Secret sauce of offshoring and distribution - summary of Scan-Agile open space session

October 31, 2008 by Artem

This Wednesday on the first Scandinavian Agile conference in Helsinki I was running an open space session about what works and what doesn't work with distributed and/or outsourcing teams. During the two hours we had an excellent discussion with many people in various roles from offshore customers to ones working in an outsourcing company to people being pushed to distribute, from product managers to Scrum Masters to developers.

A lot of the discussion results are intangible and stay in the heads of the participants and I didn't record the excellent discussion on feature teams VS component teams VS functional teams in the case of distribution. Here is the brief summary of what was commonly acknowledged to be working and not working in cases of offshoring and distribution. Use at your own risk.

What doesn't work

• Distributing for cutting costs. Whatever attractive cost cutting might sound for business people, the problem is that value of software development is way more difficult to calculate, than the programmers' salary and if your only motivation is to cut costs, you might be loosing way more, than you are getting without realizing it. Some studies report that with the careful calculation you may loose way more, than you are getting.
  • Also when many business people read the same cost cutting books and are pushed by similar shareholders, the demand for programmers in the "low cost" countries raises that quickly, that prices go up and it is not that low-cost anymore. Some companies started realizing that and are actually moving jobs back to the main site.. at least they were doing that before the current financial crisis.
• They come, learn and go. For the same reason of high demand for programmers, the turn-over in the typical outsourcing countries can be that high, that any people you see are newbies who learn new technologies. Once they learn, they go for continuing their career in a different place.
• Investing in coaching people in remote location. Because of the same high level of turnover, you might find out that you are investing into people.. who will go to another companies and position very soon.

What works

• Expand globally, when you don't have skills or talent available locally. For example, in Finland all the guys skilled in Linux programming seem to be hired by just a couple of companies. If you want to hire more people, you have to look in the other countries.
• Get good guys only, Start with motivated individuals. Getting good guys is important in any kind of business, but it is twice as important in the case of distribution, especially in the start-up phase. Distribution is adding enough challenges on its own. Hiring the mediocre people might make it unbearably difficult.
• Synchronization, synchronization, synchronization. Whenever you get a multisite configuration, there is a communication barrier and it is twice as important to make the problems and issues as visible as possible. Invest into daily or ideally continuous builds, extensive automated test coverage and communication tools such as wikis and video conferencing.
  • Invest into good communication tools. Tandberg video conferencing are expensive comparing to the telephone, but they make the communication so much easier that I would wholeheartedly recommend considering the video conferencing seriously (Note, I am not affiliated with Tandberg in any monetary way)
• Small business. A particularly good type of a customer for offshoring seems to be small and very small business in the Western countries. The scale of the business makes such customer count money well, invest into making sure the development team understands what he wants and such customers are often eager to embrace early releases and provide continuous feedback.
• Start together (meet live). When starting the distributed project it proved to be effective to colocate team or at least some members from remote and main site teams for a reasonable amount of time such as several weeks to several months. That helps building the common understanding greatly.

General conclusion:

General conclusion was such that outsourcing and distribution is rarely a good thing if you count actual costs really well. With the few exceptions, the only case when it works is when you distribute for getting local talent not available at your main site or when you expand to get connections to the local market. In any case it is more efficient to become efficient on the main site first and expand to many locations after that.

What is your experience in the distribution and outsourcing? Does it work for you? If it works, what is your secret sauce?

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