Press About Luxoft
13.04.2005
Dmitry Loschinin, President and CEO, Luxoft on choosing the right outsourcing partner.
For richer, for poorer?
Dmitry Loschinin, LUXOFT President and CEO, explains how to build successful client relationships.
source link Dmitry Loschinin, LUXOFT President and CEO, explains how to build successful client relationships.
Most people think companies outsource as a quick way to save money. But focusing on costs alone could result in unreliable service or products that could damage a company’s reputation. Dmitry A. Loschinin, President and CEO of Luxoft (www.luxoft.com), an ISO 9001 and CMMI 5 company that has developed world-class outsourcing processes for such clients as Boeing, IBM, Dell, Microsoft, Google, Intel, and Deutsche Bank.
In this Q&A, Loschinin provides insight into successful outsourcing relationships.
What mistakes do companies typically make when deciding to outsource?
They decide to outsource only to save money, looking for the lowest-cost provider while ignoring a variety of parameters and vital factors, such as task complexity, suitability for outsourcing, where a company is and where it wants to be in terms of the offshore maturity model, and what partnership type is in line with its strategy. It is critical that executives in charge have a clear understanding of why, what, where and with whom to outsource prior to finalizing a decision. We use a decision matrix as a part of our client engagement model. This matrix helps our clients not only select the most appropriate outsourcing relationship, but it also helps companies determine whether outsourcing is right for them in general.
Once companies decide to outsource, they need to allocate resources such as analysts and project managers to facilitate knowledge transfer, solve issues such as infrastructure integration, and to handle the intense level of communication necessary during the ramp-up period. Once knowledge transfer begins it is too late to inhibit the process by citing information security restrictions. Client engagement done correctly avoids such problems.
Why isn’t cost savings the most important variable when determining the best outsource provider?
Cost savings is important but so are time to market, the need for an organization to focus on core activities, a company’s access to required skill sets, and quality improvement. By taking into account all practical criteria, including customer outsourcing maturity status, companies can determine whether or not they should conduct a project internally or outsource it.
What should companies look for in an outsource provider?
Aside from labor costs, companies should also look for supplier technical expertise, strength of management, organizational capabilities, cultural fit, language skills, and commitment to quality. In fact, companies should look for outsourcers who have achieved high level process certifications such as CMMI level 4 or 5, and develop software following strict standards and rules that govern all phases of development processes. After a short list of candidates is identified, companies should conduct a full evaluation prior to final selection of the outsource provider assessing geopolitical characteristics, regulatory environments, standards of living, and infrastructure.
When India seems to be the global outsourcing/offshoring leader, why should companies consider outsourcing to Russian companies?
The question of whom to choose as a partner is best decided according to specific requirements rather than geographic location. And there are technical, cultural, and economic reasons to consider Russian outsourcing providers. Certain applications characterized by a higher level of complexity require non-traditional, “one of a kind” approaches. Russian-trained professionals are renowned for their ability to creatively handle complexity, executing demanding projects with ease and excellence. While India has become Corporate America’s back office, Russia is increasingly seen as the destination of choice for software product companies as well as enterprises looking for strong analysis and algorithmic skills. Russia’s reliable infrastructure is another advantage. Culturally, Russian work and communication habits are similar to those of workers in the U.S. Additionally, the approach to high-level architecture and design, and problem-solving methodologies used by Russian IT professionals are virtually analogous to those typically employed by U.S. specialists. Finally, Russia’s IT industry is at the beginning of its growth curve. The environment is dynamic and characterized by rapid growth, low wages, new and strong government support, and very low attrition and turnover rates in comparison to India. All this makes Russia an attractive newcomer.
What is the client engagement model and how can it help companies avoid pitfalls?
The client engagement model is a framework that guides a customer and software development outsourcer to achieving a successful relationship. This framework contains rules, processes, methodologies and other components that, if left undefined, could easily cause trouble during the engagement. Effective models also contain special parameters that allow the tailoring of rules, processes, and methodologies to suite each client’s unique requirements. This flexibility becomes a key element in reducing engagement risks.
Why must outsource providers be flexible enough to consider specific needs of the client? Typically what form do these specifications take? E.g. speed, linguistic requirements.
Henry Ford famously painted his Model T any color as long as it was black. Companies should ask potential outsource providers about their flexibility to customize and fine-tune their processes to account for the infinite differences and needs of each client, such as: its operating standards and processes, outsourcing goals, engagement size and scope.
Does the client-outsource provider relationship change over time? In what way?
Relationships change significantly. The client-outsource provider relationship has four phases: pre-engagements; engagement engineering; engagement tuning/operational trial; and sustainable operation. Each time a phase is completed, the relationship changes. The engagement tuning/operational trial is the most intensive phase. In the sustainable operation phase, the changes generally come in the form of optimization adjustments.
How can you determine whether outsourcing is successful?
Key indicators for successful outsourcing include meeting all target objectives and the improvement of client business parameters. Target objectives should include: time, budget, scope and quality, resource utilization, retention targets, and overhead costs.
What are some best practices to ensure outsourcing success for customers?
Clients and outsourcing providers should define key performance parameters at the start of each engagement. The two organizations should establish clear measurements for each parameter and assign a straight connection between these performance parameters and client’s service level agreements. Other best practices include: maintaining a continuously high level of communication, formal issue resolution workshops, and risk reduction programs.
CXO