The document discusses three main challenges of global software development (GSD): increasing cost pressure, complexity of projects, and organizational volatility. It provides examples of how increasing complexity can lead to higher costs. The document also shares some of the author's experiences with coping strategies, including using new and old media for project communication, knowledge networking within and outside companies, and managing complexity.

1. Mastering Current GSD Challenges
Assoc. Prof. Dr. Michael Heiss
Global Vice President for Knowledge, Innovation & Technology
Siemens IT Solutions and Services
© Siemens AG Austria 2009. All rights reserved.

2. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

3. Cost pressure – the main driver for GSD
 During the last years the
cost pressure for offering
IT services and software
development has been
increasing steadily
 This holds true for many other
businesses, too, if the work is
easily transportable
 Software business is
people intensive
 The reduction of hourly rates
is the key argument for CFOs
 This is often seen like a
natural law of globalization
Page 3 © Siemens AG Austria 2009. All rights reserved.

4. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

5. A pragmatic definition of complexity
We call a technical system
complex
(in contrast to complicated),
if it is impossible to predict the
behaviour of the whole system,
even if you know exactly how
each of the system components
behave and interact.
Page 5 © Siemens AG Austria 2009. All rights reserved.

6. Just a simple example for complexity
System 1
1
x Delay y 0,8
3 very simple elements
Ausganswert
0,6
one step 0,4
0,2
3 simple behaviors 0
0 1 2 3 4 5 6 7 8 9
Takt
“perfectly predictable” System 2
0,2
x y
Ausganswert
y = x - x² 0,15
0,1
0,05
0
0 1 2 3 4 5 6 7 8 9
Takt
x(t=0..4) = 0,8
x(t > 4) = 0,1 System 3
x y 4
Ausganswert
3
y = 3,8x 2
1
0
0 1 2 3 4 5 6 7 8 9
Takt
Page 6 © Siemens AG Austria 2009. All rights reserved.

7. Just a simple example
Complexity is generated
Delay
by interaction one step
y1 x = y3
x = y1 y3
y2 x = y2
y = x - x² y = 3,8x
Page 7 © Siemens AG Austria 2009. All rights reserved.

8. Just a simple example … ???
Complexity is generated
by interaction.
The result is…
1
0,9
0,8
0,7
0,6
Ausgangswert
0,5
0,4
0,3
0,2
Even the best supercomputer of the world cannot predict more than 300 steps
0,1
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
y1 full precision
volle Genauigkeit
y1 limited precision
auf drei Kommastellen
Time steps
Takt
Page 8 © Siemens AG Austria 2009. All rights reserved.

9. A typical real-life software example:
the high number of interactions leads to high complexity
In a real world software system the number of elements, interactions
and dependencies is far larger than in the simple “toy” examples, e.g.:
 integration in legacy systems,
 interoperability with additional IT systems
Example: Intelligent Networks service platform for telecom systems (more than 100 customers worldwide)
Page 9 © Siemens AG Austria 2009. All rights reserved.

10. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

11. Organizations are changing rapidly:
new ways of global cooperation are opened
“The only constant is change”
 Mergers and acquisitions,
 Reorganization of companies
 High turnover rates in many
low-cost countries
Interesting new perspectives
such as
 “Project companies”
 Open innovation
 Crowd sourcing
Page 11 © Siemens AG Austria 2009. All rights reserved.

12. The challenge of „project companies“:
working with the unknown
project
company 1 company company 2
Survival of the fittest
Evolutionary approach:
small company mutation, recombination, selection
Page 12 © Siemens AG Austria 2009. All rights reserved.

13. Open Innovation:
Suggestion for a change in cooperation models
Paradigm shift of Open Innovation1)
The lab is The world
Strategic opening of innovation is our lab
our world
Closed innovation Principles Open innovation Principles
• The smart people in our field work for us. • Not all the smart people work for us. We need to work
with smart people inside and outside our company.
• To profit from research and development (R&D), we • External R&D can create significant value; internal R&D
must discover it, develop it and ship it ourselves. is needed to claim some portion of that value.
• If we create the most and the best ideas in the industry, • If we make the best use of internal and external ideas, we
we will win. will win.
• We should control our innovation process, so that our • We should profit from others' use of our innovation
competitors don't profit from our ideas. process, and we should buy others' intellectual property
(IP)
1) Chesbrough, H. (2003), "Open Innovation: The New Imperative for Creating and Profiting from Technology“,
Harvard Business School Press
Page 13 © Siemens AG Austria 2009. All rights reserved.

14. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

15. The GSD-dilemma for high-cost countries
customer needs,
global competition integration in existing systems global competition
GSD cooperating with unknown
Increasing Increasing Increasing
cost pressure complexity volatility
only the best
Higher complexity leads to higher costs
Page 15 © Siemens AG Austria 2009. All rights reserved.

16. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

17. How to reduce the offshoring cost barrier:
Invest in communication and collaboration!
Communication Challenges
Offshoring Cost Barrier
Cost
Ctotal = Cop + Cdistr
100% Cop, HC
Cop
100% Cop, LC Cdistr Cdistr,mature
Cdistr =
Cdistr,mature Collaboration Maturity
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Collaboration
Source: S. Lasser, M. Heiss, Proc. of IEEE IPCC, 2005
Model
low collaboration maturity  high distribution cost  high offshoring cost barrier
The higher the communication maturity the lower the distribution costs
new tendency inverse offshoring model
Source: Proceedings of the IEEE International Professional Communication Conference (IPCC 2005); ISBN:
0-7803-9028-8 Limerick, Ireland, 10-13 July 2005, Thread: Engineering Management, pp. 718-728.
Page 17 © Siemens AG Austria 2009. All rights reserved.

18. Project Communication: proven “old” practice
 Kickoff meetings are worth the investment (also in times of travel
restrictions) – team members should meet at least once personally.
 You have to deal with
emotions on both sides:
 “Am I supposed to help outsource
my own work?”
 “Why do we get only the boring stuff
and little information?”
 To achieve a high collaboration maturity
for distributed teams requires trust and
months / years of working together
 The main drivers for collaboration maturity:
Processes, communication and tools.
Page 18 © Siemens AG Austria 2009. All rights reserved.

19. As trust increases the productivity of GSD,
staffing of GSD teams needs human intelligence
 Where can I find the available
people with the right skills at the
right time for a low hourly rate?
 Up-to-date company-wide
data bases with skills profiles
are desired (in middle Europe
opposed by workers´ councils)
 Such data-based people search seems to work already well for
consultants (individual experts working loosely together)
 In our experience the data-based approach does not work well
for staffing of GSD teams (continuity, skills level, soft factors,...)
 Challenges:
Management of teams, locations, multi project management
Page 19 © Siemens AG Austria 2009. All rights reserved.

20. Project Communication: new media help a lot
to overcome barriers and improve productivity
Scenario: distributed collaboration in development project with 17 team members at
3 sites (Project Management, Integration and Development in Vienna, Bratislava, Cluj)
New communication media (Microsoft OCS) encouraged people to change the
communication processes so that the desired increase of productivity was reached.
Changes: OCS incl. Video, number of meetings, organizational change (meeting culture),
more conscious choice of synchronous or asynchronous media
(task/media fit: ambiguity vs. uncertainty)
Improvements:
 Reduction of response time
 Reduction of solution time (due to „Presence Service“ and “Instant Messaging”
more awareness about the work of other team members)
 Increase of productivity of the team members
 Information Sharing
 Transparency about the process improvement
More details in the presentation by
Daniela Damian and others this afternoon!
Page 20 © Siemens AG Austria 2009. All rights reserved.

21. Robust project communication in natural language
is a key factor – “English as a lingua franca”
 In GSD projects people with different mother tongues and different
cultural backgrounds are working together
 In our projects almost nobody speaks English as a mother tongue,
but everybody has to communicate in English
 This topic is in our experience underestimated in the scientific
discourse about GSD
 Most prominent challenges for the robustness of communication:
 Requirements engineering
 Project management, meetings and meeting minutes
 Inquiry culture in daily work
More details in the presentation of
Benedikt Lutz this afternoon
Page 21 © Siemens AG Austria 2009. All rights reserved.

22. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

23. Knowledge Networking across the organization
is not just a vision: it already works today
Example:
Social Network Analysis
Siemens IT Solutions and Services,
System Design and Engineering
„Who has helped you in your professional work during the last 12 months“
Page 23 © Siemens AG Austria 2009. All rights reserved.

24. Technoweb – company wide knowledge networking
identify implicit knowledge via the activity stream of the appropriate expert
higher business value lower business value
higher accessibility
Internet, publications
visible
Blogs, Microblogs, Wikis,
CRM, CM, Intranet
DIGITIZED
limited
Proj. E-mails
access
pers. Desktop
data
pers. E-mails privacy
Voice
NON DIGITIZED
lower accessibility
Face 2 Face
identifiable not
visible
Brain
activity stream
Page 24 © Siemens AG Austria 2009. All rights reserved.

25. Knowledge networking has a business impact on the
project performance and the speed of new technology adoption
10 years of  start small and evolve continuously (business demand driven)
experience with  Hold barriers low for participation
TechnoWeb  Balanced bottom up / top down approach
Key aspects of SIS TechnoWeb
 Networks related to technology
 Focus on networks of experts
 Open for all employees
 Very low cost of operation
Facts of TechnoWeb Business impact
 534 knowledge networks
 8072 members  Trend setting: 31.6 % of TW members are already in
 634 technologies SIS top priority trends (analysis FY08)
 3366 network services  Early/fast identification: Significant Improvement
 38 countries regarding availability/visibility of new technologies
Examples for knowledge networks within  Innovation: TechnoWeb members have a 7 times
TechnoWeb: RFID, Green IT, Car-2-X, higher probability of a successful innovation idea.
Security, DEMS, Architecture, Remote Service,  Cost reduction: 0‘4 Mio € in FY2008 could be saved
Modeling, Semantic Systems
only by the TechnoWeb urgent requests
Page 25 © Siemens AG Austria 2009. All rights reserved.

26. TechnoWeb 2.0 provides a globally integrated
“Dashboard" for technology workers
The Siemens Technology Network Dashboard
Rating of network automatically
activity emerging structure
Techno
Web
2.0
Short description of
technology/topic Topics that are related to
network
rating
+
Partner Networks
Incorporated Fast
Technology Search
Links & references to
related content
Communities with related
Services and Network services/references topics
experiences provided by
the network
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Page 26 © Siemens AG Austria 2009. All rights reserved.

27. Microblogging: the simulated open-plan office
Microblogging...
• supports the private/collaboration/social aspect
(important for globally distributed teams)
• helps to separate the business stream (mailbox) from the
knowledge stream (twitter):
the business stream needs 100% to be read, elements of knowledge
stream: only if the subject looks interesting / you have time
• increases the communication frequency compared to full blogs
barrier much lower (less time required)
• A typical use case for professional users is to use
twitter as a dynamic social bookmarking tool
• generates a digital activity stream which helps
to identify implicit knowledge of experts
Page 27 © Siemens AG Austria 2009. All rights reserved.

28. Microblogging:
lower barrier, higher frequency, and social relationship
publishing continuous
140 letters search on
Cappuccino law: “Enterprise
messages
80% coffee and 2.0“
retweeting incl. link
20% foam
interesting
messages
continuous
non-public
following search on
replies
interesting “Open
persons Innovation”
25
25
20
20
15
15
Number of Enterprise 2.0 tweets
10
10
on June 11, 2009
5
5
0
0
00:00 04:00 08:00 12:00 16:00 20:00 24:00
1 2 3 4 5 6 7 8 9 10 11 12 13
Page 28 © Siemens AG Austria 2009. All rights reserved.

29. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity

30. Be an expert in managing complexity
Topics of our recent study:
 Detecting complexity in the
problem space vs. reducing it
in the solution space
 Usability Engineering:
Prototyping, Standardization
 Patterns in SW Architecture
 Architectural tactics
 Organizational patterns
 Metrics as useful indicators
 Responsibilities
 Agile development practices
 Safety nets: robust systems,
self healing systems
 Test driven development
 Impact analyses
Source: M. Heiss, St. Huber, B. Lutz, M. Arnhof: „Management of Complexity“,
presented at the MIT-Europe conference on March 25, 2009
Page 30 © Siemens AG Austria 2009. All rights reserved.

31. Agenda
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity
 Conclusion

32. Conculsion:
measures to cope with the GSD-dilemma
customer needs,
global competition integration in existing systems global competition
GSD cooperating with unknown
Increasing Increasing Increasing
cost pressure complexity volatility
only the best
higher complexity leads to higher costs
 Increase the communication maturity (incl. new technologies)
 Increase the knowledge networking maturity
 Increase the maturity in managing complexity
Page 32 © Siemens AG Austria 2009. All rights reserved.

33. Thank you for your attention!
Assoc. Prof. Dr. Michael Heiss
Global Vice President for Knowledge, Innovation and Technology
Siemens AG Österreich
Siemens IT Solutions and Services
Gudrunstraße 11
1100 Vienna
Austria
Phone +43-5-1707-46560
Fax +43-5-1707-56591
Mobile +43-664-8855 1526
mailto:michael.heiss@siemens.com
Blog: http://twitter.com/heisss
Fotos: http://www.flickr.com/groups/visualization/
Slides: http://www.slideshare.net/heisss
Page 33 © Siemens AG Austria 2009. All rights reserved.

34. Appendix
 Top 3 challenges for GSD in our business
 Increasing cost pressure
 Increasing complexity of projects
 Increasing volatility of organizations
 Some of our experiences
in coping with these challenges
 Project communication
using „old“ and „new“ media
 Knowledge networking
within and outside the company
 Management of complexity
 Conclusion
 Appendix

35. The Agile Software Development paradigm
Heavy team – light methodology, high productivity
 Less documentation – personal communication is getting more
important (difficult for dislocated teams)
 Product owner: direct
customer involvement
(the biggest challenge
for dislocated teams)
 Beware of “daily SCRUM”
phone conferences at
midnight!
 Our experience for success:
local customer proxy, stable
structures of teams, knowing
the partners personally
Source: Siemens IT Solutions and Services
Page 35 SDE System AG Austria 2009. AllSEM reserved.
© Siemens Engineering Method rights

36. Balance between local and global responsibilities
 In our experience, a balanced approach of global and local
responsibilities on project and organization level is the
key for success
 Organizational
patterns of
best practice
are a good guide
 Many patterns
are grounded in
“soft topics”
 see e.g. our
“Project Insights”
or the recent “Adrenalin Junkies” of the Atlantic Systems Guild
Page 36 © Siemens AG Austria 2009. All rights reserved.

37. Cross project communication: Knowledge networking
 TechnoWeb: A knowledge
networking tool (“Know-who
database” instead of Know-how
databases), urgent request
mechanism
 Internal consultancy centers
(“Support Centers”) – the first
three hours of effort for free!
 Learning Network – internal
training for own technology and
methodology topics:
Standard -> customized ->
consultancy -> work in project
Page 37 © Siemens AG Austria 2009. All rights reserved.

38. Example:
discovering the blog post of Prof. McAfee (Harvard
University) in less than 2 hours after he published it
June 10, 2009:
18:13 McAfee, Boston
18:19 RT New Jersey
2.0: Technology is used to broadcast information 18:29 RT Canada
publicly to people both known and unknown 18:46 RT Singapore
19:01 RT San Francisco
1.0: Technology is used to transmit information
25 19:10 RT Stuttgart
20
privately to known people 19:30 RT Washington
15
Example from McAfee‘s blog at
10 20:08 RT Vienna
5
http://andrewmcafee.org/blog/?p=871 20:25 RT Hawaii
0 RT…retweet
Page 38 00:00 04:00 08:00 12:00 16:00 20:00 24:00
© Siemens AG Austria 2009. All rights reserved.