right sourcing

© Insight Test Services 2005 1

1. Paper Summary

Software developer organizations can no longer

ignore that there are specialist

software QA & Test suppliers in the market who because of their

core competencies, processes

and locations can deliver faster, cheaper and better results than

the internal test and QA department.

However we have all heard of the war stories of outsourcing to

far shore locations where the

supplier failed to deliver the

results expected and information

flows were less than acceptable.

This paper discusses an approach that can minimize the

risk and ensure the planned

business value is realized for your organization when handing over

key software QA and Test tasks to

a 3rd party (Or equally a remote operation within your own

organization). Right-sourcing is

about best practice people,

process and product working

transparently with your

organization where the vendor carries out tasks and projects on

site, and on their premises (near

and far shore). Key Phases are

Readiness, Mobilization,

Transition, Ramp, and ongoing operations.

1.1 Key Points;

• A blend of in sourcing, near

and far shore outsourcing is

most effective for results, the profile of the blend is

adjusted over time as the

relationship, performance and business goals change.

• A critical success factor is

knowing when your company is ready to

outsource software QA & Test

and where to start. • Partnering with the right

supplier and managing

service levels is essential to ensuring successful delivery

of results.

2. What is outsourcing?

When a company decides that there is some activity that it

wishes to have a supplier carry out rather than use its own

internal resources it is in effect

outsourcing the activity. The scope of outsourcing in the

software development world

can be small or large and may include the following:

1. The full development life cycle from Business Analysis

to Maintenance 2. Any part(s) of that life cycle

a. Business Analysis

b. Design c. Development

d. Test

e. QA f. Maintenance and

support

3. Any component(s) of the selected activity(s)

a. Task(s) b. Activity(s)

c. Project(s)

d. Department/Function e. Process

f. People

g. Systems

Right-sourcing: Aligning your performance with

your supplier.

Declan Kavanagh, MD of Insight presents an approach to ensure successful performance and

delivery in outsourcing projects.


The considerations, techniques

and approaches proposed in this paper can apply to any chosen

scope of activity, they can be

applied to a situation whereby an organization or operation is

transferring an activity to another

part of their corporate

organization, or to a 3rd party or

where they are reviewing their own role in the market they

operate whether it be internal or

external. The focus of this paper is of course on the area of

software QA, Test and Validation

2.1 The reason and goals for outsourcing

Strategic

Strategic outsourcing relates to a

decision and plan that are

integral to a company’s long term strategy, and designed to

create and/or enhance its

competitive advantage in the marketplace it operates. Some

strategic reasons that may be

considered are:

• The organization wishes to

concentrate on its own core

business and competencies

which differentiate it and deliver competitive

advantage.

• The organization recognizes that software QA, Test and

Validation which may be very

important to the business is not a core competency and a 3rd

party organization may be

able to deliver, faster, cheaper and with higher quality

because software QA, Test and Validation is their core business

• The organization wishes to

create an extension of their capability and capacity by

engaging with a strategic

partner • The organization may want to

sharpen their processes, get

more standardization and get an outsider view.

Tactical

Tactical outsourcing tends to be

more short term in its nature and

driven by business and market

conditions which may be unclear

or unpredictable such as:

• Demand is un clear and suffers

from peaks and troughs • A particular skill set is un

available internally and needs

to be developed or is only a

short term need

• The deliverable requires a particular standard or

performance, accreditation or

certification that can be supplied by a 3rd party

• A specialist asset, such as

equipment or software is required but purchase, training

and support is not justified with

a business case

2.2 Why do companies

engage in outsourcing?

There are many reasons, whether

they be strategic and/or tactical underpinning these reasons will

be a desire to enhance

competitive advantage in the marketplace and create

stakeholder value. A Cap Gemini

Ernst and Young paper indicates the following drivers:

• To Realise Cost Savings

• Lack of IT Staff

• Lack of Expertise • To Improve Efficiency


• Get Access to Broader Skills

Base • Deliver a Better Service

• Focus on Core Business

In addition we suggest based on

our experience that relating to

software QA, Test and validation

the following are also drivers:

• To have a 3rd party

independent contribution

visible to stakeholders • As a route to drive process,

performance improvement

and best practice

2.3 Concerns companies

have with out-sourcing

From the same Cap Gemini Ernst

and Young survey, the key

concerns are as follows: • Security/Confidentiality

• Loss of Control/Visibility

• Choosing the Right Partner • Reliance on Suppliers

In addition we suggest based on our experience that relating to

software QA, Test and validation

the following are also drivers:

• Knowledge acquisition and maintenance

• Environment consistency

• Loss of Flexibility • Transition & Management

overhead Overhead

And most importantly in

recent years following

scandals in major international industries both in

the private and public sector “ Regulatory Compliance”

such as SOX, FDA, GAMP4,

Basel 2 etc

2.4 What are the experiences

business has had with

outsourcing?

Positive

• Cost reduction and hence profitability improvement

• Enhanced services levels internally and to end clients

• Integrated and transparent

operations

• Enhances Capability,

Flexibility and Responsiveness • Reduced Fixed Costs

Caused By:

• Clarity on the goals and objectives

• Goals and risks shared by

partner supplier

• Excellent communications

and relationships • Readiness for out sourcing

(Robust, Reliable &

Predictable Process) • Clear roles and performance

standards

Negative

• Delivery and Quality un predictable

• Rigid scope and documentation

conformance

• Lack of innovation, creativity and experience

• Management effort and

overhead more than expected

• Rework and Duplication

• Loss of flexibility and responsiveness

Caused by: • Big bang over the wall

outsourcing

• Insufficient focus on relationships and

development


• Poor readiness for

outsourcing • Overselling by supplier

• In effective out sourcing

process • In experience on both sides

• Lack of awareness of cultural

differences

2.5 Critical Success Factors

We conclude this section by summarizing what we believe

the critical success factors are:

1. Goal Clarity: Having clear

goals in the business and

operationally, shared with the stakeholders in the business.

In addition having and plan

and operational process that is flexible to respond to

changes in customer, supplier, partner and market

needs.

2. Readiness: A poor track record of delivery

performance (e.g. cost,

schedule and quality) will not be solved by jumping straight

to outsourcing the next

project. An essential ingredient in creating a

successful outsourcing relationship is to ensure that

current product and process

are moved towards best practice performance

(Process Maturity, Product

stability, Development quality, staff buy in and

expertise)

3. Relationships: Formal and informal at many levels need

to be formed for the

partnership to really perform

effectively. These

relationships are of course underpinned by pragmatic

service level agreements,

best practice process and effective Management

information which are all

essential to guide both organizations.

4. Financial Synergy: There has

to be a win –win for both parties the supplier needs to

feel that his customer is a high value customer so he is

willing to invest in that client

and make a profit. The buyer needs to see real

competitive advantage from

the supplier.

3.0 Right-sourcing

Right sourcing is an approach

designed to ensure that the critical success factors relating to

setting up a strategic or tactical partnership are addressed and

that the risks of the change are

minimized. Right sourcing requires a supplier who can

provide on site, near shore and

far shore capability. There are a number of phases that are

followed; each phase has a set

of time lines and performance standards.

3.1 In-sourcing (Phase 1)

Ideally the proposed supplier

takes responsibility for a project

on site initially. The objectives of this Phase for the supplier working

with your organization are as

follows:

1. Deliver a specific project /

Release in line with your companies business

objectives. 2. Provide key team members

who will be part of off site

delivery to work on project and learn


3. Establish overall readiness

and actions needed for a smooth transition.

4. Best Practice process

definition and interface process definition

5. Allow customer work directly

with the supplier.

This phase in effect is a value add due diligence for both

parties and has the following

benefits:

1. The supplier provides a

business deliverable while completing training and

process readiness. 2. Direct relationships are

established face to face

3. The planning for the transition phase becomes interactive

and informed by the real

world operational situations in both companies

4. A pragmatic service level

agreement and improvement plan can be

put in place. 5. At the end of the phase the

client will have a process and

set of best practices that indicate readiness to near or

far shore as appropriate.

3.2 Transition to Offsite (Phase 2,

near and/or far shore)

On completion of Phase 1 the

processes, skills, systems and relationships are in place to carry

out some subsequent projects off

site.

The blend of activity can be structured to include on site,

near shore and far shore

depending on the business conditions that exist at the time.

Key considerations are as follows.

• The supplier owns the

deliverables and

performance • The supplier has on site or

local project management • The location of activity is

reasonably transparent

• A Pilot project or two are completed off shore where

all processes, systems and

performance are validated

• Initial Test Strategy and

Design is completed by the

supplier on site or near shore and Test execution or test

automation script

development work packages are assigned to far shore

operation.

3.3 Ramp phase (Phase 3)

On satisfactory completion of

Phase 2 Pilots and over time more and more of the activity

can be carried out at the off

shore low cost location, this would include more

projects/products and higher

value test design and management activity.

Eventually the blend changes

with the majority of routine test

and QA activity carried out off shore and the supplier providing

local or on site capability for new

products, technologies which are really at phase 1. Subsequent

phases are about refining the virtual test centre of

competence, leveraging the

skills and assets across each location and driving

performance improvement.


4. Key Processes & Systems

4.1 Processes

In order for any right-sourcing

relationship to be effective it is

essential that the key processes are agreed, defined and

documented:

• The development process and

methodology • The test process through the life

cycle

• The source code and

configuration management

process

• The release process internally and externally

• The defect and fix management process

• The Test environment

management process • The communications and

escalation process

• The change control process

4.2 Systems & Tools

Key systems that need to be in

place support the above

processes

• Test Management System to

manage test development, execution and results with

traceability end to end

• Source code control and

configuration management • Defect reporting and tracking

system ideally integrated with

the test management tools • Test Automation tools

(Functional and Non

Functional).

5.0 Supplier selection and

management

There are many considerations

when seldctingh a supplier to be

right sourcing partner. It is best to define the requirements of a

supplier in an RFQ. This is not

intended to go into detail, but just highlight some of the key

features that should be in the

definition of requirements.

• Statement of business goals and objectives

• Statement of business

conditions • Statement of contract

requirements • Deliverables

• Schedule

• Any available estimates • Quality standards

• Contract Terms & conditions

• Details of the evaluation and selection process

5.1 What should you look for

in a supplier?

• Their core competence and capability is software QA, Test

and Validation

• They can demonstrate a knowledge of best practice

• They have a track record of

similar successful projects • You meet the key people

and feel comfortable with

them • They are committed to taking

ownership and sharing risk • They have a clearly defined

process and approach

• They have a local presence and project management

• Their commercial model is fair

• They are flexible, responsive and collaborative during the

sales and negotiation

process as an indicator they are easy to work with.

• They demonstrate where they can add value

immediately and over time

5.2.1 Supplier selection and

management process

5.2.1 Selection

• Profile of supplier

• Request for proposal • Proposal evaluation

• Meeting and Presentation


• Short List

• Audit • Selection

• Pilot Project

• Service Level Agreement • Contract

5.2.2 Management

• Frequent status reports

• Interim deliverables

• On Line metrics and information

• Deliverables

• Effort • Quality Indicators

• Schedule conformance • Forecast • Issues

• Visits and audits • Quarterly formal reviews

6 What the supplier will be

looking for?

A good supplier will be asking questions that verify your

readiness to right-source; they

will have specific interest in:

• Current process maturity • Current performance

• Complementary processes

• Levels of development test • Development and Test

Strategy and methodology

• Interface processes • Information requirements

• Certifications and standards

required • Style of management and

operation • Where they can immediately

add value and where they

can add value over time • Win – Win profit strategy (do

both parties benefit)

7 Contracts and agreements

Any professional business

relationship should be regulated by formal agreements that are

legally binding.

The value of these agreements

are mainly at the start of the relationship as they serve to

clarify both parties expectations

and they also serve to provide

some protection to both parties.

The service level agreement(s) are the most important

document as they are the day to

day management documents that assist the teams in both

organizations understand what is

required, when it is required and how it will be delivered.

These service level agreements

may be appended to the overall

contract or master service agreement:

6.1 Contract schedules or

SLA’s

6.1.1 Service level agreements

The purpose of the service level agreements is to define in more

detail the operational aspects of a specific work package, project

or function. They act as a guide

for both parties on what has to be delivered, how, when and

the performance standards. They

in effect become a schedule to any master service agreement or

contract, and allow flexibility and

responsiveness to both parties to respond to the day to day

business needs and changes. They also remove the need for

lengthy and complex

negotiations each time there is a


new work package or

Requirement.

The key components for inclusion

in the SLA are:

1. Deliverables

a. Statement(s) of work

b. Test and QA strategies

c. Test Plans d. Definitions

i.Test Process

ii. Test environment iii.Control processes

(Config, Release,

defects etc) e. Test Scenarios

f. Test Cases

g. Test Reports h. Release notes

i. Defect analysis reports j. Risk and risk mitigation

reports

k. Entry, Exit and Suspend Criteria

l. Metrics

m. Reports n. Tested code in source

code control system

2. Interim deliverables 3. Key Milestones and overall

schedule 4. Definition of key processes

and references to

documented procedures and policies

5. Roles and Responsibilities on

both parties

6. Primary contact and

escalation points 7. Communications

a. Report frequency and

content b. Meeting frequency, content

and channel

c. Performance metrics

8. Dependencies

9. Assumptions 10. Capacity plan if needed

11. Scope control process

12. Change control process 13. Sources and repositories for

code and information

14. Response times and turn-around times (measured)

15. Assigned and named

resources 16. Costs

a. Fixed price, Fixed Fee, Open Book, Time and Materials

b. Overtime

c. Capital and Consumable purchases, budget,

ownership

d. Expenses, Travel etc e. Bonus and penalties

17. Acceptance criteria and

process 18. Any other term or condition

that requires definition in the master contract or service

agreement.

6.2 Master Agreements and

Contracts

The master agreements/contracts govern

the overall relationships between

the parties and provide legal protection to both parties as well

as recourse in the event there is a breach or failure to perform.

The main sections that should be

included in any Master Service agreement are as follows:

1. Definition of the parties, names, addresses, registered

numbers

2. Statement of the business of each party, the intention of

the relationship, what is being purchased by whom and

what is being supplied and

by whom 3. Definitions and interpretations

of word and terms used in

the contract

4. Appointment statement

5. Commencement and

duration statement 6. Duties of the supplier

7. Duties of the purchaser

8. Fees and Fee model 9. overtime and expenses

10. ownership of deliverables and assets

11. Hours of work and days and

hours the service is being

provided for, e.g. 24 by 7


12. Notice and Termination

13. Effects of Termination 14. Accommodation and

support

15. Confidentiality 16. Intellectual Property

17. Warranties

18. Limits of Liability

19. Indemnity and Insurances

20. Force Majeur 21. Nature of agreement

22. Entire agreement

23. Waiver 24. Severability

25. Notices

26. Non Compete 27. Non Solicit

28. No Partnership

29. Governing jurisdiction and laws

30. Signatures 31. Witness

32. Date

7.0 Conclusions

This paper suggests that for the

most effective outsourcing of

software QA, Test and Validation

and for that matter any

outsourcing of the development

life cycle that there is an

emphasis on quickly getting the

partner engaged in the

purchasers business, with an

emphasis on seeing the supplier

partner deliver early on in the

relationship and doing that close

to the purchasers operations

ideally on site, there are the

additional benefits of mutual due

diligence, relationship building,

and getting ready to off shore.

The approach also is very flexible

and allows controlled ramp of

activities to a near and/or far

shore operation while

maintaining a local presence

and delivery ownership while

minimizing risks. Having the

supplier work directly with you on

your site is a critical success

factor in ensuring readiness to off

shore, and adjusting the blend of

where activity is carried out can

be designed to create maximum

added value from the supplier.

The paper suggests that best

practice outsourcing is as much

about relationship development

as it is about good professional

business practice. It is not about

just creating rules and policing

those rules but about creating an

extension of your organization

with a supplier partner who is

easy to work with and brings

additional competencies and

capabilities that create new

competitive advantages and

value within your organization.

right sourcing

Documents