Product Software

Session 3 Sourcing Prof.dr. Sjaak Brinkkemper

Dr. Slinger Jansen

Contents

What is sourcing? – Reasons

– Definitions

– Sourcing options

– Decision making

Knowledge management – Problems in distance collaboration

– Two cases

– Practices for knowledge exchange

Success factors – HRM policies

– Product ownership

– Knowledge infrastructure

– Mutual interest

What is Sourcing?

Sourcing is the transfer of part or of entire IS functions, employees, computer facilities of an organization to an internal or external supplier, for which the supplier is responsible.

Klant

Leverancier

Organisatie A

Klant

Leverancier

Organisatie A

Organisatie B

INTERN EXTERNInsourcing Outsourcing

Organization A Organization A

Organization B

Process Client

Department Supplier

Outsourcing is the transfer to an external supplier.

Insourcing is the transfer to an internal supplier.

Reasons to outsource

Why do companies decide to locate their IT services in other parts of the world?

Advantages:

Cut the costs by paying lower wages

Entering a large labor pool

Increased international opportunities by entering new markets

Reduce time to market by establishing round the clock development

Disadvantages:

Higher costs infrastructure

Communication barriers

Fragmenten processes

Increase of coordination

Sourcing cases

1. Baan Global Support (Call Centers) – NL 150

– India 150

– USA 100

2. Baan Research and Development – NL 550

– India 450

– Canada 100

– USA 60

Global support centres

Grand Rapids

USA Hyderabad

India

Ede

Netherlands Grand Rapids

USA Hyderabad

India

Ede

Netherlands

Management

Central call administration

Call transfer

Call handling statistics

Organization

1st and 2nd line support 24h support ( follow - the - sun )

Integrated infrastructure

Baan R&D: global distribution

Sao Paulo Sao Paulo

Localizations Localizations

Sao Paulo Sao Paulo

Localizations Localizations

Reykjavik Reykjavik

Middleware Middleware

Reykjavik Reykjavik

Middleware Middleware Quebec City Quebec City

Supply Chain Supply Chain Quebec City Quebec City

Supply Chain Supply Chain

Pulheim Pulheim

Workflow Workflow

Pulheim Pulheim

Workflow Workflow

Hyderabad Hyderabad

Core Developm Core Developm Hyderabad Hyderabad

Core Developm Core Developm

Tokyo Tokyo

Multi Byte Multi Byte

Tokyo Tokyo

Multi Byte Multi Byte Seattle

A & D

Seattle

A & D

Mumbai Mumbai

Integrations Integrations Mumbai Mumbai

Integrations Integrations

Tel Aviv Tel Aviv

Engineering Engineering Tel Aviv Tel Aviv

Engineering Engineering

Copenhagen Copenhagen

Configurator Configurator

Copenhagen Copenhagen

Configurator Configurator Netherlands Netherlands

Core Developm Core Developm Netherlands Netherlands

Core Developm Core Developm

Atlanta Atlanta

Logistics Logistics Atlanta Atlanta

Logistics Logistics

Golden, Co Golden, Co

Front Office Front Office

Golden, Co Golden, Co

Front Office Front Office

Characteristics

Central release mgmt T eam size 4 - 6

Concurrent engineering

Employees

124 0 total

80 0 developers

125 managers (line and project)

The Sourcing decision

Strategy: what and how

Strategic sourcing is sourcing taking into account current and future core competences, aligned to the strategic course of an organization.

Synonym: smartsourcing Single sourcing is outsourcing of the entire IS function to a

single supplier. The supplier has complete control over and responsibility for the provided function.

Synonymous: full outsourcing Multiple sourcing is the use of different suppliers for the

same process, in which goals are realized by mutual competition.

Synonyms: selective sourcing, competitive sourcing

Sourcing: Where?

Onsite sourcing In onsite sourcing the activity is provided at the client location.

Example: business-critical support. Onshore sourcing In onshore sourcing the sourced activity is provided from the same country, but

from another location. Example: outsourcing from one province (Zuid-Holland, the Netherlands) to another (Utrecht, the Netherlands).

Nearshore sourcing - nearshoring In nearshore sourcing the sourced activity is provided from an adjoining country or

region. Mostly Eastern Europe Example: outsourcing from the Netherlands to Romania.

Offshore sourcing - offshoring In offshore sourcing the sourced activity is provided from another continent/region

of the world. Example: outsourcing from the United States to India.

Crowdsourcing Crowdsourcing is the act of outsourcing tasks to a large group of people or

community (a crowd), through an open call. Example: call for creation of software component

Sourcing Decision Making

Cost Reduction

Time - to - market

Quality

Flexibility

Cost Reduction Cost Reduction

Time - to - market Time - to - market

Quality Quality

Flexibility Flexibility

Sourcing option

Sourcing relationship

In - Single Multiple Joint

sourcing Outsourcing Outsourcing Venture

Sourcing location

Offshore Offshore

Onsite Onshore Nearshore Western non - western

Sourcing option

Sourcing relationship

In - Single Multiple Joint

sourcing Outsourcing Outsourcing Venture

Sourcing location

Offshore Offshore

Onsite Onshore Nearshore Western non - western

Which goal(s) does an organization pursue?

Which sourcing option is optimal for the goal(s), i.e.:

– At which location are activities performed?

– Which relation does the client have with the supplier?

Crowd-

sourcing

Sourcing options

Onsite Onshore Nearshore Offshore Crowd

Insourcing Marketing

communication

Single Outsourcing Test capacity

Multiple

Outsourcing Document

translations Device drivers

Joint Venture

Development centre

Support desk

Contents

What is sourcing? – Reasons

– Definitions

– Sourcing options

– Decision making

Knowledge management – Problems in distance collaboration

– Two cases

– Practices for knowledge exchange

Success factors – HRM policies

– Product ownership

– Knowledge infrastructure

– Mutual interest

Product software companies as outsourcing clients

They share the same capabilities as their outsourcing vendors

They are the authors of their own product portfolios, release plans, features and functional details

They have a lot to say about how things are done and a story to tell about the initial situation and/or products

The problems of distance collaboration

The activities are technically innovative

Requirements are not 100% fixed

Specifications needs to be backed up by interactive explanation

Transfer of knowledge about architecture

No “coffee room” or “water cooler” talks

Nearshore case studies

Levi9: outsourcing services provider

Offices in Netherlands, Serbia, Ukraine, Romania, Turkey

Founded 2004

200+ employees

Issue: managing knowledge in distributed software development – Knowledge explicitation

– Repository with best practices

– Methodical processes and deliverables

– Diversity in development cultures

Case studies

Projects outsourced to Levi9 in Serbia and Ukraine by OnGuard and Exact

Main data collection took place in the Netherlands and Serbia in February and March 2010

Six interviewees per project

Observations of work practices, tools and documents

Case study OnGuard

Dutch ISV specializing in credit and collections management software

85 employees, all internal developers located in the Netherlands

Decision to rewrite the web-based Distributed Credit Management Solution (DCMS)

Silverlight and WCF technologies from Microsoft

Needed new knowledge and new way of working

Team and role overview

Requirements

Management

Functional

Design

ArchitectureTechnical

Design

Programming

QA Testing

Acceptance

Testing

Deployment

OnGuard

Levi9

1 Product Owners 1 Design Support

1 Project Mgr 4 Developers 1 Tester

Highlights

A kick-off meeting in Novi Sad involving six employees of OnGuard – Scrum training – Architectural collaboration – Learn about DCMS

Scrum with analog taskboard and JIRA GreenHopper

Grooming meetings and updates of functional specifications

Tooling infrastructure provided by Levi9 Eye Catcher Videoconferencing provided by

OnGuard

Team members’ opinions

Internal improvements at OnGuard (Scrum and JIRA)

Eye Catcher was a hit on both sides

Developer in Novi Sad on mutual adjustment: “They had to learn our way as much as we had to learn their way”

Other success factors: Meeting face to face, customer commitment, transparency, respect

Case study Exact

Publicly listed, 25-year old Dutch ISV with global customer base and 2200 employees

Competes with SAP and Oracle in the business solution market (ERP, CRM, HRM, SCM, ..) for all but the largest of companies

Exact Global vs. Exact Online Urgent need for capacity to develop new

addition to Online product line Pilot for sub-contracting to global

outsourcing vendor Already veterans in distributed development

(USA, Malaysia)

Team and role overview

Requirements

Management

Functional

Design

ArchitectureTechnical

Design

Programming

QA Testing

Acceptance

Testing

Deployment

Exact

Levi9

1 Sub-Team Lead/Architect 3 Developers 1 QA Manager 1 Tester

1 Project Mgr 1 Team Lead/Architect 2 Developers

1 Product Mgr 3 Functional Designer 1 Technical Buddy

Highlights

Kick-off training organized by Exact in Delft – All members from Serbia and Ukraine

– Same program as for new employees

Distributed Scrum with digital JIRA taskboard

Exact Synergy as a common central project infrastructure – Forums, CM, Issue tracking

Technical buddies who visit Serbia regularly

Team members’ opinions

Exact’s goal is to integrate the Levi9 team members as much into Exact as possible – Get the team involved in the “Exact way of

working”

No concerns about loss of knowledge – Exact resources are committed on a functional and technical level and the “recipe is known”

Technical buddies are very important and helpful components of the project

Comparing the cases

Exact team is distributed, OnGuard team is co-located

Both projects had sessions where training and informal mixing took place but organized by different sides

Both projects have transparent common technical infrastructures

Different responsibilities for architecture and technical design

– Levi9 leads the work for OnGuard

– Exact is in complete control

Diverse, open and intense communications (VoIP, IM, forums, tickets, videoconferencing)

Technical buddies in both projects

Identified practices

Common and transparent infrastructure

Kick-off training

Specification reviews (OnGuard)

Discussion forums (Exact)

Technical liaisons

Technical documentation

Practices for Knowledge Exchange

Knowledge

Alignment

Functional

Collaboration

Specification

Grooming

Project Kick Off Ongoing Development

Technical

Assistance

Technical

Documentation

Tacit focus Explicit focus

Fu

nc

tio

na

lT

ec

hn

ica

lTeam Transition

Product TransitionProduct

Knowledge

Center

Nonaka spiral

1. Knowledge Alignment

Mutual adjustment and bridging of knowledge gaps when kicking off the collaboration.

Practical Guidelines: – Analyze and bridge knowledge gaps. – Convene all team members in one location. – Team building to establish conditions for

knowledge sharing. – Establish information infrastructure. – Use multiple ways to transfer knowledge.

2. Product Knowledge Center

A hosted platform for knowledge exchange, to support and link the proposed practices.

Main features:

– Discussion forum (current issues)

– Web-based instant messaging (e.g. Jabber)

– Product knowledge base

– Document repository

3. Functional Collaboration

Ongoing live communication and collaboration between customer and vendor on a day-to-day basis about desired functionality.

Practical Guidelines:

–Customer should be as accessible as possible.

–Pay attention to weak spots in business domain knowledge.

4. Specification Grooming

Systematic review, clarification and revision of approved functional specifications.

Practical Guidelines:

–Grooming sessions should be formal.

–Update specifications after meetings.

5. Technical Assistance

Committing an expert from the customer side to the project who supports knowledge development at the vendor side and transfers new knowledge back to his organization.

Practical Guidelines: –Role is part of the job. –Partial or full co-location. –Deliver knowledge back to customer

organization.

6. Technical Documentation

Making knowledge about the technical implementation of a software product more explicit and accessible.

Practical Guidelines:

–Customer determines documentation needs.

–Determine responsibilities explicitly.

7. Product Transition

Make sure that the level of application product knowledge within a new responsible team is of an acceptable level.

Practical Guidelines: –Review and finalize product

documentation. –De-brief the outsourcing team. –Select an appropriate transfer

strategy. –Train new responsible personnel.

Contents

What is sourcing? – Reasons

– Definitions

– Sourcing options

– Decision making

Knowledge management – Problems in distance collaboration

– Two cases

– Practices for knowledge exchange

Success factors – HRM policies

– Product ownership

– Knowledge infrastructure

– Mutual interest

Critical success factors

I. Personnel exchange and career policies

II. Integrated knowledge infrastructure for product and processes

III. Product ownership

IV. Mutual interests and understanding for culture and character of country

I. HRM policies

Recruitment according to local norms – Management follows “castes”

– Don’t let the prince do testing

Personnel exchange – Short stay: knowledge transfer

– Long stay: line management or staff

– Selection of capable persons

– Carreer planning involved several locations

Workshops on culture, religion, country

Beware: jumping board for emigration

II. Knowledge infrastructure

Knowledge managment is essential because of staff turnover

Integrated documentation infrastructure on intranet

– Employees are not aware of the storage location of documentation

– Company wide standards

– Local initiatives to describe knowledge

– Incentives and bonus

Process and product knowledge

Method on intranet

Corporate method

All processes described

Standard document templates

Examples

Courses

Product documentation

Architecture Dashboard E-E E-Sales E-Sales 2.2

E-Sales 2.3 E-Sales 3.0

Document Management Systeem

• All products described

• Output design tools

• Requires discipline

III. Product ownership

Let all locations share successes

Distribute products over locations proportionally

Organisation structure follows the Product architecture

Own architects and product management

Invest in domain knowledge – Apics

– Management accounting

Distribution of the Product structure

Works:

– Product parts

Doesn’t work:

– Hierarchical

– Unstructured

– Halfhearted

Clear distribution of tasks

With own product accountability

Relation career planning

IV. Mutual interest

Cultural workshops for personnel – Be informed on do’s and dont’s!

Read about country and culture – Books and videos

– Touristical trips guided by colleague

– Local sports events

Interest in colleagues – Family visit

– Recruitment of oldest sons

– Cultural presents

Invite foreign colleagues – Birthdays and garden parties

– Beschuit met muisjes

Show your own country – Amsterdam, van Gogh, Vermeer

– Keukenhof, Zaanse schans, Volendam

– Ajax, Koninginnedag, Delta works and polders

Lessons

Accept differences: Own country is not the norm

Invest in knowledge infrastructure

Competition between locations, provided fair

–CMM levels

–Call solution levels

Collaboration with other cultures is very interesting

Lessons - 2

Successful knowledge exchange is not created by technical solutions – it's about people.

A transparent development process is a key success factor in global outsourcing.

Both parties need to commit to sharing their knowledge.

Mutual adjustment and meeting face to face in the beginning is the key to build positive attitudes toward knowledge sharing.

Further reading

Erran Carmel, Global Software Teams: Collaborating across borders and time zones. Prentice Hall PTR, Upper Saddle River, USA, 1999.

Frank Harmsen and Sjaak Brinkkemper (Eds.), Method Engineering: Web-enabling van methoden voor systeemontwikkeling, ICT Bibliotheek series nr 10, Ten Hagen Stam, March 2002, ISBN 90-4400-3720 (140 pages).

Sourcing BSc research projects

Sourcing options and decision

Knowledge infrastructures

Product knowledge center

Experiences with crowd sourcing

Tooling in sourcing

– Development

– Communication

– Management

Product distribution, transfer and ownership

Role distribution

HRM policies

Discussion