Implementation challenges of Agile in Captive units or offshore Development center?

Why it is tough to implement Agile in Captive units or Offshore development centers?

Let us understand the purpose of building Captive Unit(CU) or Offshore Development Center.

The Major driving force for opening CU or ODC was by tactical reasons such as short-term cost savings and staffing flexibility.

Non-core or non-critical activities are typical candidates for outsourcing.

What are the nature of the project?

Outsourcing is considered to be the most appropriate for development of software with well-defined requirements and deliverable. Typical pricing models are Time and Materials (T&M) and Fixed Price.

Captive model means that customer organization makes strategic decision to create its presence in the lower cost location and conduct work there as a part of its own operations.

Captives are supposed to lower cost through labor arbitrage. Advantages are Ongoing realization of real cost savings,Full operational control and monitoring,Full ownership after the transfer.

Both outsourcing and captive operations have similar driving forces (cost reductions and competitive pressures in the first place)

Side effect of Captive units:

• Less Motivation/Incentive for the person running the captive operation
• Less Innovation due to lack of Entrepreneurial Attitude(Surrogate mother)
• Higher Attrition – Person heading the captive center at the end of the day is an employee (who can easily switch) as a result causing lower sense of ownership and higher attrition throughout the operation.
• All the goals are around cost and cost optimization(FTE savings in the name of Productivity gains).
• Maximize Resource or capacity utilization is the key focus.
• Create tools, KPI around ROI like Resource utilization, Cost benefits
• Mindset or culture is more plan driven.Team members are measured based on how much hrs logged into. Overall culture is to logging hrs and optimizing the cost by minimize services as much as possible.
• No investment in team building, travel restriction from one way,preference given to the team members from parent company, Good quality work will be done in parent company, only legacy outdated maintenance work will be dumped into ODC/CU, which will effect team morale and motivation
• Team members are treated as a machine/Resources tagged as Per Hr Billing numbers

Challenge is to implement Agile Practices in such Captive units or Offshore Development Center.

Agile Implementation is driven by Values and Principles. Agile implementation is People driven philosophy.People and Value delivery at incremental level is the key.

Without changing the old setup or mindset or belief or culture, bringing agility will be tough.

What should be the new model for Agile Captive Unit?

To implement Agile in Captive Units, we need to change the most of current way of working, is it easy? not at all , 2-3 years drive !

Mostly heavy Top down and bottom up approach, basically Vertical and horizontal change management drives.

a) Shift the focus from cost optimization to Value delivery

b) Shift the focus from Billing efficiency improvement to outcome based measurement.Eliminate all the tools which micromanage about the time/hrs log-in by the team members.Eliminate all the roles(overhead) which drive those.

c) Shift the focus on Micromanagement to empowerment and rewarding leaders based on Value delivery

d) More and More co-creation in end to end delivery process( To increase involvement and ownership,Increase Participation)

e) Build trust into whole ecosystem and improve retaining employees

f) Build One company concept( Come up with strategy to execute)

g) Work for entrepreneurship, build the intrapreneurship culture, drive innovation ,Reward and recognize innovation.

h) Come out from the mindset ( Low cost destination), by delivering year on year value generation and scaling up contribution in end to end value chain

i) Implement continuous Delivery and deploy Agile in all the places.

j) Leaders and Team members from parent companies should sit together in ODC/CU and build solutions for several years.Sitting together will create miracle with change in mindset, ownership etc benefits.

k) And this model should continue to change the old setup(Expat as a Team members and collocated,face to face).There is no segregation in team in terms of parent company or head quarter of ODC units or work segregation.

l) All are part of same team members, Goals and KPI are same.Global Team concept( Break the political barriers).

m) There should be governance at global level at monthly level about the progress made to change the whole ecosystem

There are many more changes are require. Until we initiate all these core changes, we will achieve Surface Agile Transformation. At the bottom nothing will change.

So far what I have seen there are many ODC/CU model undergoing significant changes within the company to get the competitive advantage of the globalization.

What is your experience working with ODC/CU agile coaching? Please share..

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