Present

1
Present The Top 10 Reasons Offshore Development
Fails and a Roadmap for Success.
April 21, 2004
2
Agenda

• 8.00 8.30 Networking and Breakfast
• 8.30 8.40 Introductions
• 8.40 9.50 Industry Overview
• 8.50 9.30 People and Process Lessons
• 9.30 9.40 Break
• 9.40 9.50 Special Perspective
• 9.40 10.10 Technology Lessons
• 10.10 10.30 QA and closing remarks

3
UnanetAt A Glance

• Based in Northern Virginia Technology Corridor
• Established business since 1988
• 1998 reengineered from consulting to products 6
  people
• Privately funded, woman-owned, employee-owned
• Pioneer in professional services automation and
  web apps
• State-of-the-art server-side Java (J2EE)
  application with over 6 years of actual
  production usage

4
LeverPointAt A Glance

• Headquartered in Reston, Virginia
• Field Offices
• Pittsburgh, PA
• Phoenix, AZ
• March 2000 - Began Offshore Development Center
  Operations in New Delhi, India
• 300 Consultants and Software Engineers
• 30 Professionals in the US
• 270 Engineers in India (75 from IIT)
• Experienced Executives 50 combined years IT
  services
• 100 Client Satisfaction Guarantee
• Business Focus
• Premium, dual shore IT service firm at high value
  rates.
• Optimized for small to medium-sized engagements
  of under 100 total team members.

5
Quick Survey 1

• How many have had first-hand experience with
  offshoring?
• More than one year
• Less than one year
• None

6
Whats HappeningOffshore Development Market
Realities
"Offshore software development is entering the
mainstream. Mid-market companies are now eager
to join large global concerns in outsourcing
application development overseas. Stephen
Lane Research Director, IT Services Aberdeen Group

• Offshore Development Industry Statistics
• Software Companies in 2003 (Gartner 2003)
• Currently Offshoring 63
• Plan to Offshore in 2004 21
• No Plans to Offshore 16
• By the end of 2004 (Gartner 2003)
• 10 of IT work for IT companies will be done
  offshore.
• 5 of IT work for other companies will be done
  offshore.

7
WhyOffshore Development Client Benefits
Survey Results of Top 7 Client Benefits (Reasons
Offshore Development is Exploding) 1.     Huge
Financial Advantages driving Greater Profits
and/or Larger Teams. 2.     Provides Huge
Competitive Advantages in Speed, Quality and Risk
Mitigation. 3.     Flexibility of Scaling Up or
Scaling Back as Conditions Demand. 4.    
Immediate, As Needed Access to New or Special
Technical Resources. 5.     Relieves Tensions in
a) Quality vs Profits, and b) Features vs
Costs 6.     Alleviates Resource and Demand Peaks
and Valleys 7.     Relieves Frustration Over
Demands of Next Version vs Last Version.
8
Why NOTOffshore Development Client Benefits
Top 7 Objections to Offshoring 1.     Environment
too fluid. 2.     Dont have any clear, defined
process or specs in place. 3.     Too busy to
provide needed knowledge transfer. 4.    
Companies our size cant use the offshore
model. 5.     Fear of losing control. 6.    
Been burned before 7.     Philosophical
opposition to outsourcing / offshoring.
9
Development Project Failure Rates

• Software Development Failures (CIO Magazine, Fall
  2003)
• 70 of all software development (on or offshore)
  projects fail
• 30 35 fail outright
• 35 30 drastically miss time, budget or
  deliverable goals.
• LeverPoint Premise
• Offshore development differs from onshore by
  about 25
• It puts pressure on areas that may already be
  strained.

10
Agenda

• 8.00 8.30 Networking and Breakfast
• 8.30 8.40 Introductions
• 8.40 9.50 Industry Overview
• 8.50 9.30 People and Process Lessons
• 9.30 9.40 Break
• 9.40 9.50 Special Perspective
• 9.40 10.10 Technology Lessons
• 10.10 10.30 QA and closing remarks

11
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision.
12
The Top 10 Mistakes

• Selecting the wrong partner
• Selecting a partner much larger / smaller than
  you.
• Picking a company that may not be around long
  term.
• Picking the cheapest provider
• Picking a pure offshore company with no major US
  presence risk.
• Not understanding the risks / rewards of various
  provider countries.
• Not checking the vendors references first hand.
• Not picking a partner with deep, relevant
  technical and/or industry expertise.

13
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team selection.
14
The Top 10 Mistakes

• Selecting the wrong project
• Projects that are very high risk in any case
• Projects where requirements are very ill-defined
  and are likely to be very fluid.
• Projects where an intimate knowledge of other
  systems is required.
• Projects involving non standard technologies or
  standards.
• Projects that require specialty skills not
  currently possessed b y the partner.
• Selecting the wrong team
• Team is selected based on availability.
• Team is not selected but simply assigned.
• Team composition is not considered.
• Team experience is not considered.
• Not selecting an offshore team lead because
  weve an onshore lead.

15
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align cultures
16
The Top 10 Mistakes

• Failure to align cultures
• Ignoring the impact of the relationship on your
  internal team.
• Underestimating the potential for sabotage by
  internal team members.
• Ignoring the differences between the two
  companies cultures.
• Assuming no news is good news.
• Treating the partner team differently.

17
Unanet Solutions
18
Quick Survey 2

• For those of you currently doing software
  development, what are the most compelling
  benefits driving your interest?

Survey Results of Top 7 Client Benefits (Reasons
Offshore Development is Exploding) 1.     Huge
Financial Advantages driving Greater Profits
and/or Larger Teams. 2.     Provides Huge
Competitive Advantages in Speed, Quality and Risk
Mitigation. 3.     Flexibility of Scaling Up or
Scaling Back as Conditions Demand. 4.    
Immediate, As Needed Access to New or Special
Technical Resources. 5.     Relieves Tensions in
a) Quality vs Profits, and b) Features vs
Costs 6.     Alleviates Resource and Demand Peaks
and Valleys 7.     Relieves Frustration Over
Demands of Next Version vs Last Version.
19
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort
20
The Top 10 Mistakes

• Underestimating the critical startup efforts in
• Communication
• Communication is largely oral
• Written communication is all point-to-point (ie.
  E-mail)
• Communication is 100 single threaded
• Communication is 100 multithreaded
• Communication only takes place between developers
• Some members of the team speak Java better than
  English
• Lack of a systematic plan with scheduled
  communication at multiple levels.
• Knowledge Transfer
• Simple assuming your offshore team can read minds
• Failing to invest in the partners team as you
  would your employees
• Under investing in face to face meetings
• Not creating a training program for new team
  members.

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The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes
22
The Top 10 Mistakes

• Failure to align processes and key documents
• They are CMM5 and you are CMM ???
• They use Waterfall and you use Xtreme
• They call everything by different names
• Assume good processes make up for a weak team
• Assume one size (process) fits all (projects)

23
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes 6. Failure to integrate the ODC with
internal staff
24
The Top 10 Mistakes

• Failure to integrate the ODC and IDC
• Espousing an us versus them mentality
• we write the specs they to the work
• we set the vision they execute
• we communicate to the ODC on a need to know
  basis
• Treating the ODC team differently than you would
  the IDC anent
• Communication
• Encouragement
• Correction
• Team building
• Face-to-face relationship building is not
  necessary

25
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes 6. Failure to integrate the ODC with
internal staff 7. Failure to manage expectations
26
The Top 10 Mistakes

• Failure to manage expectations
• Financial Expectations
• Failure to consider the true total cost when
  calculating savings
• Hourly rate
• Additional program / project management costs
• Net change from time differences (loss plus gain)
• Trips to visit the ODC
• Thinking all ODC vendors produce approximately
  equal results
• Hourly rates are a poor measure of performance
• Should consider costs per function
• Sample True Cost
• Offshore hourly rates 15 30
• Program management 5 - 15
• Inefficiencies in comm. / time diff. ??
• Travel expense and lost time 5 .
• True hourly rate 25 - 50

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Up to 3x Financial Advantage
60
Employee New Dev
LeverPoint New Dev
50
Employee Maintenance
LeverPoint Maintenance
40
Monthly Financial Spending
30
Team Size (Speed)
300000
20
200000
10
100000

0
0
Current
Maintenance Only
Plan
Maint New Dev
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The Top 10 Mistakes

• Failure to manage expectations
• Other Expectations - Timeline, Quality, and Risk
• Lacked regular visibility and control over
• Progress against planned timeline
• Progress against planned budget
• New resource availability by skill set,
  seniority, etc.
• Individual and team utilization current and
  expected
• Identified risks
• Code defect rate and nature of defects
• Other trouble spots

29
Unanet Solutions
30
Agenda

• 8.00 8.30 Networking and Breakfast
• 8.30 8.40 Introductions
• 8.40 9.50 Industry Overview
• 8.50 9.30 People and Process Lessons
• 9.30 9.40 Break
• 9.40 9.50 Special Perspective
• 9.40 10.10 Technology Lessons
• 10.10 10.30 QA and closing remarks

31
Quick Survey 3

• For those of you currently doing software
  development, what area presents you the most
  trouble / creates the greatest risk?
• Please elaborate??

• People
• Process
• Technologies

32
Special Perspective
33
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes 6. Failure to integrate the ODC with
internal staff 7. Failure to manage
expectations   TECHNOLOGY 8. Ad hoc collaboration
/ communication tools
34
The Top 10 Mistakes

• Ad hoc collaboration / communication tools
• Process
• Allowing communication mainly oral
• Written communication is all point-to-point (ie.
  E-mail)
• Communication is 100 single threaded
• Communication is 100 multithreaded
• Communication only takes place between developers
• Some members of the team speak Java better than
  English
• Lack of a systematic plan with scheduled
  communication at multiple levels.
• Platform
• Using email as the primary / only channel
  (inherently one-to-one)

35
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes 6. Failure to integrate the ODC with
internal staff 7. Failure to manage
expectations   TECHNOLOGY 8. Ad hoc
collaboration / communication tools 9. Little
or no effective SDLC acceleration or support tools
36
The Top 10 Mistakes

• Little or no SDLC acceleration and support tools
• (From inception through transition and
  production)
• No common requirements gathering tool
• No centralized source control system
• No central requirements/bug tracking system
• Inadequate backup / recovery systems and
  processes
• Sloppy configuration mgmt (poor ODC IDC
  environment mirroring)
• Uncoordinated upgrades to both environments

37
The Top 10 Mistakes
PEOPLE 1. Made the wrong build / buy / partner
decision. 2. Poor project and/or team
selection. 3. Failure to align
cultures   PROCESS 4. Underestimating the ODC
startup effort 5. Misaligned SDLC documents or
processes 6. Failure to integrate the ODC with
internal staff 7. Failure to manage
expectations   TECHNOLOGY 8. Ad hoc
collaboration / communication tools 9. Little
or no effective SDLC acceleration or support
tools 10. Little or no effective services
automation (PSA) platform.
38
The Top 10 Mistakes

• Little or no effective services automation (PSA)
  platform
• Little or no visibility and control over
• Progress against planned timeline
• Progress against planned budget
• New resource availability by skill set,
  seniority, etc.
• Individual and team utilization current and
  expected
• Status of known risks
• Status and response on other trouble spots

39
Unanet Solutions
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Evaluation Raffle
41
QA and Closing Remarks
42
Thank You!!