When to outsource (and when not to) Typical projects Key issues with outsourcing Most common reasons projects fail Best practices Questions to ask your potential partner

1. Software Outsourcing:Pitfalls and Best Practices Igor Tsinman CTO, Sitrus

3. Typical projects

4. Key issues with outsourcing

5. Most common reasons projects fail

6. Best practices

7. Questions to ask your potential partnerAgenda

8. Sitrus / AMC Bridge is a U.S.-based software engineering outsourcing firm, with >100 developers in Ukraine. Over the past decade we have carried out dozens of projects for both established firms and many start-ups (CAD/CAM, SaaS business apps, social network sites). The observations and recommendations in this talk are based on our and our partners’ experiences in carrying out these projects. Background

10. With skills that may be hard to find locally, or that are not necessarily part of the long term “picture” for your company

11. Time to market

12. Project cost savings

13. Save money or extend existing budget

14. Cost savings can be 4:1

15. There are pros/cons

16. No free lunch: in many ways, successful projects require many of the same elements as building your own team (communication, organizational knowledge, processes)

17. Outsourcing is not a “silver” bullet – just another tool in getting things done, taking into account tasks, resources, time and money at hand.Why outsource?

19. [Most of our experience, and thus the observations and recommendations in this PPT, are for projects in category 1-3.]Typical projects

20. Several ways that outsourced engineering teams can play a role Occasional one-off project (e.g., 1-2 engineers for 2 months) Extension of in-house engineering team (e.g., 5-10 engineers on a more-or-less ongoing basis) Fully outsourced development Wide range of scope

21. What’s delivered is not what’s expected Bug fixing can be long and cumbersome After project delivery, lots of time spent bringing it up to the acceptable standards Excess expenses eat up projected “savings” Common failure modes

23. Lack of understanding on the part of development team of the purpose and goals of the developed application

24. Technical context mismatch

25. Lack of clarity and coordination on key architectural assumptions/design/approach of overall program

26. Development Process mismatch

27. Not integrating the outside team into overall program’s development process

28. Cultural mismatch

30. For example, if you need to design and build application for performance based compensation in brokerage industry you should understand some basic things about how this industry works, such as:

31. The difference between gross commissions and net commissions.

32. What is ticket charge, what is trailer etc.

33. The gap could be mitigated by a well defined spec, but it may not be enough in all cases.

34. People work more productively if they understand the “big” picture, and see their work in the context of the overall projectBusiness context mismatch

35. Here we are not talking about “basic technologies” like C++ or Java or .Net… Rather, this is about the architectural assumptions of the project, approaches and ideas that technical leads put into project. It’s rare that that information is captured in up-to-date documentation – at best one finds “original design documents” which most of the time are very outdated. Frequently, developers are forced to “research” product architecture by looking into code. For “local” staff, this can be mitigated by ability to ask questions in the real time – for outsource team this is much more difficult. As a result code submitted by outsource group can often be “contradictory” to the approach taken by the “main group.” It may not follow design guidelines, may be considered “poor” and unusable. At the end of the day quality for the project declines –sometimes to a critical point. Technical context mismatch

37. This is especially true for many small companies and start-ups.

38. Need to think through: project management, communication, code submission process, bug tracking, time management, QA, documentation.Development process mismatch

40. There are culture where “it is impossible” for the boss to we wrong – i.e. if you’ve been told to do this – you should do it, period. Regardless of the quality of the assignment or the fact that you may know how to do it better.

41. Engineers are chronically afraid to ask a question of their customer’s project leader – fearing that someone (especially their customer – their “boss”) will think that “they’re stupid.” The result is that the boss always hears “OK, everything is good” - while the engineer on the other end searches endlessly for answers to simple questions.Cultural mismatch

42. Areas to probe: Evaluate how familiar outsourcing partner is with business domain, architectural components References – similar projects Explore their operations – process, approach, tools, technologies, source control, bug management, etc. Key questions to ask

44. If you have an important project, it should not be outsourced to “moon lighters”

45. Rather, look for organization who has been in business for some time, and has invested in building a company

46. They would police their workforce themselves since “IP leak” would spell death for their business;

47. If company ownership is in the US, this would add additional “protection” – owners could be reached by US legal system, adding pressure on them to build team and process accordingly.Intellectual Property

48. Think long-term, build teams, invest in bringing people on board Choose teams w/domain expertise (rather than focusing on programming language / technology) Communication – one-to-many; many-to-many Best practices

50. This helps create the effect of “information accumulation” – once explained, a topic could be clarified later, avoiding the need to revisit it over and over again

51. Select teams that have worked in the same business area. For example, if they have written applications for financial industry – they most likely know concepts and terms such as Account, Positions, Product, etc. mean.

52. Select teams that have experience in outsourcing for companies similar in size to yours

53. Select teams that have built applications similar architecturally to yours– e.g., Client Server, Social Networks, CAD etc.Choose/build the right team

54. Spend time to bring engineers on board – both in terms of business as well as technical aspects of the project. For example: at the beginning of a project, or at an important stage of the project, key members of outsourcing team visit your company for extended period of time, to get “merged” into the thinking around requirements, specification and approaches. (Also helps reduce cultural mismatch!) On-boarding new members

56. Structure outsourcing team in such a way that while everybody can talk to everybody, there is a point person on the other side for issue resolution as well as issue tracking;

57. Pay close attention to the process – a well-defined process is essential to making sure that offshore team contributes successfully to a project.Communication

58. Case Study:Interactive Supercomputing MIT spin-off in High Performance Computing recently acquired by Microsoft Founded 2005; Identified need for outsourcing in 2006 Deployment and installation tools, QA framework, Math libraries developments Conducted search for outsourcing partner, hired and trained internal manager for the program (~12 months) Selected outsourcing partner, hired 2 Engineers and invited them onsite for 4 weeks of intense training (early 2007) Implemented best practices: Built communication, project procedures etc. for 6 months before hiring more people into the group Regularly hosts new members for on-site training, sends program manager overseas for group meetings Expanded group to 10 engineers, testers and system administrators ( 30 -40% of the total development force) Conducted several research projects by temporarily expanding the team Acquired by Microsoft – 09/2009: 2out of 3 technologies highlighted by Microsoft tech assessment team were developed with active participation of outsourcing team

59. Outsourcing can improve time-to-market and save money… …But there’s no free lunch. Must be vigilant about key failure modes, and be disciplined about best practices. Summary

60. Questions? Igor Tsinman itsinman@sitrusllc.com (617) 842-7470