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The Trusted Supplier Organisation
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Understanding Customer Value
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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.
SMS Supplier's Guide to Successful Outsourcing Partnerships
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.
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The Intelligent Customer Organisation
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Managing the extended value stream
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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.
The customer should always be in control of the relationship. An "absentee landlord" approach to vendor management is a very high-risk strategy. 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 deliver the desired outcome as effectively and efficiently as possible.
To achieve this, the supplier needs the client's engagement in understanding and managing the end-to-end process of delivering value.
SMS Customer's Guide to Successful Outsourcing
Understanding Value
Understanding value from the customer's, user's and stakeholders perspectives is a key principle of Lean systems thinking. Delivering value from an outsourced supply chain requires customer and vendor to work in partnership on understanding and delivering value to the end customer from the extended supply chain.
A supplier cannot deliver good value without the engagement of an informed and committed client management team.
Shared Values, Shared Success
Outsourcing partnerships have two sets of business stakeholders to be managed: the stakeholders in the customer's business and the stakeholders in the supplier's business. To foster the stable, long-term relationship that the knowledge-rich nature of much softsystems outsourcing demands, the needs of ALL stakeholders must be met.
Outsourcing partnerships work when client and supplier are a good cultural fit. Shared business values and shared strategic positioning are crucial. A customer organisation focused on innovation is courting disaster by engaging a supplier which is operationally excellent and provides a highly competitive price per transaction.
Procurement processes must support informed consideration of value over transactional cost. Too narrow a focus on transaction costs increases whole-life costs, decreases effectiveness, and significantly ratchets up the risk.
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Perfecting process performance
requires matched capability between customer and supplier
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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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Independent Third Party
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.
Engaging an independent third party to broker the deal brings objectivity and know-how to the negotiation, avoiding wasteful disputes and complex contractual terms which do little to ensure successful business outcomes for either party.
Using an independent "expert witness" gives customers assurance of value for money, and facilitates a constructive collaborative dialogue around stakeholder value.
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