A Business Less Ordinary

Why Does It Hurt?

Wall Street never meant much to me and I’ve actually never set my foot there. So except from being a part of our vocabulary in the same way McDonalds or AmEx is it, to me Wall Street represented a higher order seemingly beyond comprehension for a software guy like me. In fact a good part of my family lives in upstate New York, so trips are somewhat regular (yes Ella, I know it’s been a while.. :) ), but I just never saw it as a particular interesting place to see with my eyes. I mean- would I want to visit McDonalds HQ..? Somehow Wall Street gives me the same feeling thinking about it.

Now days that may all have changed. I have decided to go down there once I’m back in town. I’d just like to see what some of these people look like, that drove the entire world economy off the cliff… and I’m not going to dwell over George W. Bush or others that could have done something to avoid this disaster earlier on, given they had had the balls to do so, but no- I’ll leave that subject to others.

However, during the past few months I have spoken with business leaders from diverse business environments such as sports retail, travel agents, leisure boat manufacturers, and garment factories. The message I get is an alarming one.

To most, the economic downturn is already being felt in force. Drop in new orders for 2009, double-digit drop in month-over-month revenue from last year, and customers delaying payments, to name just some. Just from these people I have spoken with myself, the total drop in revenue must represent a good thirty to fifty million dollars worth of business lost. Now that translates into serious consequences for a lot of other companies down their chains as well, and that’s where we are right now. Are you down that chain too? 2009 is going to be very tough- maybe even flat out scary- and a lot of us will be faced with some tough decisions that need to be made with speed, to sustain our operations through that year.

My primary concern is the outlook for Sri Lanka and the Srilankan IT industry in particular, in the year to come. Srilankan IT is still fighting for “its right” to a seat at the Global IT Outsourcing Table as a serious partner and destination, and many of our businesses here are still building their capacity and capability, and may or may not have the financial strength necessary to carry on through if and when “the shit hits the fan” as we say in the army.

Add to this the overall high cost of communications and leased-line operations here (translates directly into loss in competitiveness), new suggested increase in company taxes, and the rupee heavily appreciating against most other niche currencies (including Indian rupee, Chinese Wot, and Norwegian NOK) which makes our Srilankan products either more expensive to the customer, or may force the vendor here to sell at a loss.

Currency appreciation makes our products less attractive to the market, be it tea, rubber, or IT. Those of us who are dealing with smaller countries still maintaining their own small “funny-money” currencies have probably already seen a 25-30% loss in revenue in foreign Exchange contracts, and an increase in our costs ratio. As such our prices will either have to surge or our costs will have to be cut, and from this you can imagine that companies are losing competitive edge fast.

So is this stuff all just bad? Bad Yes but All Bad? - I’m not so sure. Of course it is bad on the individual level both for the companies and the employees under siege, but where there are problems there are also new opportunities. There will be massive restructuring happening and the pathway through this and to make sure we’ll still be around, is to quickly wake up and face the new reality. Restructuring generally means a need for new products and services for the company to be able to automate, differentiate, or simply change the way their business is conducted.

There will be customers out there (maybe even more so in our field as they are forced to cut their costs in domestic operations), but our ability to create, visualize – and measure –the business value we present to our clients will be increasingly important. To the companies and management teams that understand the meaning of crisis and are willing to take the tough decisions head on, there will always be new possibilities. Think about it - some competitors will have it worse than you.. So what we all need to do right now is to get our focus right, re-assess our market approach, put the customer back in focus, get rid of any unnecessary fat in our corporate spending, and again invests in our R&D, product development and marketing. Lean and Mean is what it will be all about.

And Yes there’s a storm out there and there’s no way around it, so in deed we need to scramble for our rain gear. On the other hand- calm seas never made much of a sailor anyway.

Security in an increasingly Unsecure World

Dealing with your software outsourcing plans, security will soon become an issue touching every aspect of your outsourced operations- from personal travel arrangements to protection of your IP-rights and disaster recovery plans. The recent Mumbai attacks shows just how serious these issues can be.

We recently had a team from a new client visiting our Colombo offices. About two weeks prior to their arrival we received a request for additional information regarding the on-site security situation. Our client had routinely requested a security update from their native embassy in Colombo, and the message was "travel if needed only".

For the past 25 years or so Sri Lanka has been suffering from an unfortunate insurgency situation, and while the conflict has largely been a military one confined to the northern part of the island, infrequent incidents have been seen in Colombo as well. In recent years the security has been stepped up in our major cities, at the cost of increased security checks, but with the benefit of such actions almost coming to a complete halt. Still, the picture viewed from outside will differ substantially from any on-site experience.

Eventually our client's team arrived for their first visit to Asia and Sri Lanka. They were soon embraced by the beauty of this island and impressed by the buzzing but somehow still relaxed life-style you experience while living here. Further, measured from the hospitality and warmth that greets everyone coming here, everywhere you go and from everyone you meet, it is almost impossible to envision this country as one being subject to a military conflict. But to the spouse left at home, the picture will be dominated by whatever is the news of the day and less by how the situation is felt once in country.

When considering an outsourcing operation, be it in India, Sri Lanka, or elsewhere, the security of your Software should probably mean something to you too, and will have a much wider scope to cover. How can you manage the risks involved and what should be in place to ensure your continued peace of mind while your software reside overseas?

No matter what you do it will sooner or later come down to finding an outsourcing partner providing you the necessary transparency, and with a management team that is willing to take your concerns seriously, and truly commits to your needs. An agreement should be reflected in a security plan laying out off site backup principles and routines, as well as policy issues regarding individual source code access, the use of a proper system to check in/out your software (VSS) and monitor potential security breeches, the use of laptops (you don't want to see some consultant in your team wander off in the afternoon with your complete system loaded on to his personal laptop or even memory stick), and a proper emergency contingency plan.

To be frank, during my 12 years in software outsourcing I have yet to experience a vendor who will bring this to your attention without a proper prior provocation. In outsourcing, planning is everything and "late" can soon turn out to be "too late".

While international drama may unfold on CNN, your real-life drama may actually be unfolding right now in less visible form- in the murky digital world well hidden behind a seemingly properly organized operation.

Season's Greetings from Colombo

We wish You All a Joyful Holiday Season!

Overrated and Underestimated?

I met with a foreign client a few weeks back who is running an Outsourcing project in Chennai. He  was highly frustrated, and his situation is a classic. He is the owner of a small, but successful, software company targeting an industry-vertical with a highly specialized solution. These kind of companies comes in the dozens, and they are all faced with many of the same issues;

While running a small-scale, and for years very profitable, operation in their native market, they are now faced with mounting challenges both in technology and market space. This particular company is made up of a small, but very professional and experienced staff, but with very little of formal processes or standard methodology in place. All a common sight.

So, they went to the Outsourcing market with a very high-level description of their problem, and with an already-made-out contract they wanted the potential vendor to sign. The contract was largely focused around a fixed-price contract term, which was supposed to protect them against the always scary threat of potential time & cost overruns.

Now, I have no issues against that approach in principle, as it has some good sides as well in regard to creating a certain discipline in the project, but there are certainly some other things that also falls to mind with such an approach. The first is that this guy can become an easy prey to experienced "traders" as the way many companies cope with a fixed-price challenge is very often to virtually bomb the client with daily emails requiring "clarifications" and lengthy reports that requires fast feedback "to avoid delay" in the project. And this was exactly what had transpired.

Now what was wrong in their initial approach, and how should this situation have been mitigated?

First thing first; A fixed price contract may seem as a safe haven against unpleasant additional costs, but it is at the same time pretty obvious that the supplier, well aware of the risk he is taking, is moving over to the far side of your table. This meaning that rather than having signed up with a true partner that will try his very best to deliver the powerhouse solution of your dreams, you have actually signed up with a minimalistic supplier that will try his best to stay clear of any additions or improvements his development or QA teams will recommend to him (as they gain experience in your field). He will choose this approach by instinct, just to keep secure, as he probably feels that you're not willing to pick up that tab anyway.

Second, a proper Communication strategy, agreed by both parties at the time of signature, would have left the suppliers gun without much ammunition. Such a strategy should indicate a clear communication profile, and organization, so that all documents and clarification requests would have to be submitted in a specified format, and the response would again be a joint responsibility of the Steering Committee of the project, where the supplier himself would be represented. This would effectively have closed the door to that escape..

Personally I do still believe that the best software solutions comes out of projects with an iterative approach, where the first high-level vision documents are creating a "base-line" for where this project is going, but where the functional requirements are developed jointly between the customer and his vendor. This may seem a bit wild you may say and "yeah, but when - and at what cost- would this project ever be delivered?" Truth is; your supplier is more likely to do a good job on your project if he feels confident with you every step of the way, rather than where he will face a wall of financial risks towards the end of the project. Your steering committee will also be there to ensure frequents updates of status and risks, and be responsible for formal reports on both progress and quality.

Now, this particular company is a couple of years late with their release, the supplier is probably half-way bust, and the uncertainty of the future still lingers..

Different Things to Different People

Long time ago I was once approached by a lovely Danish lady at a hotel bar in Copenhagen. She said in her whistling Danish voice, "Kan du lie det?" simply meaning "can you like it?". Well the young woman was soliciting her services and I wasn't a buyer, but it all comes down to the same thing for all of us, no matter what business we are in; Do we provide a service that is attractive to our potential client?  

In the Software Outsourcing business our "Product" is a complicated one. Not so much because of the technical challenges involved in writing any specific part of code, as this is usually the part we're best at anyway, but due to the complexity of the total organization involved, and gaining a common understanding with the client on how it will all have to happen.

First time I meet with a potential buyer I know I tend to iron out the potential problems I know we will face at one stage or another in the duration of the project. It is simply too tempting not to dive into all those "risk-issues" at this point, but focus on building the confidence of the buyer with the help of my PowerPoint skills, rather than our problem-mitigation-techniques. As suppliers we have proper procedures in place to handle these issues once the project is on, and the reality of everyday project management is dawning upon us all. The Challenge is really left with the Buyer who may be doing this for the first time.

In an earlier blog issue of PROJECTIZED (June 2005) our Project director Thushara Wijewardena wrote her project communication complexity equation as [ n(n-1)/2 ] simply meaning that the number of communication channels between all the related parties in a project will by itself create a separate challenge that needs to be addressed.

Number of communication channels with “n” members = n*(n-1)/2. A project that has 25 members (including the project manager), will make the total communication channels as 25*24/2 = 300.

I believe this is greatly underestimated in the initial stages of most potential projects, as such painful problems are often brushed under the carpet until the project is already on. However if you implement an efficient communication strategy from Day 1 you will probably be able to say Goodbye to some pretty frequent problems and issues that usually will arise anyway at a later stage. The supplier would certainly be better off addressing this early on, while a potential customer should also make their own mind about how this is to be handled within his own organization.

You can read Thushara's excellent blog "PROJECTIZED" at http://projectized.blogspot.com

Close but Close Enough?

Communications means different things to different people. You talk with our IT department and they will lecture you on bandwidth and routers, while marketing people will provide you with a comprehensive overview of our communication strategies and samples of their latest whitepapers and brochures.

To me good communications simply means to make that extra call.

Lately we've had some really interesting negotiations going between two different foreign companies that have a joint ownership of a software solution and are discussing how to best move future development and maintenance to our outfit here in Colombo. With a 3-party agreement like that there are some obvious, and some maybe less obvious obstacles involved. Much has to do with risk-factors on all sides and mitigation strategies to avoid the pitfalls.

Well let's add some 10,000 km, a 4,5 hrs time difference, and some heavily clogged diaries on all sides to that discussion, and you'll see that big fat bandwidth just won't cut the cake on its own. Working with overseas clients simply turns your job into a total lifestyle and your mobile phone into your always present life-partner. Today's discussion ran into the night on my part as one of our (still potential) clients in this deal was stuck in a meeting and texted a response to my sms "will call you in two and a half hours". Something that would translate into midnight on my watch.

Still that extra mileage is what finally cut the deal- while things were still hot on the table on a late Friday afternoon in Europe, instead of leaving it all to a Monday of Uncertainty. The call came and through Skype we spent less than 20 minutes ironing out the last issues- motivation can run high on both sides when you hear kids are playing in the background and the wife of the house is trying to stick her husband to their Friday dinner table, rather than to your phone call.

Skype has saved my day in so many cases, and today was really no different, only my stomach got disappointed over a dinner which just never happened.

The Outsourcing Challenge

Our Sri Lankan software industry is in deed no comparison with our Big brother India when it comes to the available staff numbers, but after 9 years here and 2 years in Mumbai (no comment..) before that, I believe that for most our clients our relatively low number is really not what matters. The Key to successful outsourcing is based on a range of other factors.

First of all it has to do with finding an organization that is some what like your own. If you're a 200-man company it is less likely that a 30,000 outfit is the right outsourcing environment for you. What you really want is probably to team up with an organization that is genuinely interested in your business and how your market functions. It has all to do with being able to provide business value to your customers current operations.

I spoke with a client today. They have an online integration between their own system and one popular mid-range ERP solution. The issue was that their customers didn't see the integration as a real product as it is "just there" and that makes it difficult to defend the cost of maintenance of a relatively complicated technical solution. Further on they have discovered that their current users are having a wide variety of ways of utilizing the solution, hence creating new challenges to make a generic "one-for-all" product. After discussing this for a while our guys suggested to add another feature to their product with a "workflow manager" giving the customer further control and easy setup of their various environments. This showed to be a good approach as it would probably address the need of many of their customers, and at the same time add enough value to be defined as a "maintenance product". Often the key can be found in very low-level things and providing real value without installing any moon-rockets. It has really to do with recognizing your customer's market.

In principle this is where I feel many outsourcing companies fail. Instead of focusing on the culture and business environment of the clients you want to serve, we end up running 50-slides+ presentations about our company structure, complicated development processes, and so on. Yes we still need to have all that, but maybe not as the main objective in the first line when we talk to our potential clients?

A post from Colombo

Being a foreigner in another country gives you the opportunity to observe things from maybe a bit different angle than most people around you- much like others do when they visit wherever is home to you. I enjoy this situation a lot, and after 9 years in Colombo (a city I will tell you more about later) this place have become a second home to me, and will probably remain so for the foreseeable future.

This year I have done something I thought I would never do again- After 20 years I've started all-over with founding a new company, with a new crew, new building, new customers, new everything- can you imagine! It has been quite a journey and fun one- and now as we speak December already, I can say with my heart that I'm very happy about my decision.