10 Best Practices for your next software product engineering outsourcing, and how to carry it to a successful conclusion

Outsourcing: staying the course in the start-up world

It has become very common for start-ups to begin their entire product development by leveraging companies offshore. From being a long-haul possibility for large corporations with deep pockets, offshore development  outsourcing is accepted as a natural phenomenon of business strategy for even the smallest of companies. Industry reports assess the offshore outsourcing to touch $150 billion in 2010, of which at least 13% will be contributed by start-ups in product engineering and specialized outsourcing services.

So much so, in 2005-2006, the Craigslist has added over 20 new cities across the globe—from Manila to Bangalore to Sofia, and so on. These lists see active transactions exchanged—between buyers and sellers of offshore services, where the largest level of interest appears to be in areas like web applications development, custom software development in various domains, graphic design, and independent testing and quality assurance. Other electronic bulletin boards like Elance, Guru, ODesk, and OutsourcingWorld are providing robust environments for start-ups to engage with remote companies through their trusted channels.

If one were to look a little deeper into the boards, many of them provide a service ranking system, and platforms to rave and rant about the buyer experiences. While the buyers are scrambling to hand out projects even as they compete with a fickle market, the engagements have not been as uneventful or helpful as forecast. Why? The raves are far outnumbered by the rants, and the seller side seems to be completely uninterested in retorting or even salvaging tarnishes. Why again?

As a seasoned service provider that works closely with start-ups—from early stages to mature companies—Xoriant Corporation has assembled intelligence from the market, from the customers we have served as well as from the user companies that we have interacted with. Even as the venture funding explodes in new trend-driven development, the ground rules for commencing, nurturing, and expanding an offshore engagement are often forgotten.

From our experience in the past decades, we have created a list of some basic do's and don'ts that will help you guide your company's initiative in the offshore engagement. But before we get there, let us step back and ask a couple of questions: when do you commence an offshore exercise, and why should  you?

The answers will define the foundations of your offshore outsourcing engagement. We have found that a start-up typically commences an offshore initiative almost as soon as the business plan and prototypes

are validated. To build a product takes a lot of muscle—from conception to architecting, marketing, and selling, where each component is a big cost initiative to the company, not only in terms of direct dollar costs, but also in terms of management bandwidth. Even as the company spends front-end cycles delighting the first reference customers, the next solid version of the product has to be  simultaneously built for the next set of customers. Here is where the companies come up against a dilemma—how will they build out the product and not miss the market window, while spending as much local engineering bandwidth as possible to make the reference customer implementations a grand success? This is a good instance where a specialized offshore product engineering services partner can bring tremendous value.

To evaluate the reason for offshore, many list cost and convenience as valid reasons. While these are true, time could be the most important element since time-to-market can determine the success or failure of a software venture. An offshore partnership brings in the value of time-savings to the table— in the efficiency of operations, shortening development, in easing up the mandatory chores like testing and implementation for the core team, and so on. Pay a few dollars more to hire the right company that will save you time in managing the offshore, rather than choose the lowest bidder and find yourself spending increasing amounts of time in hand-holding or—even worse—cleaning up after the vendor leaves a trail of bad delivery. An offshore outsourcing engagement is like running the Marathon—the run is arduous and long, the benefits are returned manifold times in the long term.

To help you get the best from your outsourcing engagement, here are our customer-focused 10

Marathon Rules:

1. Ensure that the outsourcer is a product engineering specialist rather than an IT generalist: product engineering entails a mindset wholly different from IT support. The rules of the game change almost every day, and the services firm should bring a talent pool and the gene pool that understands and adapts to these vagaries with aplomb, and still deliver flawlessly. The interaction with the U.S. team will be intense, and the team should be able to understand the bigger, customer-centric vision of the problem and solution. For IT projects, customers are internal, which results in limited specification vagaries. Products are conceived with a certain customer use profile in mind, thus creating very high levels of changes in specifications, priorities and even technologies. To cope up with these changes and still deliver the output, the offshore team needs to have the right experience. Flexibility is the key for successful product engineering.

2. Treat the relationship as a partnership than as a client-vendor relationship. Treat the outsourcing team members as your own employees: when teams on the other side of the world understand your dreams and ambitions, the energies are different, and the commitment to solve the same problems that you intend to is of high importance. If you treat the partner as a vendor, the team will just work to your orders, and not contribute valuable experience that it may have gained from other engagements. In a typical product cycle, one never knows when one needs to draw on that "superhuman" effort from some members of the team. The chances of counting on that one extra stride are much more when the offshore team members feel the involvement.

3. Start small with maintenance-oriented activities before a full-fledged development: as with any nascent process, time, training and hands-on problem solving experience are the keys to accelerate the learning curve. At the beginning of the engagement the offshore team may not be fully aware of the product to run you a full functional testing plan. But if the engagement begins with some maintenance and enhancement tasks, it gives the partner firm time and scope to learn the product better, thereby able to engage better with time.

4. Choose your partner using a pilot project evaluation rather than from an RFP process: as the saying goes, anybody can write a good RFP response, but that does not mean that you will be able to choose the right partner from the responses. Take a closer look and you will find that most responses simply copy out your RFP just so they fill in the check boxes for our selection. A pilot project will involve effort, but pays off in the long run when you decide to choose a partner.

5. Hire for the job: If the outsourced work does not involve mainstream development, do not insist the partner provide the best and the brightest of their talent pool. The top class talent may not like the non-development work and will create attrition problems very soon. As the nature of the engagement evolves, the right partner can always bring in the right talent.

6. Delegate the project management: At least the people management should be in control of the outsourcer. They are on the ground there. The engineering leadership in the U.S. may tend to insist on full control on the project, which involves hiring, firing and day-today management—all of which will become distasteful issues with time. In many successful engagements we have seen than the involvement in these tasks is significantly higher at the beginning of the engagement, but the US company's detailed involvement successively tapers down as the US based management develops more and more confidence in their offshore counterparts. It is important that this gradual transfer of control should be planned at the outset.

7. Focus on the team's ability to deliver rather than choosing a group of technology savvy individuals, who do not operate as a team: the right partner firm will know best about putting the right team for you—choosing talent, experience, team effort and so on. Allow them the benefit of choice, and you will have a team that is far more responsive to your needs.

8. Ensure that the U.S. team begins following some engineering processes. Most start-ups scratch up a requirement document on the whiteboard, and the U.S. team, where the team members work in adjoining cubicles, will work very easily off such a rough transcript. Getting productivity out of a remote team working in a totally opposite time zone is much more complex than "over the wall" management. If you do not have a process, invite the partner firm to set up one for you. It will ease your managing the engagement vastly in the course of time. Again, one should never advocate a full blown SEI-CMM or ISO level processes for a startup. However, the discipline of creating specification-architecture design documents and critically reviewing the plans, documents and code created by the offshore team, both in a timely manner, is minimally necessary to ensure higher success.

9. Insist on weekly project meetings and monthly business review meetings in addition to the ad-hoc daily communications. Weekly meetings can bring milestones, schedules, issues, changes, and goals at a tactical level in front of the project teams, while the monthly meetings can focus on larger issues like company goals, directions, and plans. These help glue the offshore and onsite teams in a more powerful manner—especially if you can enable a video conference and meet up virtually.

10. Incorporate a certain resource slack in the overall project budget. The US startups are forced to work with almost no resource slack because of the resource costs. However, in case of offshore teams, the chances of encountering some unforeseen situations, either people-wise or infrastructure-wise, are much higher, which could impact  productivity and schedules. Since the offshore resources typically cost substantially less than the US resources, keeping a little resource slack is a very prudent way of doing things.

We hope this paper has given you a helpful list of rules in managing your next offshore project.