Agile Methodology, Customer Experience, Nearshore, Project Management, Successful Outsourcing
First, let me say this is not an article for budding sociologists or business leaders who think that the last 20 years of increased person-to-person connectivity across the world, with the Internet, social media, entertainment and globalization, have broken down the differences in cultures across the world. The world has changed to be sure, but not on the scale you might imagine. People across the world still see things differently and interact based on their point of view, and that is as true in business as it is in international politics.
Culture actually takes a long time to change, whether we are considering an established business or even more so, a country or region. Studies have shown that the recent growth in communications across the world has only added to the social stereotypes we have to cut through to understand individuals from other cultures. And this is not to say that everyone within a culture will have the same values and drivers. While sociological texts provide many comparisons between cultures, they are at best, a general understanding of the expectations of people inside a society and how they interact with each other.
But at a business level, for a company wanting to outsource software development, what does this really mean? Why should you care? Software development is just a form of work and technology is pretty ubiquitous in the modern world. If people have the skills and experience to do the work wherever they are located, do their cultural values matter?
To investigate this question, let’s imagine a scenario that we (as an nearshore outsourcing vendor in Mexico, serving clients in North America) can relate to. You are starting a project with an agile software development team located in the central area of Mexico. Your team is located in the US Plains region. You might assume that because Mexico is just south of the border – they would know a lot about your culture – and you would be right. People in Mexico and the US consume a very similar range of entertainment and consumer goods and they cross borders in both directions for vacations and visiting their families. But does that fill in the gaps in understanding generated by sensational news reports and differing political agendas on each side?
Sadly, no. Although people in the US visit Mexico in increasing numbers every year, their destinations tend to be resort enclaves like Cancun. Unfortunately, those locations have more in common with the US than Mexico – with good reason. They are intended to make a US and international traveling public comfortable during their stay in another country, not confront them with challenges of language or culture.
On the other side of the coin, people in Mexico generally have relatives in the US and many have visited at different times, outside of the vacation areas like Disneyland. They have a good general understanding of US society, but in most cases, from an outsider’s point of view, even if they have been a resident of the US for an extended period of time. So, while people in Mexico have a fairly good understanding of US social interactions, it may not translate to an easy transition to a working team without some additional understanding and work on both sides.
To understand the differences between the two cultures, take a look at a comparison between the US and Mexico as outlined by studies done by the Hofstede Center.
Hofstede measures cultures based on six areas (adapted from the descriptions provided by the center) :
- Power Distance – The degree to which the less powerful members of a society accept and expect that power is distributed unequally. The fundamental issue here is how society handles inequalities among people. People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalize the distribution of power and demand justification for inequalities of power.
- Individualism – The high side can be defined as a preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families. Its opposite, collectivism, represents a preference for a tightly-knit framework in society in which individuals can expect their relatives or members of a particular in-group to look after them in exchange for unquestioning loyalty. A society’s position on this dimension is reflected in whether people’s self-image is defined in terms of “I” or “we.”
- Masculinity – The high side represents a preference in society for achievement, heroism, assertiveness and material rewards for success. Society at large is more competitive. Its opposite, femininity, stands for a preference for cooperation, modesty, caring for the weak and quality of life. Society at large is more consensus-oriented. In the business context, Masculinity versus Femininity is sometimes also related to as «tough versus tender» cultures.
- Uncertainty Avoidance – Expresses the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. The fundamental issue here is how a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? Countries exhibiting strong UAI maintain rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. Weak UAI societies maintain a more relaxed attitude in which practice counts more than principles.
- Long Term Orientation – Every society has to maintain some links with its own past while dealing with the challenges of the present and the future. Societies prioritize these two existential goals differently. Societies who score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.
- Indulgence – On the high side, societies allow relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint stands for a society that suppresses gratification of needs and regulates it by means of strict social norms.
From the comparisons generated by the surveys behind the studies, You can begin to see some basic differences between the expectations of people in the US versus Mexico:
- People in the US are generally less accepting of inequality in their interactions than people in Mexico. Business and organizations in Mexico tend to be more hierarchical and less accepting of «flat» organizational structures.
- In line with their lower acceptance of inequality, people in the US have a higher level of individuality. In Mexico, although this dimension is changing rapidly and different among segments of the population, individuality is less evident.
- In areas of masculinity versus femininity, the two countries are very similar, but Mexico is slightly higher. This shows in a what to outsiders may find to be a surprising amount of competitiveness between individuals and in business within Mexico.
- Mexicans have a high propensity for avoiding uncertainty in comparison to people in the US. This plays out in less propensity for risk and higher reliance on pragmatic solutions.
- People in the US and Mexico have very little difference in their orientation to long-term versus short-term goals. Both societies generally favor conservative goals.
- In contrast to the difference between the two societies’ individualism, Mexico is much higher on the scale of indulgence than the US.
Understanding these basic differences however, doesn’t tell you a lot about how a team of individuals might deal with a business situation. If you imagine a situation when the Mexican team is faced with working over the Christmas holidays to meet a deadline – you might expect some strong push-back because of long-term family traditions and expectations. But you could also expect that in the end, the team would go along with the need because of the value of having work and stability over the long term. But, if you didn’t understand underlying cultural expectations, could you also provide enough incentive to ensure production would not suffer during the period? You could generally expect that some special indulgences for the team would help, but what would really drive them?
Dealing with a specific problem requires more than a general understanding of a team’s cultural distance from your society. There are many layers of the cultural onion, including at a minimum societal, business, and individual levels, that impact the way a team interacts. Almost no one in business today has the time or resources to do the work required to really do a «deep dive» into comparative cultures to find a perfect match for their project. It is important to know we have cultural differences between us when we start a project, but from a pragmatic point of view, it is more important to know how to bridge them than to find «someone just right.»
Bridging the cultural divides goes back to best practices in starting all outsourced projects with remote teams – the initial period of team formation and alignment. Getting teams together, face-to-face, is critical to breaking down barriers and creating an atmosphere where cultural understanding can grow. You can’t expect either side of a team to change their own cultural profile, but you can put them in situations where their awareness of cultural norms within the team is improved and their ability to work together improves. Direct communication and interaction, in both work and casual situations, opens up opportunities to remove stereotypes and replace them with real, dimensional understandings of individuals.
In the end, the simple fact is that there are cultural differences between teams, even in the same company and in the same region. The cultural studies available should simply reinforce that understanding and the importance of dealing with them, not drive you away from using outside teams. You cannot use studies that give you only a general understanding of society to understand a specific team, although they may help you understand where to start.
From that point of view, if you are interested in finding an outsourced team, vendors that understand cultural dimensions and have ways to deal with them from the outset are going to be your best bet. Particularly in agile or DevOps implementations, trust and understanding are among the most important parts of team formation. Scio provides outsourced development teams to our nearshore clients in North America, with the elements necessary to ensure success, including team building approaches to fit your specific situation and assignment. Our teams have less geographical distance and more working-hour overlap than offshore providers which lowers the issues that new teams have to deal with at the outset. We would be glad to discuss your next project and how we can help.
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Agile Methodology, Customer Experience, Nearshore, Product Development, Project Management, Successful Outsourcing
Outsourcing is a standard practice in the software development industry and it continues to experience steady growth, year after year. Among the common drivers cited are lowering costs of outsourcing, rapid acquisition of skilled resources, and avoiding staff overhead for one-time projects that would result in layoffs after completion.
In other words – it is all about costs in one way or another, whether they are real expenses or lost opportunities because you could not bring together a new team for a project in time to achieve your market. But, when you have paid the invoices and implemented your new application, what is on your balance sheet? Did you really save the money you thought you would? Are there hidden costs that have drained all the benefits out of the engagement?
10 hidden costs of outsourcing you may not be considering (in no particular order):
#1 – Deciding that driving cost to the lowest level possible is your primary goal
Are you confused? If outsourcing is all about costs, how can it be that using lower costs as your primary reason for outsourcing would actually end up costing you more?
- The lowest cost vendor cannot also be the best equipped with the best resources, deep expertise, strong cultural fit, high reliability and excellent real-time communications in your language. Solving each of the issues mentioned has a cost to the vendor, during the contract period or before to find, train, and maintain the necessary resources. Pushing to the lowest possible costs will require trade-offs that you and your team will bear. You may be able to anticipate the cost of working with less experienced and less independent resources at a production level, but can you also judge the costs that could come when unexpected issues arise? Have you ever experienced a project without unexpected issues? Really?
- Often, when price is the primary driver, the service buyer decides to manage costs by requiring a fixed-price bid. The upside is the risk is placed on the outsourcing vendor. To mitigate their risks, the vendor will then require extensive documentation, a detailed waterfall-type project plan that leaves acceptance testing to the end of the project, and penalties or prolonged negotiation if changes are needed. Plus, to pad for risk, the vendor will actually increase their bid because they know that fixed-price engagements rarely finish on time and within budget. In addition, they may decide to use less experienced resources (lower cost) overseen by senior resources (high cost, but with little time to look deeply into design and coding issues), So, in the end, instead of gaining assurance the project will end on time with an expected cost, the buyer has more cost for upfront specifications, more risk the final application will meet specifications as written but fail to achieve its goals, and much less oversight and flexibility once the project begins. The vendor will manage to the contract requirements and not the business goals their client decided were important internally. The vendor takes the entire responsibility for cost control, quality assurance, and management. In most cases, this means if their timeline or costs get out of line, quality control and communication between the development team and the client team will suffer.
- If your primary driver is cost, you will probably be pushed to offshore resources that are very low cost but have difficulty making their teams available in real time to collaborate with your team, lack good communication skills in your language and little in common with your culture. In these cases, you will have to do what you can to mitigate the fact that 28% of projects fail because of communication issues and 16% fail because of poor cultural matches.
#2 – The cost of selecting a vendor
Few buyers have a budget for selecting an outsourcing vendor and if they do, they rarely allow for the work that would really contribute to successful projects and relationships.
- Up-front requirements and bidding document preparation. In order to assure all vendors provide comparable bids, considerable time needs to be spent, by your in-house team specifying both the project and the vendor requirements. If a number of non-compliant or non-comparable bids are returned, what is the cost of going back to the vendor with more details and allowing other vendors to update their bids with what is perhaps new information or different assumptions for them? The hourly cost of internal staff, consultants or both add up but are often not counted in the final project analysis.
- Time and opportunity costs. Depending on the value of the project, the vendor selection process can take 4 months to a year. This includes selecting the vendor pool, preparing documents, sending, receiving and reviewing documents, negotiating and preparing contracts, demonstrations, travel to selected vendors, and more.
- Travel costs. To properly evaluate final round vendors for a strategic project, it is imperative that is spent at the data center or workplace of the vendor team to assure that practices and conditions match expectations. The greater the distance, the greater the actual costs and the time required for travel. Typical round-trip times to India and Asian locations are two to three weeks depending on the goals and number of vendors to be visited.
#3 Project initiation
The costs of project initiation have an inverse relationship with project risk. The less you spend on project initiation, bringing the teams together, assessing process and methodology, assuring communication, respect, and team collaboration is strong, and that there is a shared understanding of project goals, the greater the risk that the project will fail. But even knowing this simple fact, most vendors and buyers will decide to cut the project initiation phase in favor of «getting to productive coding» quickly. The downside of this choice is a longer time to reach full productivity, more risk of rework to meet expectations, and increased costs for project oversight and team management.
#4 Staff transition
When a new outsourcing team is started on a project, internal staff is often given new roles as part of the initiative. They could be tasked as product owners, to oversee user story development, to run internal quality and acceptance testing, or to assure that questions that cannot be handled directly by the internal product team are handled quickly by the right subject matter experts. If the outsourced team cannot work during the standard workday of the client team, the daily schedules of the internal team may have to be shifted drastically. Their existing roles and responsibilities will need to be handed off or reprioritized to allow them the time to handle their new work and the task switching that invariably occurs. The costs of transition (and retraining in the case of those that may be new to methodologies like agile) are rarely considered in project costs but in reality, if they are not allowed for, the resulting issues can be very costly.
#5 Infrastructure & operations realignment
Inevitably, a new outsourcing project will incur changes in local infrastructure and software development operations. The changes may include new virtual environments, changes to internal processes for continuous integration, automated testing, security and authentication, incremental releases to production or many other issues. Again, part of this falls to poorly planned project initiation, but even with upfront time focused on team cohesion and user stories, the requirements for infrastructure and operations are often overlooked. When they are, count on additional costs because of lowered productivity as issues are ironed out and everyone gets on the same page.
#6 Contract & relationship management
Throughout the project, the buyer/client-side project manager needs to assure that incremental payments match the effort spent and the deliverables received as well as the necessary progress toward completion. Not spending enough time on this aspect of the project can result in very tough negotiations if the project goes off track or unexpected issues arise. In addition, selecting the right project model, whether it is fixed price, time and materials, dedicated team or another variation, has a big impact on this area. A lack of trust and understanding or lack of partner-level communication during the project can make a project very hard to manage to a successful conclusion and very costly when issues must be resolved.
#7 Cultural & organizational alignment
It may seem like a «soft» issue, but if the outsourced team and vendor cannot navigate your cultural norms and organizational environment it is likely to make project management very difficult. Bringing a team from a hierarchical culture into an organization with a flat structure can be very disorienting to team members with different expectations for interaction and responsibility. Merging a small team into an enterprise system with many silos and layers of control can be very difficult. The new team in either case will require additional time to reach full productivity and oversight to ensure they can fully participate as expected – and has a real cost.
#8 Intermediaries
To mitigate many of the issues in this list, outsourcing vendors and buyers often impose intermediaries on projects as an extra layer of «assurance.» This imposes two extra layers of cost on a project: The direct cost of the extra labor required and the indirect cost from the risk incurred when developers, product owners and subject matter experts do not regularly engage in project discussions directly. Every time an intermediary becomes involved, there is a loss of fidelity and clarity. In the end, instead of assuring better communication, the sides are pulled into a «blame-game» when issues are not fully explored or questions are «translated, collated and summarized.»
#9 Technologies
The selection of technologies for a new project can have significant impact on project and application success. If the internal team restricts choices because of a lack of understanding and confidence in the options offered by the outsourcing team, if a lack of communication results in a poor understanding of risk and downsides of technologies selected, or if choices are avoided to keep from exposing a lack of awareness – the downsides can be very hard to overcome. They can raise «technical debt» to a degree that limits options «down the road» in the project or the application lifecycle and lower team cohesion to the point that trust and communication are lost completely.
#10 Location, location, location
To a degree, we’ve covered this already in the sense that work time overlaps, cultural fit, and communication issues can cause project costs to rise significantly. But on its own, the location of the outsourcing team in relation to the client team should be a part of vendor selection, a factor in project initiation, and a major concern from the beginning of any outsourcing relationship. The greater the geographic distance between the teams, the greater the issues will be. Mitigation costs, in general, will increase including travel, working hour adjustment, intermediaries, communication, contract management, etc. While considering nearshore vendors will not eliminate all outsourcing risks and issues, they can make other choices much easier to deal with and diminish risks significantly if they have the right resources and ability to work at a partner level with your team.
Outsourcing can save you time and money, but only if it’s done correctly. With so many factors to consider, it’s important that you do your research before making any decisions. The 10 points above are a great starting point – but there are still more software development costs to think about, such as marketing development costs and advertising expenses. By taking the time to understand all of the possible hidden costs associated with outsourcing, you can be sure that you’re not overspending on your project.
Scio is a nearshore vendor of software development services for our clients in North America. We tune our project model to the project at hand and operate with our clients at a partner level to lower risk on both sides. If you would like to discuss your next project and the options we can offer, please contact us. We would be happy to work with you.
Agile Methodology, Customer Experience, Nearshore, Successful Outsourcing
In one sense or another, we’ve all heard the term «body shop.» In the world of automobiles and mechanics, it refers to a shop that repairs or modifies car bodies, but in software development, it refers to outsourcing vendors who use contract labor to fill their requirements. Let’s say at the outset, this isn’t an inherently bad practice. Many, if not most, larger vendors started out as body shops (0r temporary staffing providers – another similar term) and eventually grew beyond the practice. There are many well-established vendors who are essentially filling the place of in-house recruiters and have a network of contractors they have used repeatedly that make the process of filling short-term needs an easy job for their clients.
But, the problems start when an outsourcing vendor doesn’t disclose their business model and you assume from their website or on the basis of a phone call that they are offering a team for a software development project that has a full-service house behind it.
What’s the difference?
In most cases, a full-service outsourcing provider can offer:
- In-house staff – Trained, supported, and backed by an organizational structure that includes infrastructure, formal methodologies, processes, and benefits that promote success and staff longevity.
- Organizational-level expertise in technology, verticals, project planning and initiation, risk management, automated testing, and other areas that make their teams more robust and create a better opportunity for project success.
- The ability to shift quickly to fill a team role if a resource becomes unable to finish a project for some reason. Generally, established vendors have some «bench» – resources not fully committed to existing projects that can step in when needed. Because the technologies, methodologies, and processes they use are formally supported in the organization, staff members that join a project after initiation are likely to be able to get up to speed relatively quickly.
- Established infrastructure (virtual and physical) including up-to-date workstations, secure Internet connections, managed IT resources, and the project-level resources necessary to support development operations such as continuous integration, testing automation, shared repositories, VPN connections, etc. When these resources are already in place, there are practices in place to operate and maintain them, setting up a secure, reliable project structure is relatively easy and the resulting operations are robust, reliable and secure.
Body shops generally offer:
Relatively quick access to individual resources or the ability to pull together small teams from contractors. Most cannot offer a great deal in the way of project planning – their business model is to provide experienced resources, whose resumes, skills, rates, and availability have been checked – not to provide full-service for longer-term engagements.- They may offer some level of infrastructure at the organizational level, mostly virtual, but since their resources are generally remote, this means they will have difficulty providing the same level of security, methodology, and practices that you would find in a full-service vendor with a data center.
- Relatively low-cost resources for short term, well-defined engagements. They offer little in the way of project oversight so it is incumbent on their clients to provide the project planning, requirements, and organizational resources the project needs.
When Things Go Wrong
As we mentioned earlier, projects go off the tracks when you assume or are told your vendor’s business model is one thing and it turns out it is another. If you go to a full-service provider to fill a spot need (a few weeks to a month with one or two resources) you are likely to be surprised when you read the quote. Their proposal will generally include options or steps you might have assumed you would do in-house or weren’t needed. Their resources will be more expensive when compared on skills and experience and their value will be harder to judge against vendors who do not have the same level of overhead, staff and organizational support.
If you go to a body shop and expect the vendor to be able to provide an experienced team for a longer engagement, you are likely to be surprised that you are expected to take responsibility for bringing together everything needed to ensure the project operates with industry-standard methodologies and the team collaborates in ways that provide strong production metrics, reliable and maintainable code and proactively manages risks while avoiding «feature creep.»
There are a lot more things that could be said about picking a software development outsourcing partner with a business model that is not suited to your needs, but the point is – when you don’t know what you need or what the vendor is really offering – the outcome can be more expensive and less successful than it should be.
If you don’t ask, most vendor sales are likely to be opportunistic. They want more business above all and will present the picture they think you are looking for. Somebody shops will provide resumes on their letterhead to make it appear the resources are in-house. They might even go so far as to recast past experience as «in-house» when in fact the contractor offered was working directly or for another provider. Some full-service vendors will offer junior resources for short assignments or staff from the bench that cannot be committed more than a few hours or days at a time. They aren’t being «dishonest» – they are trying to get full utilization and lower their overhead, but in the end, if you call them back for that resource again, they may be unable to break them loose. The same may be said of the body shop, however, since they generally cannot fill the available hours of their contractors for every day of the year, they will often have to substitute with another resource if you need to bring someone back to continue work.
The Right Vendor for the Need
All this comes down to one thing – regardless of your need, you need to have outsourcing vendors whose business model you understand and that gives you the ability to use the one that fits the need you are resourcing. This means having conversations, relationships, with your vendors and establishing a partner-level dialogue so you have confidence in what they can do for you successfully. It takes time and attention throughout the relationship to maintain the level of communication needed and it should be as much from the vendor as from you. But, if you can establish partnerships with your outsourcing vendors, the outcomes should be better for both sides.
In that «best case» scenario you might use your «body shop» partner to provide:
- Spot resources to fill short term needs within your own teams or to bring a specific skill when needed that is otherwise time-consuming to find and contract.
- Low-cost resources that you plan to manage in-house and provide whatever they need to be successful in working with you.
- Replace positions lost through attrition, illness, vacations, etc. while you search for permanent replacements.
And you could use your full-service development shop partner to provide:
- Small to large experienced teams to become an integrated but largely self-sufficient part of your operations that can be responsible for strategic projects without straining your internal staff.
- Agile project teams that can use the methodology effectively to develop less defined but critical applications collaboratively with your staff.
- Dedicated teams that work as a part of your larger DevOps system for continuous app development either as part of enterprise or product teams for client-facing applications.
Either scenario represents putting your outsourcing partner’s business model to the best use for your needs, not bending either one into a configuration that could be a bad fit for both you and your service partner. If your organization is small or a startup, it may seem like a lot to take on to take the first step, establishing a partner-level relationship but in the long run, even a small operation can benefit from an atmosphere of shared understanding and trust – perhaps even more than enterprise-level organizations who have more leeway for risk.
Scio is a full-service, nearshore provider for software development outsourcing to our clients in North America. We seek partner-level relationships with our clients to help us provide the right services tuned to their needs over the long run with less risk and better project outcomes. Whether you are unsure where your needs fit or you have a clear idea of how to resource your project, please consider contacting us to discuss what our services can offer you. We would be happy to work with you.
