IntroductionIntroductionMGD services Certified Woman Owned Business Over 20+ years of successful quality management service providers both onsite and off site/near shore/virtual Successfully implemented off site/near shore quality servicesPurpose Discuss current quality service provider issues and how MGD may provide a competitive alternative that addresses the problems hindering effective quality management resulting from the lack of service by the off shore provider
Problem Statement1. Current offshore services are suffering from a lack of quality within the deliverables and consistency Not getting what you are paying for2. Companies are spending increasing amounts of time correcting, micromanaging and intervening in process management Spending time fixing the issues that should not be happening3. Companies are not realizing the benefits and cost savings from the offshore services. Overall loss of ROI/profitability and reduction of cost to benefit ratio “The primary objective is to ensure that the perceived benefits from a low-cost environment are achieved” “How effective is offshore out sourcing and what critical factors should be considered when outsourcing” BE790.614.5DBusiness, Government and the World Economy Johns Hopkins University Facilitator: Arefaine G. Yohannes
Problem Statement PROS and CONS of Offshoring:PROS CONS Skill Set/QualityDecreased resource costs • encountering poor or unacceptable quality of work in test automation, regardless of the experience level• - hourly rate decrease due to touted or other defined universal methodologies abundant yet inexperienced labor * Language Barriers force • Unquestionably many offshore resources provide communication challenges, especially over a forum that does not allow you the ability to understand accents, phrasing or written word and e-mail can be worse * Time Zone Clash • Many of the firms in Asia have as much as a 10-13 hour time difference. The outsourcing firms try to spin this as a "good thing" for you. Is it good to not be able to have your team discuss issues with their team as they arise? * Increasing Price Trends • Many offshore providers that have been successful are increasing their prices due to fact that competition for local human resources is pushing up the cost of labor.
Problem Statement (con’t.)* Labor Backlash – it would be nice to get some positive Public RelationsThere is a groundswell of backlash against the current trend toward exporting jobs outside the US. This backlash may cause negativepublicity.According to (Bie, 2005), risks associated with offshore outsourcing for financial entities fall into four categories: operational, reputation,legal and country-specific (not applicable)The operational risk is the income/profitability loss resulting from an internal failure in the business model or from external events. Operational risks relate to quantifiable costs that may be hidden unless monitoredThe reputational risk arises when the way by which services are performed by third parties reflects badly on the originating firm ororganization. Especially for financial firms, the breach of confidentiality concerning customer financial information can cause significantdamage. The transfers of information itself as well as imperfections in the service provider’s control environment are specific areas of risk. - If systems are not tested well this risk increasesThe legal risks arise as offshore outsourcing is based on binding contractual arrangements. Besides small print problems, risks can arisewhen specific contractual details become detrimental to the financial firm’s business strategy, for example if the contract is of long duration,but the service in question reflects outdated business realities or lacks the value added benefits necessary to realize the return.The above-mentioned risks are common to all outsourcing arrangements, but moving the service offshore, which tend to lessen directinfluence or at least increase the supervisory burden, exacerbates the risks. “How effective is offshore out sourcing and what critical factors should be considered when outsourcing” BE790.614.5DBusiness, Government and the World Economy Johns Hopkins University Facilitator: Arefaine G. Yohannes
Problem Statement Q: Why hasn’t the offshore QA resource experiment worked?1. Offshore = abundant resources and lack of experience drives low costs a) many resources are fresh out of school and are not trained in the fundamentals of Quality Assurance and testing nor do they have the system experience to provide value added services to ensure that meet expected quality objectives2. Reduced communication a) hinders efficiency and requires additional cycles of review and increased time b) Onshore FTEs are having to micro-manage process methodologies due to lack of test lead leadership, capability and experience – significantly risks the client being served correctly3. Time zone challenge – reduced agility and flexibility, increases the overall duration and creates obstacles when speed coupled with quality is necessary – adds time and effort “the primary objective is to ensure that the perceived benefits from a low-cost Decreased Increase in value added benefits and/or environment are achieved” Hourly Rate profitability =
Problem Statement (con’t.)Q: We significantly reduced our costs of QA resourcing that has to increase profitability… right?1. Off shore Rate = lack of experience – this generally increases the overall duration and requires more oversight by onshore resources2. FTEs are having to micro-manage the process a. For every hour a FTE spends doing the work of an offshore resource the overall hourly rate increases and the effectiveness of that manager decreases – this increases the costs of the project overall but may stay hidden Hourly rate Hours spent Total cost of off shore project work FTE Manager $50/hour 200 hours (fixing the 10000 (estimated) problems) Offshore QA person $30/hour 1000 hours 30000 #1 40000 Combined hourly rate now up from $30 to $40 reducing the cost to benefit ratio NOTE: The fixed costs are no longer static and no one is seeing the soft costs associated with the off shore cost increases
ProposalWhat MGD cannot deliver.• The same hourly rates of off shore service providers – we can be competitive but not match.What MGD can deliver.• Sustainability – Pool of experienced resources to support all quality services• Experience – Invested and motivated professionals with systems, documentation, quality process, GDP, validation, SOX and other regulatory systems backgrounds• Effectively utilizing the mature client methodology – Mitigation of current issues through effective resource management and process leadership• Increased value – Costs that over the lifecycle of a project will be competitive• Flexibility, agility, delivery – On shore, off site resources with open schedules, high performing work ethic and delivery centric mindsets• Leadership partnering – Oversight of Test Leads and testing resourcesEnsures client will be provided the appropriate level of:• status reporting• Meetings coverage and thought leadership• Process management and documentation quality reviewEnsures resources are effective and exceed expectations and deadlines
ProposalMGD is asking for an opportunity to prove out our value added services:1. Provide a general SOW and rate card of resource costs2. Estimate the next quality project to be able to compare costs and delivery with current supplier3. Initiate a project based contract4. Execute
Summary• Documentation quality and process management issues with their current testing services provider• MGD has a successful background of near shore/offsite QA and testing project/program execution• MGD is asking for an opportunity to prove out the value added service they can provide
Footnotes for referencesFootnotes:Excerpts and referenced statements provided by:“How effective is offshore out sourcing and what critical factors should beconsidered when outsourcing”BE790.614.5DBusiness, Government and the World EconomyJohns Hopkins University Facilitator: Arefaine G. YohannesFebruary 17, 2007By Martye Karen Joyce 2/17/2007Excerpts in the background slide for Labor backlash provided by: Bie, U.H. (2005)Offshore Outsourcing: Consequences and Challenges for U.S.