Guiding Business Transformations

Avoiding The Value Trap – Will Global Delivery Work for You?

Over the past decade we have seen a tremendous uptake in moving work to lower cost delivery centers across many industry sectors. Our collective clients often correlates cost inversely with value, causing us to seek out providers with the lowest unit cost to drive down our own delivery costs to deliver on this perception. But considering only one dimension of the delivery equation creates its’ own value trap and can actually drive the end costs even higher.

If you’ve worked in any outsourced projects, you’re familiar with the sales pitch that positioned this as a source of great potential value, but your experience may have seen this ‘potential’ as untapped in execution. Capabilities may not have been delivered, quality may have missed expectations, timelines may have slipped, and the product may have been perceived as ‘odd’ by your user community. These gaps wouldn’t exist given adequate focus and the correct governance structure, however it does require a certain amount of rigor that the typical work force finds too constraining to execute effectively. There are three fundamental focus areas that are crucial to address for successful execution of a program when outsourcing work from an organization.

Cultural Alignment

Work culture can vary significantly from company to company, but offshore cultures have their own value systems. Multi-cultural teams have an added dimension of risk in governance and delivery – there may be a slight disconnect or the difference could be sufficiently profound as to be very difficult to cross. Some cultural values emphasize influence over others more than building depth of expertise and craftsmanship valued in other cultures. This can lead to churn and result in overly long hours to address revolving teams, productivity degradation and skills gap remediation.

Cultural difference are also known to effect the content and approach of communication. Team members can find this a bit frustrating as they find each other too circumspect or too direct – there may also be a tendency to avoid communication, but more on that follows.

Effective Communications

Effective communications include more than the simple mechanics of speech and general intelligibility. We generally require communication of both accomplishments and failures in order to recover from a failure effectively. In some cultures, communication of a failure is avoided as failure is historically treated quite harshly. To this end, communications requires sufficient structure so as to draw out the complete status and must be focused on each subject in turn to ensure all topics of discussion are addressed and failures are acknowledged early when recovery is possible.

Even when cultural alignment challenges affecting communications are addressed, success is not assured as there are challenges related to general communications involving accents and potential idiomatic disconnects. Such challenges can be addressed given sufficient time, patience, and the willingness of the team to work through the frustration of stating something several times. This directly impacts communication of intent and establishing a common understanding of the business need – especially when overlapped working time does not exist and teams keenly feel the time pressure of closing the discussions so they can get some sleep or spend time with their families during the non-business hours over which these discussions occur.

Governance And Accountability

Global initiatives can take on a life of their own when all parties are not accountable for or in agreement on business results. Offshore delivery management often focuses on margin management and team utilization without the benefit of direct client accountability. Matrix management models often leave the offshore managers accountable only to the offshore executives who have operational objectives to manage margin while onshore executives manage client satisfaction.

The typical offshore management and delivery model can consequently yield results that are less than thrilling for business stakeholders, with decisions taken out of business context but within contractual context to optimize offshore delivery margin and not business results. In the US, we call it “the tail wagging the dog”… many offshore providers call it “business as usual”. This may seem a bit harsh from either perspective, but when the relationships are fragmented they tend to take a backseat to enforcement of the literal terms defined in the contract and drive decreased agility in the solution delivery relationship.

Mitigation of this risk requires the success criteria of any global initiative be clearly defined to a level where key metrics are stated and are measurable to facilitate timely acceptance. Often times we are faced with the task, subsequently finding that those expectations were not defined in the requirement or the delivery contract. With software, the product might be too slow, it might only allow integration to one specific system, the usability might be poor, or any of a number of ‘softer’ requirements may be missed due to lack of clear documentation of the product requirement at the outset.

Mitigating Risk – Charting a Path to Success

With these risk factors in mind, an organization can choose to eliminate or mitigate the risks. Effective mitigation could include training, adjustments to operating hours, introduction of flex time, supplemental staffing, delivery process changes, or any of a number of activities tailored to the identified risk.

Skills gaps should be identified early and mitigated through training or expectations should be adjusted to fit the team level of experience and expertise. Alternatively, the gap could be mitigated with another team that lends higher expertise and greater stability to collaboratively address the gap while making progress on delivery.

Elimination of the risks often involves optimizing cultural alignment and ensuring clear communication when questions arise in real-time. This can be fairly complex in execution and generally involves a fair amount of travel in both directions to open up the communication channels.

The level of commitment clearly plays a key role in extracting value from a global delivery model. In the short run the cost of mitigating cultural alignment challenges can drive your costs higher, but longer term relationships have a better chance of recouping some of that investment.

The best cultural alignment is much more easily achieved by working with teams that live and breath within your culture. In many cases, you’ll also find that in US based operations your team does not ‘age out’ of their roles and the instance of churn tends to be much lower providing greater continuity and lower ramp up costs. Even when considering long term relationships and committing to an offshore model – a US based organization familiar with the model can yield certain advantages in supplementing more senior level positions in the total team and enabling communication as an interested third party.

For shorter, less well defined engagements it would appear that better results would be achieved by teaming with native providers for better cultural alignment and real time communication during a normal work day. For longer engagements, the expected skills and communication gaps in steady state operations would impact those decisions more significantly – however other factors can make the decision more complex. We’ll explore this further in Accelerating Delivery – Seizing Market Control.