Enabling Offshore Collaboration in German Engineering Services

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1 White Paper Eablig Offshore Collaboratio i Germa Egieerig Services Germa egieerig compaies, who are market leaders i their respective domais, are experiecig challeges i terms of acquirig sufficiet egieerig talet from local labor markets. Defedig their iovatio leader positio, at the same time icreasig productivity remais for them, a major busiess objective. I additio, typical busiess cycles demad higher flexibility ad agility ot oly i productio, but also i R&D to better maage the ext potetial ecoomic dowtur. Orgaizatios uderstad that success lies i the ability to collaborate with global suppliers who have a presece i low cost egieerig markets such as Idia combied with the ability to work together from remote locatios. This would eable easy access to global egieerig resource pools, simultaeously esurig that suppliers will provide additioal resourcig support as ad whe required. I additio, it offers strategic opportuities to further develop the Asia market as well. However, orgaizatios fail to realize the full potetial of this strategy due to shortcomigs i its actual implemetatio bore out of a lack of prior experiece of workig i such collaboratio models. This paper explores the various challeges faced ad puts forward a suggested implemetatio strategy towards establishig a effective collaboratio model that fully leverages a efficiet sourcig model such as off-shorig i the egieerig market.

2 About the Authors Mrithyujay R Mrithyujay has bee with TATA Cosultacy Services sice 2008 ad is curretly workig as a IT Cosultat i TCS' Global Cosultig Practice i Germay. He has executed a umber of cosultig assigmets i the areas of IT Strategy & Goverace for cliets i differet idustries. He has also played key roles i may successful executios of assigmets across both Cetral Europe & Asia Pacific regios. Mrithyujay holds a Masters degree i Busiess Admiistratio. Guido Horstma Guido Horstma joied Tata Cosultacy Services i 2008 as a IT Strategy Cosultat. Prior to joiig TCS Guido worked i the US for a large telecom provider i major IT positios, as Vice Presidet & Chief Iformatio Officer. Guido has held several IT portfolio maagemet positios i IT as well as i sales & operatios with regioal focus o EMEA & Americas for Telecom, Isurace ad Hi-tech idustries. He graduated i Electrical Egieerig from Uiversity of Dortmud (Germay). 2

3 Table of Cotets 1. Overview 4 2. Implemetig the Offshore Collaboratio Model 5 3. Case Study: A Germa Hi-Tech Egieerig Market Leader Coclusio 12 3

4 Overview Historically, Germa Egieerig orgaizatios have successfully partered with suppliers who provide resources or deliver small compoets, but have bee largely limited to the local egieerig market ad to typical staff augmetatio mode of operatio where exteral resources work o premises actig i the role of iteral staff. Large scale outsourcig of egieerig services to low cost locatios remais a limited occurrece i the Germa market. Despite rigorous ad professioally drive supplier selectio projects executed i accordace with the defied busiess strategy, orgaizatios face issues i implemetig their strategy because they fid it difficult to: Idetify what competecies ad work ca be give to the global supplier ad what should be retaied ihouse. Determie what eeds to be chaged o both sides (their ow orgaizatios ad the suppliers) to make the collaboratio successful. Uderstad how to maage the chage withi their respective orgaizatios. Additioally, the success of the osite-offshore collaboratio model is limited largely due to some key challeges that orgaizatios face icludig: Busiess strategy ad core vs. o-core decisio takig Orgaizatios eed to be able to clearly categorize their competecies ad activities as core ad o-core so that the o-core oes ca potetially be sourced from strategic suppliers. Whe i-house persoel work o these o-core activities, the process of categorizig ad decisio makig ca become a paiful exercise. With a iate tedecy of may to categorize their activities as core, cosiderable challeges ca be expected. Chage i collaboratio model with suppliers Orgaizatios work i staff augmetatio mode with a huge umber of exteral cotractors ad suppliers workig at their premises. Exteral cotractors are basically treated like iteral staff ad ofte have wide access to itellectual property without specific kowledge retetio ad risk protectio models i place. A chage i the supplier collaboratio model costitutes a correspodig chage i the usual way of workig for iteral staff, which could be met with stiff resistace from those ot willig to adopt. Cultural chage Despite Germa egieerig products beig sold across the world ad beig famous for its quality, the local retaied workforce has limited experiece i global collaboratio with Germa beig used as the mai laguage of commuicatio. Eve global actig orgaizatios who defie Eglish as a compay laguage may adhere to it at the board level but ot so much o a operatioal level. It is essetial to uderstad cultural differeces ad maage laguage barriers. 4

5 Learig Curve The Germa egieerig market is high-ed ad oe of the most advaced i the world. The egieerig compaies pride themselves i the cuttig edge work they do ad quite rightly so. To effectively collaborate together, the supplier will have a iitial learig curve to uderstad the quality of egieerig work to be delivered. Both parties eed to uderstad ad appreciate this before embarkig o their collaboratio jourey. Implemetig the Offshore Collaboratio Model Implemetatio of such a collaboratio model requires both ivestmet ad maagemet commitmet from both the supplier ad the egieerig orgaizatio. I order to overcome the challeges metioed ad to avoid commo pitfalls, a structured approach to Offshore Collaboratio Model implemetatio is recommeded. This ca be doe i four key stages: Core vs. No- Core Strategic Assessmet Collaboratio Pre-Requisites Assessmet Begi with a Osite Collaboratio Model Trasform to Osite-Offshore Collaboratio Model Figure 1: Four-Step Offshore Collaboratio Model Implemetatio Step 1: Core vs. No-Core Strategic Assessmet Orgaizatios should iitially coduct a strategic assessmet to esure the aligmet of the offshore partership with their busiess strategy. The goal of such a strategic assessmet should be to examie the curret situatio, aalyze the future strategic positio ad to uderstad where offshore partership fits i. The primary objectives of the strategic assessmets are to: Develop a clear visio for offshore partership ad set tagible goals i lie with the orgaizatio s busiess strategy. Idetify o-core areas, fuctios, ad processes for offshore collaboratio, which will brig direct busiess beefits. Determie a egagemet model that best fits the busiess eeds ad improves the key measures of time-to-market, efficiecies ad cost effectiveess. Idetify strategies to maximize partership value ad mitigate potetial risks. 5

6 The strategic assessmet broadly cosists of four key activities: 1. Idetify Key Competecies 2. Defie No-Core Competecies 3. Assess Outsourceability 4. Build Outsourcig Roadmap First, idetify the key competecies i your orgaizatio by group ad product lie Secod, distiguish betwee your core ad o-core competecies The ext step is to assess which of your o-core competecies are suitable for Outsourcig ad Offshorig Fially, draft a roadmap to depict competecies that ca be offshored i the ear-term & log- term ad provide key recommedatios to make it work All Competecies No-Core Competecies Outsource-able No-core Competecies Order of Outsourcig Competecies Figure 2: Strategic Assessmet The four activities are aimed towards: (a) Uderstadig what egieerig competecies curretly exist i the orgaizatio. (b) Idetifyig which of these competecies are o-core to the orgaizatio ad ca techically be sourced from suppliers. (c) Selectig specific o-core competecies that are suitable for outsourcig ad have potetial to move offshore. (d) Formulatig a roadmap o how to trasitio offshore. Best Practices Esure participatio from seior ad middle maagemet i order to get buy-i for implemetatio Idetify ot more tha 4-7 competecies withi each departmet Esure that competecies idetified cover miimum 70-80% of the work i each departmet Categorize core vs. o-core ivolvig all key stakeholders Utilize experiece i similar customer egagemets to develop roadmap 6

7 The outcome of this assessmet will act as a showcase to the maagemet to demostrate the potetial to outsource specific egieerig competecies withi the differet departmets i the orgaizatio. This will also provide the maagemet with the view o the core (strategic to the busiess) egieerig competecies which eed to be maitaied i-house ad be further developed by key iteral resources. I additio, the roadmap from this exercise will also clarify the sequece i which the collaboratio with supplier ca be executed. Additioally, this iformatio ca be utilized to select a global egieerig services supplier (if ot already selected) as a preferred supplier to implemet the collaboratio model. Stadard supplier selectio practices together with the procuremet departmet ca be employed. Step 2: Assessmet of Collaboratio Pre-requisites Step 1 covers the aspect of what will be udertake by the supplier, it is importat to uderstad how the supplier collaboratio model will work. I order to put this together, it is essetial to comprehed the existig operatig model, the processes ad ways of workig, supportig ifrastructure required for collaboratio, chage maagemet efforts required, ad so o. We ca idetify the existig gaps i the curret model with the ed state visio i mid. These form the critical pre-requisites which eed to be put i place before commecig the offshore collaboratio program. This assessmet ivolves aalyzig the orgaizatio from five iter-depedet perspectives, idicated as Tracks i Figure 3. Track Purpose 1. Operatig Model ad Goverace Framework Formalizes ad Refies Portfolio ad Relatioship Maagemet Procedures, Goverace Structures, ad Roles & Resposibilities to Allow for Icreased Scalability ad Busiess Growth 2. Processes ad Stadards Framework Defies Goverace Processes, Ways of Workig, ad Documetatio ad Project Maagemet Stadards 3. Performace Maagemet Develops Processes ad Tools ad Defies KPIs to Eable Metrics Based Performace Maagemet 4. Chage Maagemet & Commuicatio Defies ad Implemets Cotiuous Traiig ad Commuicatios Operatios to Prepare ad Accompay Workforce o Offshorig Jourey 5. Supportig Ifrastructure -Portfolio Operatios Defies ad Implemets Techology Ifrastructure for SMT R&D Project Figure 3: Assessmet of Collaboratio Pre-requisites 7

8 The outcome of this step will be: (a) A assessmet of the existig ways of workig ad their shortcomigs from a exteral collaboratio perspective. (b) Coordiatio of the target collaboratio model ad processes with a sequece of key actios to close the gaps. Best Practices Esure impact of chage o existig ways of workig ad productivity is limited Tread carefully o the topic of performace measuremet of idividual resources Chage Maagemet is a critical compoet which eeds to be dealt with sesitively Esure target model has buy-i from the executive maagemet Step 3: Begi with a Osite Collaboratio Model I order to miimize the impact of chage o the egieers, it is importat to begi with a osite collaboratio model, formig a core team of egieers from the preferred supplier. This team eeds to be itegrated ito the differet egieerig departmets i the orgaizatio ad to work together as part of the same team towards the same goals. Durig this period, the supplier teams will gather kowledge about the work ad maitai a kowledge base. The supplier teams ca slowly itroduce the cocept of offshorig ad demostrate to the egieerig orgaizatio how this ca be achieved. Oce the collaboratio model stabilizes, some of the supplier egieers ca retur to the offshore team ad build mirror teams there to cotiue off-shorig i a steady state mode. Sigificat off -shore ratio Efficiet flexibility maagemet due to best practice kowledge sharig Offshore-ability Curve Ivestmet Curve Prove kow -how ad performace based o targeted competecy level Kowledge Curve Resources Curve Target exteral parter team size achieved over time Figure 4: Collaboratio through Osite - Offshore Model Figure 4 showcases how this model works over time. It is importat to start with a high osite presece (ear 100% of the core team), which will gradually decrease over time as the techical kowledge i the supplier core team icreases. At a critical stage, the ratios would reverse with a higher offshore leverage resultig 8

9 from a better uderstadig. For this model to be a success, a critical mass of resources would be eeded to form the core team, which will be ramped up over time followig the same patter. Similarly ivestmets ito the collaboratio model will be high i the begiig ad will gradually decrease with icreased flexibility ad efficiet kowledge sharig. Best Practices Careful idetificatio of core team members who have a potetial to be leads i future Esure implemetatio of appropriate kowledge maagemet processes ad practices Cotiuous performace moitorig of core team members required Trasitio of work to core team eeds to be doe i a structured maer Cotiuous maagemet commitmet ad support required for successful implemetatio At the ed of this phase, the supplier teams will be well itegrated ito the egieerig orgaizatio while the egieerig orgaizatio is comfortable i workig together i a remote collaboratio mode. Step 4: Trasform to Osite-Offshore Model by gradually leveragig Offshore It is ecessary to udertake the actual implemetatio of the model defied i Step 3 i a structured maer to esure its effectiveess ad to avoid potetial pitfalls. It is recommeded for egieerig orgaizatios to utilize expert sourcig cosultats (either from the preferred supplier or elsewhere) who ca had-hold the teams workig towards a effective collaboratio model by followig a structured edto-ed approach. Figure 5 demostrates oe such approach that ca be followed. Moth 1 Moth 2 Moth 3 Moth 6 Idicative Timelies Core Busiess Collaboratio Stream Preparatio Ramp up/ Iductio Setup team, fialize work scope, Org aoucemets, iductio, trasitio preparatio, Admi & Logistics, Ifrastructure setup etc Trasitio o -site KT SR CR KT: Kowledge Trasfer SR : Shadow Ru CR: Cotrol Ru Trasitio kowledge & work to supplier teams Trasformatio Steady State Moth 12 Fial State Slowly icrease off -shorig of work, implemet remote collaboratio, trasform operatig model ito steady state Advaced Busiess Collaboratio Stream Additioal Collaboratio Areas Aalysis ad Cotractig Assess & Cotract Trasitio Steady State Explore additioal areas of collaboratio with suppliers (after eough domai kowledge is gaied by supplier) ad implemet via same/similar collaboratio model Prerequisite Implemetatio Busiess Eablig Stream Detailig & Implemetatio Trasitio PMO Busiess Eablig Support required for defiig collaboratio model & processes ad had-holdig Figure 5: Collaboratio Model Trasformatio 9

10 This cosists of three mai work streams Core Busiess Collaboratio to setup the core team, iduct them ito the orgaizatio, trasitio kowledge i a phased maer util steady state ad the trasform the collaboratio model to oe that is itegrated betwee osite ad offshore. Advaced Busiess Collaboratio to explore additioal areas of collaboratio oce basic kowledge is trasitioed. This could be takig o complete projects to developig compoets or takig over specific processes. Busiess Eablig Stream to provide had-holdig ad support to set up the etire collaboratio util steady state. Best Practices Strog goverace model with trasparet reportig should be implemeted Detailed implemetatio pla with clear Resposible Accoutable Cosulted Iformed (RACI) matrix of owers should be maitaied Reluctace to work i offshore models will eed to be actively maaged Project ower i the egieerig orgaizatio eeds to be well respected & ifluetial Cultural chage maagemet will be required to itegrate the teams Expert sourcig cosultats should be utilized for had-holdig if there is a lack of experiece to offshorig withi the orgaizatio Oce the model reaches steady state, there should be a small team of core egieers cotiuig to work withi the egieerig orgaizatio osite, with a idetical team offshore. The offshore team ca be setup as a Global Egieerig Cetre caterig to the egieerig services of the differet departmets i the customer orgaizatio. Case Study: A Germa Hi-Tech Egieerig Market Leader Backgroud A Hi-Tech egieerig market leader based i Germay eeded to eable its divisios to icrease productivity through efficiet sourcig ad to adopt best practices i sourcig o a global scale. The decisio arose from past experiece wherei, durig the 2008 ecoomic dowtur, the compay had to let go of its exteral cotractors resultig i loss of critical kowledge ad further difficulties i gettig the cotractors back ito the orgaizatio whe the ecoomic situatio improved a year later. Settig up the Collaboratio Program The collaboratio program was iitiated with a Strategic Assessmet, which ivolved a competecy ad outsource-ability aalysis to idetify potetial areas for outsourcig. The outcome provided the maagemet with a clear scope ad potetial for outsource-ability that lay withi the differet Research ad Developmet (R&D) departmets. While it was uderstood that high-ed egieerig work caot be doe by suppliers, due to lack of experiece, the remaiig o-core ad low ed activities could easily be moved offshore. 10

11 The Strategic Assessmet was followed by a Fit/Gap Aalysis to idetify what prerequisites eeded to be fulfilled before icreasig offshore R&D work. This study helped recogize the eed to set up a goverace orgaizatio ad harmoize processes ad ways of workig i order to better idetify ad select R&D projects ad processes for off-shorig, expedite delivery, improve cooperatio ad quality delivery by virtual teams, while at the same time icreasig the badwidth of its curret workforce. The existig R&D project eviromet had multiple structures, procedures, ad goverace processes. Goig forward, the aim was to create a sigle cohesive ad comprehesive model, to icrease orgaizatioal efficiecy, ad to obtai a scalable workforce by: Defiig a suitable collaborative target operatig model Stadardizig roles, goverace processes, ad ways of workig across R&D departmets ad groups to eable collaboratio Istallig a portfolio maagemet fuctio to oversee implemetatio Defiig a chage maagemet ad commuicatio approach to embrace chages Implemetig supportig ifrastructure ecessary to execute the model Defiig ad implemetig a framework to cotiuously improve both the operatig model ad operatios The outcome of the fit/gap study was a clear actio item roadmap o how to address the gaps idetified ad setup the collaboratio model with the preferred supplier. After embarkig o the collaboratio jourey, the egieerig compay utilized experieced cosultats to provide implemetatio support i the form of a Busiess Eablig Assigmet, which had the sole objective of providig cotiuous had-holdig ad support for implemetig the defied collaboratio solutio. At the ed of the program, the compay was able to establish a stable collaboratio model with resources i both osite ad offshore locatios. The umber of resources workig every quarter could easily vary depedig o the busiess demad, with the supplier esurig kowledge retetio withi the team. Beefits The successful setup ad trasformatio to a osite-offshore collaboratio model has resulted i the followig beefits: Access to a much larger ad global pool of egieerig i Idia Greater focus of permaet staff o core activities ad iovatio Productivity icrease through efficiet sourcig Icreased flexibility to better maage the ext potetial ecoomic dowtur Exposure i the egieerig teams to a iteratioal collaboratio model Easy rampig up or dow of egieerig resources without ay overheads ivolved i kowledge retetio 11

12 Coclusio I ay orgaizatio, especially i high-ed egieerig compaies i Germay, the success of establishig such a osite-offshore collaboratio model largely depeds o the commitmet of the maagemet ad ability of the egieerig teams to chage their way of workig to the ew model. The greatest impedimets to success are i maagig this chage amogst the collaboratig egieers. This paper demostrates a structured approach that ca be followed to esure the success of implemetig such a offshore collaboratio model. While the paper is specific to the Germa egieerig market, the approach ca be replicated i similar scearios across the world. 12

13 About TCS Global Cosultig Practice TCS Global Cosultig Practice (GCP) is a key compoet i how TCS delivers additioal value to cliets. Usig our collective idustry isight, techology expertise, ad cosultig kow-how, we parter with eterprises worldwide to deliver itegrated ed-to-ed IT eabled busiess trasformatio services. By tappig our worldwide pool of resources - osite, offshore ad earshore, our high caliber cosultats leverage solutio accelerators ad practice capabilities, balaced with our kowledge of local market demads, to eable eterprises to effectively meet their busiess goals. GCP spearheads TCS' cosultig capacity with cosultats located i North America, UK, Europe, Asia Pacific, Idia, Ibero-America ad Australia. Cotact To kow more about us, cotact Subscribe to TCS White Papers TCS.com RSS: Feedburer: About Tata Cosultacy Services (TCS) Tata Cosultacy Services is a IT services, cosultig ad busiess solutios orgaizatio that delivers real results to global busiess, esurig a level of certaity o other firm ca match. TCS offers a cosultig-led, itegrated portfolio of IT ad IT-eabled ifrastructure, egieerig ad TM assurace services. This is delivered through its uique Global Network Delivery Model, recogized as the bechmark of excellece i software developmet. A part of the Tata Group, Idia s largest idustrial coglomerate, TCS has a global footprit ad is listed o the Natioal Stock Exchage ad Bombay Stock Exchage i Idia. For more iformatio, visit us at IT Services Busiess Solutios Outsourcig All cotet / iformatio preset here is the exclusive property of Tata Cosultacy Services Limited (TCS). The cotet / iformatio cotaied here is correct at the time of publishig. No material from here may be copied, modified, reproduced, republished, uploaded, trasmitted, posted or distributed i ay form without prior writte permissio from TCS. Uauthorized use of the cotet / iformatio appearig here may violate copyright, trademark ad other applicable laws, ad could result i crimial or civil pealties. Copyright 2013 Tata Cosultacy Services Limited TCS Desig Services I M I 01 I 13

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