabilities, dominated the early 90s. In an effort to maximize on the available content, publishers around the globe initiated CD-ROM development projects. Everything was available on the CDs including games, educational and reference material, etc. With the objective of enhancing their top line and probably the bottom line, publishing houses outsourced the CD development initiatives to low overhead organizations across the globe—India, China, Philippines, etc. In doing so, publishing houses, created a new segment of suppliers—organizations that would convert data from one form to the other or Data Processing houses as they are know. Data Processing, as a task is people intensive. As the process was completely outsourced—often half way across the globe, publishing houses needed their suppliers take extra efforts in managing timely delivery within budgets. Publishing organizations expected their vendors to understand their business processes and end-user requirements, as this had a direct relation to product quality. The data processing organizations, in their efforts to deliver quality, invested time and efforts in understanding of the processes and business requirements of the publishing organizations. The CD market, however, was slow paced with relatively long project cycles. Development teams needed to be reassembled at the start of each new project. This led to relatively long vendor selection and project initiation phase. Then came the Internet.
Exhibit 1. Traditional Ecosystem
Exhibit 2. New Age Economy—Networked and Interdependent
The static nature of CDs as a delivery mechanism gave way to a very highly dynamic approach of the Internet—or dynamic network computing. For any website to be successful, the market demands that it is innovative, fresh, relevant and has re-purposable content. Publishing houses, saw another opportunity—utilize their assets; the content, for a variety of purposes including online training, research, games, etc. The evolving new economy created opportunities and its fair share of problems—ever-changing technology, uncertain ROI and time to market issues. The new age ecosystem is interdependent, global, dynamic, coexisting and competing at the same time. The business managers within publishing organizations took the driving seat for initiatives—defining growth strategies, expected functionality, ROI and setting up delivery schedules.
Exhibit 3. Vendor Selection Cost Mapped to Total Project Costs
As the business managers in publishing houses focused on growing their business, ability to reduce the time to market became a key factor in starting new initiatives. The dependency on outsourcing grew geometrically. Multiple small initiatives instead of one big project with extended delivery time frames became the preferred approach. This called for a radical change in the purchasing pattern of the buying organizations. Repeatable performance supported by cost reduction at all stages of the project became the key to success of any business.
Value creation: Project managers facilitate delivery of a solution; as described in the project specifications, facilitating the value delivery model –get what you asked. In the new age economy, value delivery, however is not the end, it is the start of a new phase—value creation. Let us explain this. Definition of successful project in itself has undergone a change. Today, project success is evaluated on multiple factors; some traditional such as delivery within budgets, on time delivery, meeting technical specifications, use of standards, etc., and some new ones such ROI analysis, ability to meet the ever-changing business demands, scalable, with value creation being the most important one. Value creation is defined as the ability of any initiative to create new opportunities for the ecosystem. This is achieved by anticipating the implications of any new initiative before starting it, with the ability to repurpose the initiative to derive additional financial gains.
Cost reduction: The new age economy is a virtual economy—virtual clients, virtual partners. It is difficult to estimate the revenue figures for any technology project at project start. Hence, the need of the hour is cost reduction. In the CD era, the vendor's project managers remained external to the buying organization—project teams would be reassembled at the start of a new initiative, resulting in long lead times for each new initiative. A vendor needed to qualify on their ability to deliver value for each new initiative. The new economy is uncertain, instead of hard cash; number of eyeballs became the value proposition offered by many organizations. Hence, buyer organizations needed to reduce the costs associated with any new initiative. Buying organizations achieved this by calling upon its vendors to demonstrate repeated success across initiatives, as this was critical to the growth and at times existence of a business.
Understanding the global marketplace: Internet economy knows no boundaries, organizations based in one country may source from a second and sell to a third—at times without having seen or met each other. The global market, big and full of opportunities, brings in a new dimension—cultural differences, different time zone, different technical approaches and standards, etc. The number of players in the global business scenario, directly connected to any initiative has increased multifold; cost and time inefficiencies in one area, today, would get replicated and impact the complete system. Today's business managers, as they work toward growing the business; needs the confidence in their delivery mechanism. Acceptance of the project by all members of the ecosystem is of prime importance. The project manager, with an ability to demonstrate a deep understanding of the multicultural, multilingual and multi-technological understanding is probably the single most important person who can demonstrate this as the project manager of today possesses one unique quality—work together with all members of the ecosystem.
Relationship Management: Time to market has become the name of the game; turn around time of project has become a key differentiator between success and failure for initiatives. Vendors are expected to be experts in all aspects of the project—understand the clients business, anticipate client's requirements, understand the complete ecosystem, demonstrate a successful track record, be a master of all technologies and be in the right place at the right time—i.e., in front of the client at all times. There may be no second chance.
Responding to Changes
The 80-20 rule: Almost all the marketing books emphasize the 80-20 rule—80% of your business comes from 20% of your clients. Purchasing organizations, normally, consider existing vendors for outsourcing and if these existing vendors cannot deliver, then look at new ones. Having made the first breakthrough within a purchasing organization, the sales teams have effectively won half the battle. A sales person always dreams of a competition free business situation—a situation where they do not have to compete with anyone else for getting the clients business but that is a utopian world. In real life, buying organizations have adopted formalized strategic sourcing methodologies where they are usually working with more than one vendor and tracking their performance. In this world what enhances your chances of achieving winning repeat business—performance. Nothing sells like success.
By virtue of continued presence throughout the project, the project manager plays a pivotal role in winning repeat business. The sales teams need to rely upon the project manager's ability to anticipate client's business needs, build on the relationships developed during an initiative and the success story created to better pitch for next initiatives. Performance repeatability and the ability to create value in client's initiatives enhance the chances of repeat business. Who else but the project manager can demonstrate this? The project manager creates value by anticipating the business needs of the clients and developing the relevant plan in this fast and ever-changing business scenarios. Demonstrating the ability to recommend alternatives and anticipate the implications and challenges within clients business became the strengths of repeat business.
In the previous section, we have detailed some of the key changes that businesses experienced and adopted in this new age economy. In this section, we will look at the approach adopted by vendors to adapt to the market changes and highlight concepts of performance metrics.
Cost reduction: As discussed earlier, this new economy is fast paced, and there is an ever-increasing demand from purchasing organizations for reduction in costs. The project managers became the cynosure of all eyes—they gave the team an identity. Buying organizations, in turn, responded very favorably to the concept of continuity as it reduced the learning curve across multifunctional teams.
Performance Management
In this section, we discuss Project and Performance Management concepts adopted between strategic partners to establish favorable performance metrics. Having understood the metrics that a vendor is gauged against, it is fairly easy to devise a plan for managing, the same for each and every project. Project Management is all about performance management, by doing it right, repeatedly, in a standardized and process-oriented manner, we can establish a favorable metrics for the organization.
Establish a Process Framework
We have talked about establishing a favorable metrics for project performance. Such metrics does not come into existence by a one of success; rather it is brought to fruition by thorough planning and meticulous execution. With the changes in the publishing technologies, the demand grew exponentially for content delivery using the new interactive media. The suppliers not only adapted themselves quickly to the new technologies but they also continuously improved and perfected their processes to bring in new projects and drop them into a process framework—that would help them make the same reference content, interactive and cross-referenceable for easier access. Like the suppliers to the publishing industry, most successful businesses/practices operate in a certain niche and execute projects around a their core skills/strengths. As such at a high level all their projects are likely to have the similar attributes/processes. These frameworks, when executed properly, pretty much guaranteed project success. The creation of the frameworks is critical to scalability and growth without compromising on the performance.
Have the Project Goals Clearly Understood—both Strategic and Tactical
Very often we have seen that a number of very efficient project managers have successfully delivered projects by just understanding the tactical goals of the project. What went by unnoticed is the number of opportunities that were missed—if the strategic goals of the business were understood these opportunities could have helped in improving the overall quality of deliverables, reducing costs and/or improving efficiencies. Here again we will look at an example of the publishing industry—a company had developed a software product to examine the incoming news feeds and categorize them into multiple (over 10,000) different buckets for better manageability and easier research.
The project was very successful; the Project Managers did as they were advised—tactically. The project managers did not dwell into the complete process and the anticipated usage of the product—if only the PM had done that, he would have also provided for the selected articles to be automatically forwarded to the journalist covering a particular event or following a story. This would have been of immense help to the journalist and would not have had any significant impact on the cost of delivery. Understanding the strategic goals of the project helps in aligning the activities of the project with the business interests and responding effectively to the dynamics of the business.
Have the Deliverables and Responsibilities Clearly Defined
More than ever, the modern day environment requires multiple parties to contribute toward the goal of a single project. The client will have to do its part and so will one or more vendors/partners.
This obviously, gives rise to room for confusion and miscommunication. One party does something, hands-off to another and the chain continues. Needless to say, if one party in the chain falters, the entire chain will get disturbed. Each party should also ensure that the deliverables to and from it are clearly defined and understood. Any confusion here will cause expensive delay in project completion and perhaps even threatening the success of the project itself.
Develop a Reasonable, Milestone-Based Project Plan
Mature organizations are seen to create and track against milestone-based project plans. This helps in isolating set of tasks/activities from each other with their own deliverables. Whether for the Publishing industry or otherwise, most conventional IT projects would have number of well-defined activities—System Study (Business Analysis & Requirements Definition), Systems Analysis and Design, Development, Testing and Acceptance, etc.…there may be different terms used and the activity split differently but in most cases the tasks can be categorized as belonging to one group or the other. When these sequential activities are grouped together, and tracked as milestones, they serve to be good checkpoints for tracking the success and offer logical checkpoints for project reviews.
Exhibit 4. Value Chain in the New Age Ecosystem—Vendor to Advisor
Have the Entry and Exit Criteria Defined and Understood
Entry and exit criteria could be implemented at various points. Project managers are known to define entry-exit criteria between tasks and/or milestones. There is no real right or wrong approach here. The nature of the project and activity should be considered to decide on whether an entry-exit criteria is pertinent there or not. The real purpose of the entry-exit criterion is to act as a quality check on the previous task/milestone and to provide confidence for progressing to the next step.
Escalation/Exception Handling Processes Put Into Place
Whether one is managing a small project or a large one, there will always be situations that are less than ideal and things may not happen as planned. Be it a change in the requirement, or a loss of a team member or simply an unexpected technical hitch. All these things could potentially impact the project schedule and/or the cost. If proper escalation and exception handling processes were in place then the Project Manager would have the opportunity to either recover and bring the project back on track or minimize the damage.
Communicate, Communicate, Communicate!
Every one of us has been in adverse real-life situations that could have been avoided if there was better communication to somebody or somebody. Projects are no different; often one encounters issues that could be avoided by better communication. It is a key knowledge area addressed in depth in PMI's PMBOK® Guide and for those of us who are not initiated, we recommend that you refer to that document. We just wish to highlight the importance of this often ignored aspect of good project management and advise all project manager to not only incorporate formal communications across the hierarchy of the project organization as part of the administrative processes but also establish channels of informal communications and the latter becomes more important in larger, distributed initiatives.
Closure Meeting
At the time of closing a project, never forget to have a formal closure meeting and establish the success of the project and your organization's contribution. Use any opportunity to remind the vendor relations and other stakeholders of your organization's involvement/contribution in successful projects. Highlight your involvement/contribution in response to any RFP/sales presentation and watch the stakeholders draw comfort from the fact that they are speaking to a proven, reliable vendor…nothing speaks better than the language of success.
Conclusion
Most organizations exist to make profits; ones that do not make profit consistently will eventually fail. Moving up the value chain within an existing ecosystem is probably, the simplest way to grow. Vendors that move up the value chain stand to achieve multiple objectives including brand recognition within the ecosystem and a higher probability to gain repeat business. To achieve these objectives, vendors need to have effective delivery processes in place, and efficient project management is fundamental to a good delivery process. Effective delivery processes improve all round confidence; both within the vendor organization and with the client and increase the probability of project success. Successful projects create a favorable performance metrics; metrics that you can use to succeed getting repeat sales.
In the new age economy, past performance is a measure of future success.
