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Outsourcing companies ditch dollar September 28, 2007

Posted by Coolguy in IT Offshoring.
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Reconciled to the fact that rupee might stay strong in the medium term, Indian IT services firms have begun to diversify their billing currency basket, which is currently dominated by the US dollar.

 

The 11.6-per-cent appreciation in rupee against the US dollar since the beginning of the year has impacted the profitability of the Indian IT firms.

At present, the revenue billing in US dollar terms varies between 70 and 85 per cent for Indian IT services firms and is expected to go down as these firms diversify into other markets and start booking revenues from their non-US customers in other currencies.

But companies feel that shifting customers to bill in local currencies is not easy because the global budgeting of clients is predominantly in US dollar.

iGATE Global Solutions has recently started billing a customer in Switzerland in local currency, Swiss Francs, said N.Ramachandran, Chief Financial Officer.

Like other companies, iGATE still derives a bulk of its revenues in US dollar that currently accounted for 63 per cent of the total revenues as compared to 72-73 per cent some two-and-a-half years ago.

“Our revenue booking in US dollar is coming down as we have started billing new clients in their local currencies,” Ramachandran said.

For example, in North America, iGATE is billing its Canadian customers in Canadian dollar and in Japan in Japanese yen.

Large software exporters such as Wipro Technologies, which serves about 647 clients globally, books its revenues in 73 currencies. Wipro garners 73-75 per cent of its revenues in US dollar compared with over 80 per cent a few years ago. The company derives about 65 per cent of its revenues from the US.

“US customers operating from Europe still prefer to get billed in US dollar terms,” said K.R. Lakshminarayana, CFO, IT business, Wipro Technologies. Billing in US dollar is coming down gradually as we expand in other geographies, he said.

Europe accounts for around 30 per cent of Wipro’s revenues, but billing in Euro/British Pound is about 23 per cent of the total revenues. About 4 per cent of Wipro’s revenues are billed in Japanese yen.

MindTree Consulting’s CFO, Rostow Ravanan, said shifting customers to bill in local or non-US dollar currencies has not been an easy task as the global budgeting of the customers is predominantly in US dollar terms.

“We have been requesting our customers to shift their billing from US dollar to local currencies as and when a deal comes for renewal and some are open to it,” Ravanan added. About 80 per cent of MindTree’s revenues are billed in US dollar. Apart from US dollar, euro and British pound, MindTree bills a small portion of its revenues in Japanese yen and UAE dirham

Typical Factors That Make Offshore Project Management Tricky September 13, 2005

Posted by Coolguy in IT Offshoring, Project Management.
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Well-Known Issues

  • Language barriers
  • Time zones
  • Distance
  • Culture differences
  • Communication styles
  • Etiquette
  • Security problems
  • Quality discrepancies

Less Obvious Issues

  • Inherent beliefs and prejudices
  • Built-in hierarchies
  • Attitude (e.g., attention to detail)
  • Work processes
  • Work practices
  • Labor laws
  • Respect for IP rights
  • Bad management

Techniques that help project managers improve the odds of success when working with an offshore team

  • Define expectations up front
  • Utilize e-tools for better communication
  • Meet regularly
  • Provide proper training
  • Conduct quality reviews
  • Document everything

Define Expectations Up Front

  • Nothing sets up projects for failure quicker than requirements and expectations that are not established and communicated to both parties in advance.
  • Detail clear and precise programming requirements.
  • Determine timelines for each project deliverable.
  • Define reports for communicating project status
  • Develop a procedure for managing project changes
  • Document procedures for escalation emergencies

Utilize E-Tools for Better Communication

  • Voice over IP (VoIP) and other infrastructure capabilities, instant messenger service, email, and organized video sessions between onshore and offshore teams are powerful ways to compensate for less face time
  • Setting up a regular call schedule
  • Taking advantage of instant messaging, email, and chat sessions
  • Instituting periodic project reviews
  • Providing face-to-face feedback, rewards, and recognition

Meet Regularly

  • To make sure that team members communicate with one another, schedule regular meetings even if just to get a status update
  • Keeping your distributed team apprised of what’s happening is crucial. When all team members are located on site, it’s easy to grab everyone and have a quick meeting in a conference room. When people are distributed across the East Coast, West Coast, and Russia, keeping the team in the loop is not as easy
  • Simple, short communications can boost the productivity and performance of the global team and should be encouraged. They supply team members with a way to demonstrate interest and ownership in the project’s outcome and to recognize problems before they escalate.

Provide Proper Training

  • Conduct knowledge transfer that includes coding standards, product
    architecture, special tools, and hardware and software environments.
  • Technical training. How to use tools, applications, or proprietary software.
  • Process training. How to handle technical support calls and follow escalation procedures.
  • Company-specific training. How to achieve brand-specific messaging and consistent interactions with high-value customers
  • Responsibility based training. How to train people based on their roles. For example, IT architects need training in listening to business users.
  • For example, employees in the United States understand the U.S. healthcare system, such as HMOs and co-pays, even if they don’t work in the industry. This basic understanding of the U.S. healthcare system cannot be expected from offshore resources. Therefore, if you’re outsourcing the development of a healthcare application to India, basic education about the U.S. healthcare system will need to occur before the Indian IT professionals can start.

Conduct Quality Reviews

  • Unstructured, free-form status reports are the enemy of project quality.
  • Use a standard report that clearly spells out how the project is going with respect to different milestones
  • Whenever a task is reported as completed, an onshore team member should check that the corresponding deliverables are accurate, accessible, and documented correctly. Depending on what skills you need to check (such as programming code, offshore project management, or testing routines), make sure to actually review the deliverables.

Document Everything

  • Onshore project managers should confirm that requirements for documentation are understood by the offshore team, including technical specifications, deliverables, due dates, and problem-resolution procedures.
  • With escalating attrition rates in many low-cost locations, make sure that the offshore team also has documented training manuals and escalation procedures for recurring problems

Summary

  • Communication is the key.
  • Meet Regularly
  • Clear written requirements and good documentation
  • Train the staff properly
  • Have a proper in-house team to manage the relationship
  • Use technology to bridge the communication gap
  • Understand culture: Housewife, reluctance to challenge authority
  • Overcome time differences
  • Complete one full cycle quickly
  • Agree on the processes
  • Budget for offshore visits
  • Maintain constant contact

Outsourcing and Culture September 13, 2005

Posted by Coolguy in IT Offshoring.
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  • One outsourcing customer told its service supplier in India that it wanted a change to the platform that was being developed. The supplier said yes, but nothing happened. What the supplier meant was “Yes, I hear you,” not, “Yes, I will make the changes.” The supplier did not agree with the changes but said yes because India’s cultural heritage carries a reluctance to challenge authority figures. “We advise clients to ask their supplier to repeat their understanding [of the client’s request] and for the supplier to put on paper what they are going to do,”
  • An Indian middle-class wife may not ever come out and tell you that she’s up at five in the morning and awake until midnight, seven days a week, to cook and do household chores for her husband, children and in-laws — in addition to the 50 hours a week she’s putting in on your project.
  • Relationship managers provide feedback to both sides and ensure that any problems regarding the outsourcing projects are resolved
  • Business cultural difference is that some service providers like to regularly rotate their workforce, assigning individuals to different accounts to keep their interest levels up and to gain new skills

Don’t:

  • Neglect the transition phase — transfer of knowledge, process and expect-ations is critical to offshore success
  • Don’t Expect supplier-refund programs to auto-matically be applied. Monitor your bills.
  • Don’t Assume the contract terms will be adhered to without careful monitoring.
  • Don’t Neglect the importance of regular communication, especially during times of transition.
  • Don’t Forget that quality depends more on process and governance than tools and technology
  • Don’t Try to micro-manage resources

Outsource failure September 13, 2005

Posted by Coolguy in Software Development.
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  • While decisions about outsourcing IT and business processes continue to grow, the contractual side of relationships are failing nearly 60% of the time
  • Of the 58% of outsourcing contracts that do not work, four out of five fail due to poor leadership and control
  • Problems include a lack of initiative and a shortage of management skills by both customer and service provider alike, and these come together to undermine the main objectives and reduce expected returns by as much as 75%.
  • These ‘soft’ intangible issues are all too often overlooked during sourcing and negotiations, yet it is here where the foundations for success or failure are set
  • Companies exhibit five primary personality types in the neighbourhood with only one forming the basis of a strong relationship:
  1. The Curtain Twitcher
  2. The Hedge Builder
  3. The Noisy Neighbour
  4. The Trend Spotter
  5. The Good Neighbour

The Curtain Twitcher
Suppliers will find these companies curious, but not interfering. They will often complain to colleagues about their service providers’ short-comings, but not address the issue head-on. This irritable relationship, based on a sense of mutual suspicion, is often inherited by the company’s internal manager who may feel that there could be better supply options but the decision has been taken to continue with the existing arrangements.
Remedy – A contract review should be implemented annually to ensure objectives are understood on all sides.

The Hedge Builder
Sets up a contract and expects to watch it happen without getting involved. This cuts off the possibility of the service provider advancing with the contract and working hand in hand with the client. There is a tendency for the client to keep ‘the roses well pruned’ on his/her side of the hedge and ignore the mess next door that may well be affecting property values for the whole street. The misguided belief is that outsourcing will cure all ills, once inefficient processes have been chucked over the hedge.
Remedy – Generally a budget of 4-6% of the value of the contract is required to ensure an adequate in-house team to manage the relationship.

The Noisy Neighbour
An over zealous micro-manager prevents the service provider from getting on with the job. An obsession with the minute details can result in ‘analysis paralysis’ and confusion among colleagues. The tendency to escalate every service issue can interfere with the project’s progress and adversely affect the business goals on which the contract was struck.
Remedy – In-house teams need to be reassigned to other tasks while new or different management skills are developed to ensure a proactive rather than interfering approach.

The Trend Spotter
The internal team, led by the ‘trend spotter’, has outsourced because it is the current trend in business service management. They have embraced help desk and IT maintenance outsourcing and currently are hurtling towards off shoring back office services. The pressure is coming from the top – 8 out of 10 IT Directors are pursuing off shore solutions, often fuelled by the perceived belief that outsourcing costs minus previous in-house costs equals cost savings. It doesn’t.
Remedy – Companies should fully quantify the extent of an outsourcing opportunity before embarking on a long, difficult and expensive process that is fraught with risk.

The Good Neighbour
Represents only 20% of deals. Working from a win-win mentality, the time is taken to assess not only technical competency but also the business goals of the provider and ensure there is a cultural fit between both. Service provider personnel receive ongoing training and key staff are given individual incentives related directly to the client’s organisational objectives