Successful client–supplier partnerships are moving away from legacy reporting systems, which reinforce the micromanagement aspects of the staff augmentation model. By concentrating on fewer metrics and identifying issues that affect goals directly, clients will communicate more effectively with their suppliers and speed up whatever course corrections are necessary.

The key metrics that make sense to be tracked at the PMO level are:

1. Time to Market – The quicker a product gets to market the quicker it starts generating revenue. This metric also has a strong relationship to competitive advantage. Sometimes this could be quicker releases and sometimes it could be more number of releases in a given time period.
2. BVA (Budget vs. Actuals) – This metric identifies deviation from estimates and helps locate the reasons for the deviations. BVA’s can be measured individually for Time, Cost and Quality aspects of a project/program. Cost BVA should always be measured in $ and should not be replaced by hours. Mostly, estimates assume a certain skill set which may not be available during execution. Hence the number of hours spent may not be an accurate metric.
3. Hand-off Time – Most outsourced projects/programs have an initiation and knowledge transfer. The focus is to get it done quick without loss of quality and knowledge. As service providers gain knowledge of your processes, this metric should continue to decline for every new initiative. This measures whether the service provider is continuously learning your business and effectively transferring that with it’s team.
4. Customer Satisfaction – Perception is key. Whether a project is a success or not; whether the client will reengage with you or not; is based on the perception of satisfaction. Every customer is different – some need detailed metrics and some do not. But, at the end, if the customer is happy, the service provider has done their job effectively – nothing else matters.
5. Continuous Improvement – Over time, make sure that the above metrics improve steadily. This means understanding root causes and making changes . It also means tracking the metrics consistently to see the effects of your changes.

I am sure that these metrics will lead to hundreds of micro-metrics (depending on the range of services being outsourced) which would be measured and analyzed on a daily or weekly basis by your leads and managers; but these five metrics will quickly tell you whether your choice of vendor, pricing model, and delivery model is working effectively.

Well, my analysis of the situation is very simple and I plan to demonstrate that with an example.

If you take a jar and fill it with air (leave it there and it will get filled on its own). Many of you might know about Brownian Motion. For those who don’t and don’t want to read heavy scientific literature to know what it is – air in a jar moves in seemingly random directions and hits the jar in all directions with as much force and speed it has – repeatedly and continuously. But, the jar doesn’t move! So much activity, force, speed but the jar doesn’t move.

I am convinced there is a scientific explanation to this; but I think if I could give the air some direction, make them all hit the jar in one direction, it will be able to move the jar!

In our organizations too – where there is seemingly lot of activity and rapid motions without commensurate growth and rewards – what we need is FOCUS – direction, strategy, leadership and vision. Ultimately, it boils down to FOCUS, and nothing else!

1. International Law, Regulations and Bureaucracy – Fulfill all Legal requirements and ensure that all necessary paperwork is done. Connections, relationships and know-how of the local regulations matter – in getting things done on time.
2. Time Difference – The Indian Standard Time (IST) is 8 to 13 hrs ahead of the US time. This will pose challenges in remote administration and management.
3. Cultural Difference – Managing a different culture and its nuances would need trained personnel who understand the Indian Culture.
4. Language – While most foreign country residents that are on the top 10 outsourcing list understand English; this does not necessarily mean that they will understand your accent, choice of words and communication.
5. Recruit, Train, and Retain staff overseas – The human resource challenges are different than that of US. Recruiting and retaining staff overseas is a serious challenge. High turnover would be detrimental to the brand image and delivery. Lack of a brand identify in the country will even make it difficult to recruit the initial team in terms of numbers, let alone quality.
6. Remote Management – Communicating ideas/concepts over the digital communication medium without any regular face-to-face interaction will pose a challenge which would need devising new ways to communicate and make the offshore team feel like being part of your larger organization.
7. Infrastructure – Location, operational infrastructure requirements and network connectivity needs a local team who has relationships with reputed local vendors and information about the available pricing models along with negotiating skills.
8. Understanding of Best Practices – Understanding of what works and what doesn’t and knowledge of best practices is a critical success factor.
9. Time to Market – Setting up the infrastructure, team, processes, and systems and making them ready to deliver will require significant upfront time and financial investment.
10. Exit Strategy – When you set up your own center and have invested time and money to make it operational – what if your strategy does not work out? You lack an elegant exit strategy.

Going with a partner is brings the best of both worlds – extending your organization to an offshore location to extract it’s benefits but without the risks of setting it up yourself for failure. Choice is simple.

If you focus on making the customer happy on every project – deliver outstanding results  – all the other economic equations will fall into place.

A happy customer means:

Customer Word of Mouth will lead more customers with a lower marketing budget

Repeat Business from the customers means lower cost of sales (almost 85% lower than finding new customers)

Better employee morale as employees are and will be associated with successful projects and that will lower attrition and HR + training costs

The lower costs will result in better profitability. So, focus on customers and NOT on profits.

I started reading it on Thursday (start of Thanksgiving weekend) and I could not put it down. Even through the interruptions and calls for help (I have a three week baby at home), I kept getting pulled back to the book till I finished it. It’s been a long time that I have read such a book – maybe Agatha Christie series is that last one.

It was simple and real. Delivered the message with simplicity and earnestness. It satisfied my hunger, but left me wanting for more.

Hara hachi bu.

Must read for all that need to share a message and make a difference.

Vendors and customers should start thinking and working towards a pricing model that is based on the outcomes – value that the product or the services will generate for the company.. in terms of real $.

If a product or service can increase revenues or cut costs and you can put a $ value to it (ROI), the customer would be willing to share a part of that savings with the vendor… maybe annually till the product or service is used!

Needless to say, this will automatically bring focus, camaraderie and partnership value between all parties involved.

There are of course pitfalls an risks in this model. But, with some disciplined governance, clear tracking and sharing of metrics, these risks can easily be mitigated.

The biggest benefit that this pricing model will bring is that both the vendor and customer will work hand-in-hand as one team to achieve the business goals of the project – the real reason for this partnership!

How Does it work?

Your offshore vendor would provide you with the resources, basic infrastructure, HR and other general administration support. The team would work for you in a dedicated manner using your processes, tools and under your project management control.

For what can this model be used?

This model can be used for all business processes in your organization that does not need proximity to the customer. Specifically, this has enormous advantages with respect to software engineering, testing and infrastructure management.

How does the pricing model work?

Pricing depends on the scope of service. If you are looking for resources, infrastructure and general administration support, you could negotiate really low prices as long as you have faith in your PMO to manage the offshore team. In this scenario, there are no SLAs – all you sign up for are resources with predefined skills.

Prices go up as you set service levels. Service levels equates to risk for the vendor and additional governance – these drive prices up.

How do I start?

Start small! A small pilot with a non-critical project is the best way to start. Keep the engagement short – between 4 and 6 weeks. Once  that is successful, it will be easy for you to replicate that success across multiple projects and teams.

Write to me if you have any questions. In the next few weeks and months, I will publish more articles that elucidate the different aspects of a Dedicated ODC model.

Here are some sites that I have used and I hope you will find them useful.

Company Website

Needless to say, the company website is the first place to start to learn about the company, its vision/mission, its management team, products/solutions, customers from the website.Don’t forget to check out the balance sheets or other financial information on the website.

One area of the website that deserves more respect than it gets from sales teams is the career section. The career section can tell you a lot about the kind of projects they are working on, the technologies they use and the resources that they are looking for. This can be important details that can give you an edge.

Google – News, Finance, Timeline and Wonder Wheel

At the top of the Google search results, click on the link “News” and Google will give you all news items related to your keyword – a very effective way to read up on company news.

Similarly, go to “Finance” and get results around the financials of the company and what the experts are talking about the company.

Still in Google Labs, Google Timeline Search is a very effective way to read up on a company and how it has evolved over the years. This search sometimes renders a pattern that may not be visible in a raw search or even on the company’s website.

The Google Wonder Wheel is a great way to arrange search results and show related keywords. Again, a great tool to unearth patterns and connections that are not so obvious. To activate the Wonder Wheel, click on “options” on top of the search results and look for it at the bottom of the list that appears on the left.

Overall, Google is a great source for information, patterns and connections – past and present.

Networking Sites – LinkedIn, Facebook, Twitter, Ning et al.

Social Networking is going crazy – everyone is on it – and people are letting their guards down and getting private in these sites. Not just that, even companies are getting on to the bandwagon to communicate with their consumers.

Both companies and key executives are on these platforms and are a great source of information.

Most networking sites need the connection to accept your request to connect before you can look at their information and their connections, but LinkedIn is a great source of information even without the connection having been accepted.

Job Boards – Simplyhired, Dice, Monster, Careerbuilder et al.

Job Boards are a great way to search what the target company is recruiting for and technologies that they use. Use this information effectively and you figure out the key projects in the works and start up a conversation with the senior managers by pitching something that is current and real.

Here are my ideas on what could be done to control costs today that will deliver long-term value.

1. Reduce sales salaries progressively to zero or a marginal amount (say $2000 per month) over 3-6 months and increase commission % proportionately. In this new economy sales should make money only if they are doing their job – booking revenues. As a long term measure, 50% of commissions should be paid to be in stocks. This incentivizes staff to be part of organizational success. Since this is a deferred income for staff, incentivize this by giving them stocks at a discounted value.
2. Reduce delivery salaries, but may not be to sales levels. Have commission based on utilization/profitability and participation in a winning deal. As usual, 50% of commissions to be paid in stocks at a discounted value.
3. Terminate underutilized contractors. Underutilization of hourly contractors can be very costly. Get a 6-month utilization report for all contractors. Reallocate hours and contractors so that you can let go of those contractors you don’t need. Implement a strict recruitment policy to ensure that only critical contractors are recruited.
4. Renegotiate rates with vendors. If you use contractors heavily and have a vendor management program, ask for across-the-board reduction of 15-20%. In this economy, they will either accept or you can find others who will take up on the offer and deliver same or better quality resources.
5. Implement a work-from-home policy. If you want to know the benefits of working from home, click here. Needless to say the organization saves heavily on infrastructure costs. Sales is anyway expected to be at customer locations and delivery is bound by their project plans. Why bother? Let them work from home as long as they deliver. Measure by their performance and not by the number of hours they spend in office!
6. Eliminate landline phones.  Most people today have an office phone and a cell phone. And, most of them forward their office desk/landline phones to their cell phones. I am not sure why we need two and sometimes three numbers. Remove the office phones and pay for cell phones for your staff. Create a tiered phone expense policy based on usage. Get a corporate account with the wireless carrier so that you can negotiate good rates.
7. Transition to SaaS. The standard software needed within an organization such as email, finance systems, project management systems, intranets and CRM are all available today as Software As A Service (SaaS). They are robust, scalable and don’t have any administration or maintenance overheads. Their TCO is much better than enterprise software. If you want to own your software, at least move to the Cloud so that you are paying only for usage.
8. Transition to open source software. The business model of open source allows for the software to be cheap. In most cases the open source choices are equally robust and scalable as other high $ licensed (branded) alternatives. Some salient examples are Yahoo Zimbra for mail, Ubuntu for desktops and servers, Sugar for CRM, Lotus Symphony for Word processing.
9. Outsource infrastructure management and helpdesk. If this is not a service you provide and IT Infrastructure is not your core competence, outsource it those who know it well and have depth of resources. Now, you don’t have to look for resources to manage systems if you changed technology platforms or bought new software.
10. Communicate, Communicate, Communicate. Organizations are intelligent. Just because you have not talked to your employees about cost cutting measures doesn’t mean they are not discussing the options among themselves. The key to success with the measure is to get buy-in from the employees, brainstorm with them about opportunities for cutting costs and methods of implementation. Have a swat team help the organization and the staff with the changes in work culture and processes as you implement these changes. And finally, share the results with them. Let them know that their contribution paid off!

And I will repeat what I said in my earlier blog – Make sure you identify performance indicators around your measures. These indicators should be measurable and easy to understand. Track those indicators regularly. Share information about the indicators and the organization’s performance to the entire organization. Include your staff as part of your goals and you will find that they will contribute to your success!

Razor-Sharp Focus

The Mass market is dead. Today is the market of Niches. – Jeff Jarvis, What Would Google Do?

Focus on who you will serve and not what you will serve. Let the market decide the composition of your services, the service delivery model and the expertise you need to build. Technology is a tool to solve the business problems – not the focus. Tools are important, but try to visualize the bigger picture. It’s key to focus on the industry and understand it thoroughly.

Most companies I have seen start with a generic list of services and expect the customers to find them of use. That does not work in today’s world. It is important to have a razor sharp focus about the market you serve.  Your services and solutions should be built around the challenges that this market faces. In my opinion. expertise in a industry vertical delivers more value long-term than the expertise in technology.

Global Delivery Model

The playing field has been leveled. The world has been flattened. – Thomas Friedman, The World is Flat

The world is getting flatter and customers are getting cost conscious. While customers will continue to pay top dollars for specialized industry/process specialists, technology competence is mostly a commodity. Needless to say, you want the industry experts as close to the customers as possible while the technology team can be spread across the world.

A global delivery model is key to success. It’s all about ROI and the right global delivery model will provide you the most efficient arbitrage and value model to be successful.

Elaborate Incentive Policy

Never Underestimate the power of Incentives. 
– Tips from the Trenches #34

Employees are your assets. Take care of them!

If you need to understand the need of a good incentive policy, read the Pavlov’s Experiment. Incentives are the conditioning mechanism that recognizes contribution and ensures that teams are consistently delivering above and beyond their responsibilities and even capabilities. Need for acknowledgement and recognition is core to human psychology and a well directed incentive mechanism will ensure that your staff stretches and tries to reach for the stars consistently.

A few weeks back I was reading an email from one of my colleagues about Google’s multi-tiered incentive program. Starting with small gift cards, it included ownership and equity participation for those who lead and implemented a successful revenue generating products. Employees were given a free choice to participate in the projects of their choice which had varying business priorities. The employees are allowed to maintain a work-life balance and choose the recognition they wanted, the $ they earned, and how busy they wanted to be. The employees have made Google the #1 brand in the world – not a surprise! It just proves that the right incentive policy is one of the critical components of a successful resource-intensive organization.

Strong Client Advisory Team

In the professional services world, your clients are your mouthpieces. A good word about you and your capability from a customer is worth much much more than the ROI you can realize from a well directed marketing program. No wonder, customer testimonials, reference letters are the standard benchmarking techniques used by your prospects as part of their evaluation program.

Given that customer testimonials are so important, I feel taking that relationship to the next level is logical. Form a Client Advisory Team and use them to market (word-of-mouth, personal blogs etc.) your capabilities to customers in their network. Use them to brainstorm new services and solutions that may be relevant to their industry. Pitch an idea to them and let them tell you what will work and what not. Ask them to be your trusted references. Invite them to join your events, webinars to talk about their experiences. An industry insider will be talking on your behalf to people who trust him – his testimonials will count!

And finally, these are your customers – people who trusted you, worked with you and made you successful. Bend your back for them! Treat them well. Form personal relationships. Make them feel at home!

Partner, Partner, Partner

And finally, realize you cannot do everything alone. You don’t have the resources that the bigger firms have – breadth of experience, depth of resources, and brand. They can command the market just by their presence. They have delivered multiple times in the past that makes them credible. So, you got to pull together a group of partners who will complement you. Together, in a group, you will be able to engage in flank attacks and guerilla warfare in an agile manner to defeat the elephants.

But, that’s easier said than done. Partnership is not just about signing up a teaming agreement and adding their logo to your website – It’s about trust, relationship, and sharing. Partnership needs commitment, attention and focus. Develop a partnership strategy and a program around that strategy. Try to be consistent with your partners and you will see the benefits as soon as they do!

Make sure you identify performance indicators around your key focus areas. These indicators should be measurable and easy to understand. Track those indicators regularly; initiate programs to improve the indicators. Share information about the indicators and the organization’s performance to the entire organization. Include them as part of your goals and you will find that they will contribute to your success!