Disciplined Agile Outsourcing: Making it Work for Both the Customer and the Service Provider

IT Outsourcing

On June 25, 2015 we gave a webinar entitled Disciplined Agile Outsourcing: Making it Work for Both the Customer and the Service Provider (click on the link to see the slides on Slideshare).  We will likely run the webinar again as it was very well received.  We had hoped to record it but unfortunately weren’t able to save the file because the software crashed.  Hopefully it will work out next time.  During the webinar we promised to write a blog summarizing it and addressing any remaining questions from the audience.  This is that blog.

Agile and Outsourcing?  Really?

There are good reasons why organizations are taking an agile approach to outsouring IT delivery projects.  The following table overviews the motivation and concerns of both customer organizations and service providers.

Table 1. Comparing the Viewpoints of Customers and Service Providers

Customer Service Provider
  • Augmenting their ability to deliver
  • Better, faster, cheaper IT delivery
  • Want similar or better quality than what their own IT people would deliver
  • The solution must work in their environment
  • Increase business
  • Deliver what was promised
  • Reduce development costs
  • Retain staff
Primary Concern Not sure the service provider can work in an agile manner The customer’s procurement process forces them into a more traditional, and riskier, approach

Here are some interesting statistics about outsourcing:

  • Gartner’s 2014 IT Outsourcing report estimated IT outsourcing to be $288 billion in 2013 and to grown by 5.9% compounded annually from 2013 through 2018.
  • Deloitte’s 2014 Global Outsourcing survey found that 53% of organizations are outsourcing some of their IT function; 26% of respondents who do not outsource today plan to do so (supporting Garter’s growth forecast); 79% of respondents DO NOT believe their service providers are too expensive; 49% of respondents say their service providers are reactive vs proactive (e.g. they are basically order takers, not partners); and IT outsourcing activity is expected to increase.
  • The Ambysoft 2013 Agile Outsourcing survey found that half of organizations who are “doing agile” are also involving outsourcing in some way

The Challenges Associated with Agile IT Outsourcing

Here are some common pitfalls that organizations run into with IT outsourcing:

  • Organizational culture differences
  • Expectations mismatch between the customer and the service provider
  • The customer underestimates difficulty of managing outsourced projects
  • Total cost of the solution isn’t considered
  • Total value of the solution isn’t considered
  • Transition to the operations team is mismanaged
  • Over-reliance on documentation
  • Software licensing issues
  • Learning curve for service provider underestimated
  • The service provider is understaffed
  • Some aspects, e.g. security, cannot be outsourced
  • Intellectual property (IP) rights
  • Technology connectivity
  • Solution doesn’t fit into organizational ecosystem

Here are some common pitfalls with agile IT outsourcing:

  • The customer procures the “agile” project via traditional strategies
  • The customer takes a Water-Scrum-Fall approach
  • The customer governs the service provider via a traditional approach
  • The customer really isn’t agile
  • The service provider really isn’t agile
  • Neither are agile
  • Agile is based on trust, yet it behooves you to not trust the service provider

Here are some common pitfalls with geographically distributed teams:

  • Project success rates drop as geographic distribution increases
  • Communication challenges
  • Time zone differences
  • Cultural differences
  • Customer unwilling to invest in travel

How Disciplined Agile Delivery Supports Outsourcing

Disciplined Agile Delivery (DAD) provides several important mechanisms which enable agile IT outsourcing:

  1. Flexible, process goal driven approach.  A team where the work has been outsourced to them will work differently than an insourced team.  A globally distributed team will work differently than a co-located team.  To be successful at agile IT outsourcing you need to adopt a process that is sufficiently flexible to meet the needs of the situation that you face.  DAD’s process goal-driven strategy provides this flexibility while being easy to tailor.  Context counts.
  2. Hybrid framework.  The DAD framework is a hybrid that adopts strategies from a variety of sources, including Scrum, Extreme Programming, Agile Modeling, Unified Process, Kanban, SAFe, traditional sources, and many more.  As a result it provides the robust advice that you require to address the complexities of agile outsourcing.  Choice is good.
  3. Full delivery lifecycles. The DAD framework supports four full delivery lifecycles – An agile Scrum-based on, a Lean Kanban-based on, an exploratory Lean Startup lifecycle, and a continuous delivery lifecycle – that show how to approach IT delivery from beginning to end in a streamlined and lightweight manner.
  4. Risk-value lifecycle.  The DAD framework explicitly includes proven risk reduction techniques in its delivery lifecycles.  These strategies include coming to a stakeholder vision early in the lifecycle, proving the architecture with working code, and delivering a potentially consumable solution on a regular basis.
  5. Enterprise awareness.  The DAD framework promotes the philosophy of enterprise awareness – DAD teams should do what’s best for the customer organization, not what is convenient for them.  This means that delivery teams should adopt organizational conventions whenever appropriate, reuse existing assets (including legacy data sources), follow the organization’s business roadmap, and follow the technology roadmap.
  6. Explicit governance.  The DAD framework explicitly address how to govern agile teams.  The increased risks associated with outsourcing require a more sophisticated approach to governance than what you would require for an insourced delivery team.

Disciplined Strategies to Make Agile Outsourcing Work

Our experience is that the reason why many customer organizations struggle with agile outsourcing is because their intuition (which typically reflects the traditional mindset) leads them astray.  The following table indicates what traditional intuition often leads you to do and the corresponding disciplined agile strategies that we recommend.

Table 2. Traditional intuition vs. what you should actually do.

Traditional Intuition Disciplined Agile Strategy
Negotiate a fixed price – The desire is to reduce financial risk, but this typically results in scope being dropped or the development team making it very difficult/expensive for stakeholders to evolve their requirements over time. Adopt variable funding – Variable funding strategies, such as stage-gate, time and materials, or cost plus, prove to be lower risk in practice (albeit at the cost of slightly more sophisticated governance).
Follow a comprehensive procurement strategy – The greatest source of risk on an agile IT outsourcing project is how most customer’s procurement strategies are misaligned with the way that agile teams work. Procure an agile team – If you want an agile team, then procure one via a contract that reflects the strategies discussed here.  Most IT outsourcing contracts tend to reflect traditional ways of thinking which thereby inject significant risk into agile outsourcing engagements.
Save money through travel reduction – This typically increases the time, cost, and risk associated with decision making and communication. Travel at critical points throughout the project – Disciplined agile teams will get at least their key people together at critical points (initial modeling, initial planning, major milestones) so that they can quickly address the concerns at the time in a low risk, face-to-face (F2F) manner.
Define detailed requirements up front – Stakeholders are not good at describing what they want, so any effort to baseline detailed requirements early in the lifecycle will inject significant risk into your project. Evolve requirements throughout the project – It is natural for people to change their minds, particularly after they’ve seen something built.  The implication is that we need to work in a way that embraces changing requirements instead of trying to prevent changes.
Have long iterations – This results in longer feedback cycles which in turn increases the risk of building the wrong thing. Have short iterations – Short iterations result provide more opportunities for the customer to monitor and steer the effort, thereby driving down risk.
Manage remotely – This makes it harder to know what is happening “on the ground”, increasing overall risk. Collaborate closely – Close, respectful collaboration is what makes agile work.
Adopt artifact-based “quality gates” – This proves to be a governance façade in practice.  The true measure of progress should be the delivery of high-quality, consumable solutions over time. Govern agilely – Agile teams should be governed in an agile manner.  With outsourced teams, we recommend that the you insist on the team adopting the practices of continuous integration (CI), development intelligence (automated project dashboards), code analysis (to ensure conformance to corporate coding conventions and to measure code quality), and lightweight milestones from the very beginning.  The team’s automated dashboard should be available to the customer organization, thereby giving them the real-time insight that they require to govern effectively.
Perform acceptance testing at the end – This increases the average cost of fixing any defects found, thereby inject both cost and risk into your project. Test throughout the project – Disciplined agile teams follow practices such as whole team testing and parallel independent testing (as appropriate) throughout the entire lifecycle, not just at the end.
Hand-off the solution to your team at the end – Any time there is a hand-off between two teams there is an opportunity for misinterpretation. Have a gradual hand over – If you are going to do a hand-over, do so gradually be involving members of the sustainment team in the construction effort.
Outsource things you’re not good at – The idea is that you should focus on what you’re good at and outsource the rest.  However, if you’re not good at something then how likely are you to have the skills to govern it effectively? Succeed locally first – If you’re not good at agile development when the team is down the hall from you, what makes you think you’ll succeed at it when the team is on the other side of the planet?
Keep Inception and Transition in-house – This approach tends to require heavy investment up front and back end work performed by expensive staff. Actually outsource the work – It is in fact possible for the service provider to take on the vast majority of the work.  This pushes work into the hands of lower cost people while reducing the overhead and risk associated with getting disparate teams to work together.


When Disciplined Agile Outsourcing Makes Sense

We’ve found that for agile outsourcing to be successful you must first meet all three of the following criteria:

  1. You are already successful at insourced agile.
  2. You understand and accept the risks involved with outsourcing.
  3. You are prepared to address those risks.


We Can Help

Scott Ambler + Associates helps organizations around the world to understand and effectively implement disciplined agile strategies through training, mentoring, and coaching.

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