From Outsourcing to Successful Smart Sourcing

QuantiMetrics

Today we welcome a guest post from Bram Meyerson of QuantiMetrics, a partner of DCG. DCG offers benchmarking solutions based on QuantiMetrics' database of IT information, to provide valuable insights to gauge IT effectiveness and optimize performance.

It’s been nearly two decades since Kodak pioneered IT outsourcing by setting up long-term relationships with three suppliers for data centre management, desktop systems support, and voice and data networking. After initial surprise, thousands of corporations took up the trend, but many went well beyond Kodak’s precedent (it kept applications development in-house) and simply outsourced IT, lock, stock and barrel. The inefficiencies and problems that arose have led to today’s emphasis on Smart Sourcing; companies have become discerning, retaining a strategic and management role and outsourcing only those non-core services that can be provided more efficiently by a specialist.

Benchmarking for Successful Smart Sourcing

Smart Sourcing involves careful decisions on which functions to perform in-house and which to outsource. Benchmarking is the best support for this selection process because it provides enlightening comparisons, exposing where your internal capabilities are better than those found in the external market, and where they are below par.

QuantiMetrics benchmarking compares projects on a like-for-like basis. Using Function Point Analysis, we are able to measure the systems you wish to develop and determine the benchmark costs, scheduling and resources involved. By accessing the largest database of IT information in the world, we are also able to factor in the type of project (e.g. a new development or enhancement) and the technology to be used for development.

Our analysis can be used to evaluate the estimates provided by both internal and external suppliers, to determine which are most realistic and suggest greater value. It can also be used to evaluate the ongoing performance of in-house and external teams, and the technical quality of the systems delivered.

Recently, a major healthcare company asked QuantiMetrics to assess the cost of a replacement of a multi-million Euro proposal for the replacement of their administration system.

Our analysis revealed the risk and financial outlay involved, and helped the IT Exco to rethink its outsourcing strategy with reliable real-world data.

Ongoing Evaluation for Strategic Outsourcing

QuantiMetrics benchmarking supports the selective outsourcing of applications projects – from determining which projects to invite tenders for, to the selection of suppliers, to rating their delivery and ongoing performance.

Many QuantiMetrics clients, including one of Europe’s largest telecom companies, have now integrated our services into their processes to strategically manage their IT investments. This has made their internal teams and suppliers more accountable to the business, by making their performance levels highly transparent. By joining the QuantiMetrics Performance Enhancement Programme (QPeP) some clients have been able to achieve improvements in performance at a rate as high as 20 percent per annum!

Members of QPeP form part of an international community whose results are compared anonymously. Our regular assessments and report backs are designed to support and direct your outsourcing strategy. They will also encourage both your in-house teams and suppliers to improve their performance by enhancing quality and productivity, while reducing timeframes and costs over time.   

If you have any questions, please leave a comment for Bram! You may also want to check out DCG's benchmarking solution.


Bram Meyerson
QuantiMetrics, a DCG partner organization

Written by Bram Meyerson at 05:00
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Benchmarking – A Slap in the Face or an Informed Discussion?

Talking Down to the Client

Alan CameronI’ve recently been talking to some clients about their experience of software development benchmarks, either as customer or supplier, and overwhelmingly they’re telling me that it’s not often a good experience.

“Oh, I’m fed up with the whole process,” said one outsourcer. “Clients engage the blue chip benchmark suppliers, and, after a tussle and a lot of ill-will, a report lands on a desk. The results are presented as a simple answer, which is ‘the right answer,’ and we are left to scrap with our client over the results. The method of comparison and the dataset used – size and characteristics – aren’t made clear, and the result is unsatisfactory. In the worst cases, it can be contract threatening.”

I have some sympathy. Poorly created benchmarks can be misleading and in the worst cases can lead to court action. I encountered a situation once where a major outsourcer was producing a complex financial regulatory system, and the client decided to benchmark the programme. The results indicated that the software development was vastly inefficient and much too costly.

There was a dispute between client and outsourcer, which nearly went to court, until someone on the client side asked the question, “How many data points are we looking at, and what sort of applications were included in the sample?”  There was a metaphorical shuffling of feet and a sheepish reply. Basically there was one data point in the same industry and it referred to a CRM system. I don’t know who was more embarrassed, the client or the benchmarker.

Trying to commoditise the outputs may seem sensible, but the resultant model can be a gross simplification, and that is “slap in the face” benchmarking. Essentially, it’s a combative, adversarial process and it doesn’t work.

Collaborative Benchmarking

A more rational approach to benchmarking should involve a three-way discussion involving the client, outsourcer and benchmarker. Developing and enhancing applications is a skilled task, and it’s multi-dimensional. Benchmarks should reflect the things that matter to the client’s business; the benchmarker needs to be open and honest about the data used and must offer a range of answers to facilitate discussion.

We hear about time, cost and quality often and, when we benchmark, all three aspects have to be taken into account. I would add to that agility and flexibility.  Benchmark reports should balance software development business drivers against what’s being delivered. In a waterfall or similar process, where time is at a premium, either costs or defects tend to go up. Where quality is the driver, then unit costs may go up because higher skilled staff members are used, but there may be better effort productivity. If cost is key, the speed of delivery and quality may be less than optimal.

Agile should be a game changer, which is where client agility and flexibility become as important as that of the supplier. Suppliers may be well versed in delivering working software of high quality in a short time, but if the client doesn’t understand the business goals and can’t adequately groom and prioritise the product backlog, then all the benefits can be lost. But that’s a story for another time.

Go in With Your Eyes Open

The result of a benchmark should be to identify any process and cost inefficiencies in both client and supplier processes against an informed backdrop.

When you ask for a benchmark:

  • be sure what you’re asking for;
  • demand clarity and transparency from the benchmarker;
  • be prepared for rational discussion with the benchmarker and supplier;
  • collaborate and understand - there is no right answer;
  • be prepared to look inward – client processes can be as much the cause of sub-optimal performance as those of the supplier;
  • don’t trust the man (or woman) with the simple answer to the complex question.

Unless, of course, you want a slap in the face.

 

Alan Cameron
Managing Director, DCG-SMS

Written by Alan Cameron at 05:00
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Outsourced Projects Don’t Always Prove to be Cost Effective

For many years QuantiMetrics, a partner company of DCG, has been gathering, from its clients, a rich set of quality-checked data on software projects. Over the last decade we’ve noticed a growing trend in the number of projects that have been outsourced to external suppliers (see chart below). However, it’s important to note that most of these projects still include an internal cost component, often reflecting the clients’ management activities.

QuantiMetrics Data

What is most interesting about this data though, is that while cost containment has often been one of the driving forces behind outsourcing, our insights do not always support this claim. In fact, these “external” projects often achieve quite different levels of productivity, when judged in terms of unit effort, compared to their in-house counterparts.

The differences between in-house and supplier-based project delivery are statistically significant, indicating that outsourcing is not necessarily the most cost-effective option for project completion.  

This data also reveals the value of benchmarking. Many organizations may believe they are saving money by outsourcing, but without data to compare their progress to, it’s impossible to have a definitive answer. Utilizing benchmarking data to compare progress to similar organizations using both in-house and outsourced project teams will provide a better indication of which route is best for a particular company.

As a result of this research, QuantiMetrics benchmarking now allows clients the option to compare their own performance against that of comparable in-house projects and against a supplier dataset, in order to better discern cost savings and best utilize resources.

If you are interested in reviewing the data to support these findings, please let me know. I would be happy to share! If you’d like to talk more about how you can compare your own metrics to industry benchmarks, please leave a comment below or contact Tony Timbol for more information.


Bram Meyerson
QuantiMetrics, Partner of David Consulting Group

Written by Bram Meyerson at 05:00

CIOs: How to Innovate

MikeA lot of articles I’ve read lately have focused on the need for CIOs to innovate – it’s clearly an industry hot topic right now and hopefully a warning for all CIOs who want to keep their jobs. The time to innovate is now, more than ever.

Chris Curran, in the recent CIO magazine article, “To Innovate, CIOs Must Unlearn,” contends that innovation requires a change in the way CIOs are used to doing things. As he puts it, CIOs need to “unlearn” a lot of what they consider to be standard – innovation requires a new way of thinking.

Some of his suggestions include:

  • Anticipating what customers want before they want it – then deliver it before anyone else
  • Emphasizing what you don’t know instead of what you do
  • Embracing the notion that you don’t need to have all the answers
  • Thinking of yourself as a strategic counselor, not a technology distributor
  • Utilizing data from outside the organization, not just data that you create
  • Bringing software engineering work back in-house; this will allow you to test ideas and see results faster than before
  • Forging relationships outside of the IT department, particularly with business managers


As I’ve mentioned before, the CIOs who will most succeed with this shift in their job description, are those who see it as an exciting opportunity, rather than a burden.  Focus on what changes you can make and utilize benchmarks to see if those changes are actually having a positive impact on the department.

Do you have any tips for CIOs to drive innovation?


Mike Harris
DCG President

Written by Michael D. Harris at 08:00
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David Consulting Group Partners with QuantiMetrics

If you haven’t heard our news, we’ve partnered with QuantiMetrics.

We’re really excited about this partnership because of the value it brings for you, our clients.

QuantiMetrics owns the largest validated database of regularly updated software project information, which can be used to help you better understand how you’re doing compared to similar organizations and across internal projects and applications.

This benchmarking data can be key in helping you gain a competitive advantage just by understanding where you stand in terms of your competition, and then using that data to make valuable improvements.

We utilize this data in a variety of our Solutions and Services, including Software Metrics (Industry Benchmarks and ADM Performance Baseline), Outsourcing Measurement, Project Post-mortem, ADM Benchmarking, and IT Value.

In the video below, you can learn more about why I’m excited for this partnership.

 

Tell us, do you currently utilize any benchmarking data?


Mike Harris
DCG President

Written by Michael D. Harris at 08:00
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"It's frustrating that there are so many failed software projects when I know from personal experience that it's possible to do so much better - and we can help." 
- Mike Harris, DCG Owner

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