Monthly Archives: February 2013

Estimations in IT Outsourced environment

Estimation is one of the hidden costs that eats into your outsourcing costs. More often poor hands offs of scope and requirements result in piquant situation like these. The classic case of missing out on key documentation, missing links in handoffs, lack of attention to details and then the blame game begins. It is extremely important to ensure adequate checks and balances be it via simple team communications using collaborations tools, IM, chat, few phone calls along the way as you progress on estimations thru deliverables be it small, large or medium size projects or just plain simple deliverables.

Be it managed services proposal, time and material, project or program the chances that your estimation is (+) or (-) 5% is almost ruled out. This impacts both sides depending on who went wrong with their strategy.

Check when was the last time you had a project execution right on target 10 (+) or (-). A greater majority of the projects you will see go off the tangent. Precisely due to the above factors. At times the culture of padding every step which exponentially increases the estimates is common. The idea is with so much padding you are going to be successful which is not often the case. Not going into details or following a scientific process to estimate is a risk. Not very project needs to go into a functional point estimation which could be overkill, use plain best practice methods to understand work packets, break down to component level or any lower level that wont fluctuate your estimations Create your own template if you don’t have one and be consistent, run it by a peer, get reviews done and plug in feedback.

Predictable outcomes always comes from good estimations, not to mention quality of the deliverable. Poor estimations run of risk of cutting corners to achieve the end goal.
Writing good estimation needs to be developed as a culture and getting to a point of having offshore teams deliver better estimations is a discipline that will pay huge dividends. It saves time, money and frustrations, helps improve team spirit and motivate teams to do better via customer satisfaction.

What’s next Inshoring, re-shoring

You will hear more this year on these two terms than ever.  As wages increase in China and India coupled with Inflation, in addition to  unemployment rate struck at slow pace,  US companies will look to seeing opportunities right here in US to bring back the jobs.  Manufacturing is already seeing this trend with what some folks calling this a manufacturing renaissance.  US is getting more competitive now to do business and many top notch companies like Apple, Google, GE,  Boeing, Ford, are expanding already or have major plans to expand.  These top companies flush with cash is another incentive to do so once the economy looks up.
 
If and when the corporate tax rates are lowered the business leaders will welcome this with upping up the ante on bringing back jobs. There are lot of positive trends in place but it will take a while to show up really on the metric charts.
 
There is not much  tracking of the hard numbers on this piece of statistics – how many jobs are actually coming back.  The current best source might be Reshoring Initiative an organization that encourages US business to return jobs home. they are more focused on manufacturing now, now the tide will turn soon – I will place bets at  a modest % start be it in single digits for IT in-shoring or re-shoring what ever you want to title.
 

The newer outsourcing trend

The current outsourcing model of traditional ‘time-and-material’ model where clients pay technology vendors based on the cost of labour and material used and clients are billed on an hourly basis will undergo a slow but steady change. More and more clients are looking at this model to change into something more quantifiable and noticeable in terms of benefits.

There are already few companies including a a major India pure play firm that has been vocal about breaking this model with its out-come based strategy that would charge clients solely for the outcome of a project.  Imagine what this change could get to India pure play firms now seeing saturation in the outsourcing market with economic situation world wide.   US is its largest market contributing majority of   outsourcing revenues for outsourcing firms with over 60% of its revenues from North America.

The older and larger firms will still continue to sell the T&M till the new model gets traction and as smaller firms notch up some wins with models based on ‘results’ and ‘outcomes’ and not necessarily on efforts.

This provides more transparency and insights into the true ROI of outsourcing dollars. With CFOs looking more closely into the outsourcing costs from the bottom line perspective and to sustain their current outsourcing efforts this will gain momentum in the days to come. The traditional model will stay active and it its downward trend will be based on how quickly large corporations and smaller businesses adapt to the newer and encouraging model.

This model is not new to industries outside IT.  Health care companies in US have utilized this model with limited success, the limitation is more due to its own fear of losing $$ at the cost of consumer.

Watch this blog for more updates in the days to come..

This is truly interesting.