Before we get into what TIMIT has termed “NeOn”, let’s first revisit the precursor to “NeOn”. (“NeOn” will be explained in Part II).
I’ll bet some of you have been around around long enough to remember when IT “offshoring” was nascent. In any case you have certainly heard about IT “outsourcing” in some context. My first exposure was in the mid 90’s. Offshoring, as it quickly became known, was new and unproven from a process stand-point. Any major change brings challenges that need to be solved. It’s important to note there was no fault on either side, but simply differences that needed to be respected and worked through. Today these have largely been resolved, or can be effectively managed. The most talked about ones related to:
Each year efforts to solve to these challenges molded new elements of the “Delivery Model”. Each model included key elements of:
- Mix, or Leverage saw the pendulum swing ratios of offshore/onshore as high as 90%/10%, and in some cases 100% for “Extreme Offshore”. Over time initiatives to swing the pendulum back took on the forms of “Rightsourcing”, “Rural Sourcing”, and in a more extreme sense “In-sourcing” (what had been offshored).
- Project Delivery key decision to be made was where to place PM authority, responsibility, and accountability. Part of the issue came early on when it was assumed all authority stayed with the customer (onsite). Most of the work was to be done offshore, and process maturity (as measured by CMMI) was usually higher offshore than in the US. Placing authority onsite was like trying to watch the hen house through a concrete wall. Project Management transitioned to a shared approach often termed “Two in a Box” where onsite had a counterpart offshore. Then came Agile; and the evolution continues.
- Subject Matter Expertise (SME) & Skill Retention was a decision about what is “core” to your business. What percent of SME must be maintained? What skills are critical to “keep in house”? Decisions on these helped to answer leverage percentage, and whether IT correlated strongly to the “secret sauce” of your business; or not.
- Single or Multiple Source vendor/partner relationships were important in terms of managing delivery and to the value your offshore partner(s) placed on you as a customer. Typically, it was best to start with a single partner to iron out the kinks in the delivery process, and to command the most account value by your partner. Over time and with growth, as measured in people and spend, the advantages of sole source inverted to become problems in some cases. An example of this is that your partner would claim to have everything to keep the competition out. This naturally increased the variance of delivery quality across various domains and/or skills outside your partner’s sweet spot. How many partner’s was best came down to how many you needed, based on a partner’s sweet spot, and how many you could keep interested based on your total spend.
- Pricing Models first came in variants of Time & Materials (T&M), Fixed-Price and Turn-Key. Even though Managed Services existing for Business Process Outsourcing (BPO) this came later for IT Project Outsourcing (ITO).
- People Management was a decision on who “controlled” the people working offshore. Early on the norm was that the partner paid and managed the people doing the work, within the guidelines of whatever delivery process was agreed to. This evolved to include models of: Build-Operate-Transfer (BOT), Joint Ventures (in more rare cases), Virtual Captives, Global In-House Centers (GIC) and some other offshoots of these. The evolution of people management is now more generally termed Global Sourcing.
Other elements factored into these models such as partner co-investment, training, and domain and skill Centers of Excellence.
In summary, IT offshoring promised exuberant savings, and came with some real challenges. Misconceptions and challenges have largely been resolved. Key elements of offshore delivery models have evolved to form and effective set of variants. The whole idea of “offshore” has become a practice of global sourcing. In Part II (of II) we will explain what TIMIT has termed “NeOn”.
This blog is based on my many years working with great people pioneering “offshore” (customer side), providing it (partner side), and now co-managing TIMIT Software Development, Consulting and Staffing.