Business performance improvement; Rightshifting; cutting IT costs; delivering value; effectiveness; software intensive systems; SMS Ltd.

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"A modest shift up the performance scale means a 75% reduction in whole-life costs..."

Principles of Rightshifting

The Effective Organisation

Customer's Guide to Successful Outsourcing Partnerships

Supplier's Guide to Successful Outsourcing Partnerships

The Trusted Supplier Organisation
Understanding Customer Value

Outsourcing software services involves transferring knowledge which is vital to the customer organisation's operations to a supplier specialising in the software engineering that supports delivery of value from those operations.

It is the customer's responsibility to clearly define and communicate the business goals of software projects for new development and enhancements. It is the suppliers responsibility to use their professional knowledge and expertise to deliver the desired outcome as effectively and efficiently as possible.

Assurance of Value for Money

It is the supplier's responsibility to provide the client with assurance that their delivery process provides value for money. Such assurance requires open and honest accounting of performance, typically including:

Verified, independent, quantified audit of recent engagements
Volume-based pricing
Evidence of on-going, continuous improvement in productivity and quality

Delivering Value: Productivity

Collaborative partnership requires a good degree of trust between customer and supplier. While it is incumbent on both parties to agree contract terms which incentivise the supplier to maximise efficiency, the customer needs to have objective assurance from the start of the relationship that the supplier is committed to delivering value for money and eliminating waste from the system.

Traditionally, suppliers have been unwilling to demonstrate such commitment. Data from the International Software Benchmarking Standards Group and other industry surveys show generally poor levels of software performance. The perception of many working in the industry is that attempts to improve the development and delivery process are frequently frustrated by the structure and management of the organisation. Either way, all the Rightshifting data suggests huge scope for improving the efficiency, as well as the effectiveness, of software-intensive systems.

It is SMS' observation that one of the key reasons for the failure to grasp the nettle of software productivity and performance is a lack of reliable and objective data. Many studies have shown that few organizations effectively embed a measurement-based approach to improving performance and predictability. Despite the proven benefits of such an evidence-based approach, the metrics that are gathered are those that are easiest to collect, not those which are needed to support improved performance.

The current interest in the Agile development community in "story points" emphasises the need for effective measurement methods. Unfortunately, this also typifies the industry's habit of re-inventing solutions rather than applying and evolving tried and tested methods.

Output-Based Pricing Regimes

Contract management based on measures of output has proven successful around the world in facilitating an outsourcing partnership focused on the delivery of customer value.

The business value to the customer depends on what use they make of the product - this depends on factors outwith the vendor’s control. But the cost of production is proportional to the functional size rather than how the customer utilises the product.

Basing the price on the units of functionality delivered means the customer pays a fair price for the functionality required and remains responsible for changes to requirements. The vendor is responsible for their process performance and for delivering in line with their promises. There is an incentive for the vendor to improve performance, as this results in better margins. Contracts are kept simple, quick, cheap, and effective, simplifying negotiation and enabling work to commence quickly.

Scope and requirements management

Achieving an effective partnership is usually best achieved by engaging a knowledgeable and experienced Scope Manager to act as the software equivalent of a quantity surveyor in civil engineering. An independent "expert witness" gives customers assurance that measurement methods are being correctly applied and facilitates a constructive collaborative dialogue around stakeholder value.

Lean systems thinking also requires an in-depth understanding of the end-to-end network of processes required to design, develop, produce and maintain the product, whether such processes add value or not.

In a perfect process alignment, work flows continuously, piece-by-piece. Value is always delivered "just-in-time" without excessive stock-piling.

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