Outsourcing software services involves transferring knowledge which is vital to the customer organisation’s operations to a supplier specialising in the software engineering that supports delivery of value from those operations.
The customer should always be in control of the relationship. An “absentee landlord” approach to vendor management is a very high-risk strategy. It is the customer’s responsibility to clearly define and communicate the business goals of software projects for new development and enhancements. It is the suppliers responsibility to deliver the desired outcome as effectively and efficiently as possible.
To achieve this, the supplier needs the client’s engagement in understanding and managing the end-to-end process of delivering value.
Understanding Value
Understanding value from the customer’s, user’s and stakeholders perspectives is a key principle of Lean systems thinking. Delivering value from an outsourced supply chain requires customer and vendor to work in partnership on understanding and delivering value to the end customer from the extended supply chain.
A supplier cannot deliver good value without the engagement of an informed and committed client management team.
Shared Values, Shared Success
Outsourcing partnerships have two sets of business stakeholders to be managed: the stakeholders in the customer’s business and the stakeholders in the supplier’s business. To foster the stable, long-term relationship that the knowledge-rich nature of much softsystems outsourcing demands, the needs of ALL stakeholders must be met.
Outsourcing partnerships work when client and supplier are a good cultural fit. Shared business values and shared strategic positioning are crucial. A customer organisation focused on innovation is courting disaster by engaging a supplier which is operationally excellent and provides a highly competitive price per transaction.
Procurement processes must support informed consideration of value over transactional cost. Too narrow a focus on transaction costs increases whole-life costs, decreases effectiveness, and significantly ratchets up the risk.
Assurance of Value for Money
It is the supplier’s responsibility to provide the client with assurance that their delivery process provides value for money. Such assurance requires open and honest accounting of performance, typically including:
- Verified, independent, quantified audit of recent engagements
- Volume-based pricing
- Evidence of on-going, continuous improvement in productivity and quality
Independent Third Party
Achieving an effective partnership is usually best achieved by engaging a knowledgeable and experienced Scope Manager to act as the software equivalent of a quantity surveyor in civil engineering. An independent “expert witness” gives customers assurance of value for money, and facilitates a constructive collaborative dialogue around stakeholder value.
Perfecting process performance requires matched capability between customer and supplier
Lean systems thinking also requires an in-depth understanding of the end-to-end network of processes required to design, develop, produce and maintain the product, whether such processes add value or not.
In a perfect process alignment, work flows continuously, piece-by-piece. Value is always delivered “just-in-time” without excessive stock-piling.
| Preparation | Activities | DCG-SMS Know-how | Rightshifting programme |
| Strategic Positioning | Identify the client organisation’s key goals | Executive coaching and mentoring | Executive Briefing
True North Workshops Value Stream Mapping Workshops |
| Understanding the Current State | Baseline current performance and effectiveness | Capability Assessment
Document review Data collection and analysis Survey of User Value |
SCAMPI B Appraisal
CMMI Quick-Look Evaluation Mini-Appraisal Gap Analysis against CMMI/ISO Fast Data Collection Study Total IT Performance Benchmark Internal Benchmarking Functional Size Benchmarking against ISBSGs data |
| Communicating the Desired Outcome | Strategise the objective
Align activities Develop Management Action Plan Define value and outcomes to be achieved |
Benefits realisation
Understanding value Stakeholder engagement Implementing cultural change |
Value Stream Management workshops
Visible metrics for Lean management GQM Workshops |
| Selecting the Right Supplier | |||
| Preparation | Characterise governance and delivery/development environment
Capture and verify knowledge of systems to be transferred |
Software and Applications Portfolio Sizing
Document and process audit Goal-Question-Metric |
Rapid Application Portfolio Sizing
COCOMO Profiling |
| Pre-qualification | Ask the right questions
Publish necessary and sufficient knowledge of systems to be transferred |
Output-based contract management
Software size measurement |
PQQ Readiness |
| Shortlisted Suppliers | Informed and objective evaluation of suppliers | Capability Assessment
Supply Pricing Performance Improvement Risk Management Scope Management |
Rapid Capability Evaluation
Uses and benefits of FPA Practical Use of Function Point Analysis |
| Outcome requirements | Agree outcome requirements | Requirements Management
Organisational transformation and culture change |
Visible Metrics for Lean Management |
| Competitive dialogue | Undertake value stream mapping
Allocate risk Identify effective and agreed performance measures Access capability |
Value stream mapping
Risk analysis Process performance measurement Output pricing |
DCG-SMS Lean and Agile Method for Improvement Teams |
| Contract awarded | Supplier undertakes maintenance of knowledge to agreed standards, available to audit at any time.
An approved process is agreed for the return of maintained knowledge to customer, with warranties, at termination of the outsourced partnership for any reason. |
Evaluating solution options
Output-based contract management Quality standards and process improvement frameworks Governance and security |
Knowledge Transfer Programmes:
FPA Estimating Requirements CMMI ISO 9001-2008 Function Point Audit Function Point Healthcheck |
| Transfer of knowledge | Transfer of knowledge to supplier by proven and customer-approved processes | Process design and implementation
Quantitative management Integrated team-building |
Process Action Team workshops |