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Copy and paste the link to access the full recording: http://www.castsoftware.com/news-events/event/vendor-management-forrester?gad=ss ------------------------------------------- Hear Stephanie Moore, Vice President and Principal Analyst at Forrester, discuss a major challenge that 48% of IT executives say they face with existing outsourcing relationships – poor quality. Expanding on findings in the July 2011 report “Maintaining Vendor Management Vigilance in the Overheated Global Sourcing Market”, Stephanie will talk about how quality is at the heart of vendor management---whether in the processes and standards used by your vendors, the staff assigned to your projects, or the application code itself.
Citation preview
Stephanie Moore
Vice President and Principal Analyst
Forrester Research, Inc
Ensure Application Quality with Vendor Management Vigilance
CAST Confidential 2
Speakers
Stephanie Moore
Vice President and Principal Analyst
Forrester Research, Inc
Lev Lesokhin
Vice President, Worldwide Marketing
CAST
© 2011 Forrester Research, Inc. Reproduction Prohibited 3 © 2009 Forrester Research, Inc. Reproduction Prohibited
Transparency as an Antidote to Global Sourcing Risk
© 2011 Forrester Research, Inc. Reproduction Prohibited 4
Technology is more critical to the business than ever before; it’s a market maker, not just an enabler.
Bottom Line: IT has never been so important to the business, and
yet due to years of cost cutting and “optimization”, so ill-
equipped to support business needs
64% believe:
“Technology is
CENTRAL to
how we
differentiate
ourselves”
69% believe:
“Technology is a
CORE
COMPONENT
of our products
or services”
87% believe:
“Technology is
CRITICAL to
serve
and support our
customers”
© 2011 Forrester Research, Inc. Reproduction Prohibited 5
Software is everywhere and growing more complex
Product Lines of code
Order entry system 1.7 million
F-22 Raptor 1.7 million
Space Shuttle 2 million
Microsoft Word 2 million (27,000 in first release)
F-35 Joint Strike Fighter 5.7 million
Airline reservation system 6.1 million
Boeing 787 Dreamliner 6.5 million
S Class Mercedes-Benz radio with
navigation system
20 million
© 2011 Forrester Research, Inc. Reproduction Prohibited 6
65% The business
says says: “I buy
technology and
technology
services without
involving IT.”
© 2011 Forrester Research, Inc. Reproduction Prohibited 7
“I download applications
to do my job because my
company doesn’t provide
them.”
34%
© 2011 Forrester Research, Inc. Reproduction Prohibited 8
The gap between business requirements and IT’s ability to deliver is widening
How are IT and the business
filling this the gap?
In many cases, through third
party IT service providers
© 2011 Forrester Research, Inc. Reproduction Prohibited 9 © 2009 Forrester Research, Inc. Reproduction Prohibited
Understanding the trends in global outsourcing
© 2011 Forrester Research, Inc. Reproduction Prohibited 10
IT Industry Perspective: Key Trends Today
Outsourcing is viewed as an essential tool for companies to reduce costs,
improve service and help the business innovate
The large scale, top tier IT services and outsourcing providers begin to look
the same
– Whether you work with Accenture, IBM, Infosys or TCS, much of your
applications work will be performed offshore
While offshore outsourcing continues to grow, satisfaction levels decrease
Managed outcome services are recognized as essential to optimizing
outsourcing relationships –from a cost and quality perspective. But, lack of
transparency into code quality and structure is a challenge for many
customers
Domestic outsourcing emerges due to a productivity-price trade off.
Sometimes it is faster and cheaper to outsource locally due to the need for
contextual, not just technology, understanding.
© 2011 Forrester Research, Inc. Reproduction Prohibited 11
Global outsourcing: India is the destination of choice
Market is mature and large, cost is low and quality is high
However, quality is on the decline (C-Player and “fresher” syndrome)
Escalating costs are narrowing gap relative to US costs
Wage inflation, COLAs
Cost of gaining requisite contextual knowledge
Rework often required once code is repatriated to US
High employee turnover due to constrained labor market
Higher onsite component required for communications and context
Increased difficulty and expense in landing offshore resources onsite
using H1B and other visas
Communications challenges
Time zone challenges
Difficulty in performing early lifecycle work where business, process and
vertical knowledge is required
© 2011 Forrester Research, Inc. Reproduction Prohibited 12 © 2009 Forrester Research, Inc. Reproduction Prohibited
Managing your vendors for success
© 2011 Forrester Research, Inc. Reproduction Prohibited 13 © 2011 Forrester Research, Inc. Reproduction Prohibited
17%
40% 41%
48%
0%
10%
20%
30%
40%
50%
60%
Quality of work done is poor
2007 2008 2009 2010
Customers’ outsourcing frustration is rising
Which are your firm's biggest challenges with your existing outsourcing relationships?
POLL QUESTION 1
What types of business risks do you most closely associate with product quality?
Increased cost 28%
Slower time to market
22% Loss of revenue
12%
Loss of customers 18%
Damage to company brand
20%
© 2011 Forrester Research, Inc. Reproduction Prohibited 15
So, vigilance required in managing global outsourcing vendors
Quality standards and certifications: are they real and are they real for
your activity?
Resource qualifications and certifications
– How proficient are the teams you engage?
– Do they have necessary certifications?
– Do they really know how to code software?
Continuous evaluation of vendors’ HR and recruiting and retention
capability
Continuous evaluation of vendors’ training capability
Innovation capability: show me your vertical and domain expertise
© 2011 Forrester Research, Inc. Reproduction Prohibited 16
The importance of vendor training investments
© 2011 Forrester Research, Inc. Reproduction Prohibited 17
Vigilance required in managing global outsourcing vendors (cont.)
Productivity vs. price trade offs
– How to measure
Evaluating deliverables from managed service engagements
– Is the code maintainable gong forward?
– Is it efficiently built?
Vendor viability assessments a must
– This is much more difficult for small and privately held vendors
– Clients have to be clever in researching their vendors and their vendors’
performance and track record.
– Employment websites
– Social media
POLL QUESTION 2
Do your outsourcing/customer SLAs include metrics on the technical/structural quality of code being delivered?
Yes 19%
No 37%
Sometimes 25%
I don't know 19%
© 2011 Forrester Research, Inc. Reproduction Prohibited 19 © 2009 Forrester Research, Inc. Reproduction Prohibited
Managed Outcomes
© 2011 Forrester Research, Inc. Reproduction Prohibited 20
Manged services model: benefits and risks
Client buys
people
Client buys an
outcome directly
And
manages
them to
deliver an
outcome
Staff Augmentation Model
Managed Services Model
© 2011 Forrester Research, Inc. Reproduction Prohibited 21
Why is a managed services model better?
Better savings including a productivity boost beyond labor cost savings
– Potentially a one-time benefit, however according to case history examples,
savings can range from 10% to 25%
Movement of risk from client to vendor
Greater potential for process improvement
– Allows your IT services vendor to operate at its own level of process maturity
Improved foundation for knowledge retention
– Knowledge does not walk out the door with the “person”
Improved knowledge transfer in terms of time and money expenditure
– Vendor is responsible for its own staffing
But, how do you ensure your black box is filled with good things?
© 2011 Forrester Research, Inc. Reproduction Prohibited 22
Keys to Success for Managed Services
A mechanism for auditing code quality and its adherence to standards.
– This transparency is critical to both the client and the vendor
Change in the way suppliers are managed
– Managing vendors instead of programmers
– Having an effective governance model which includes vendor participation
– Ability to review vendor performance with links to penalties or rewards grounded
in the Master Services Agreements (MSA) and Service Level Agreements (SLAs)
Change in the way work is organized for outsourcing.
– A portfolio-driven view of potential work to be outsourced and the ability to batch
work where possible
Ability to envision service level requirements and outcomes and document
them in statements of work
© 2011 Forrester Research, Inc. Reproduction Prohibited 23
Transitioning to managed outcome relationships requires an SLA “starter set”
Start with SLAs that are simple to track:
– Number of incidents, enhancements, patches
– Availability
– Quality of support/responsiveness and resolution
– First time right
Allow for a “true-up” with the supplier in a mutually agreeable time frame.
– Allow time to build up historical data patterns.
Create a path forward to more demanding SLAs for the future – it seems
like magic.
– Quality improvements
– Productivity improvements
– “Innovation”
Because you can’t manage what you don’t measure
May 2012
Actionable Application Intelligence for IT Executives
CAST Confidential
Market leader in Software Analysis & Measurement
25
Ambitious
Mission
Rock Solid
Foundation
Market Leader
Introduce fact-based transparency into application development and
sourcing to transform it into a management discipline
Broad market presence in Europe, North America and India
Strongly endorsed by software industry gurus and long term investors
Over $100 million of investment in R&D, driven by top talent in
computer science and software engineering
Pioneer and recognized market leader since 1999
CAST Research Labs, the world’s largest R&D facility dedicated to the
science of software analysis & measurement (SAM)
“CAST metrics have become the de facto standard for measuring the quality
and productivity of application services.” – Helen Huntley, Research VP, Gartner
CAST Confidential
Product Quality Metrics
Most enterprises measure everything but
the product delivered to the business
CAST measures the product itself
Robustness Performance Security Changeability Transferability Size
Planning Estimation Scheduling Time Tracking Cost Tracking
Product Process
Time & Duration
Effort & Budget Function &
Scope
Quality
&Size
Requirements Earned Value User Acceptance Usability
CAST AIP
CAST Confidential
Driving software measurement in the ADM industry
27
Key Influencers Recognize CAST
250 Global Leaders Rely on CAST
Institutions Engage CAST SIs Resell CAST SIs Use/Resell CAST
Top technology
First in business IT
Biggest benchmark DB
CAST Confidential
CAST dashboards, reports & benchmarks
28
CAST Highlight
Portfolio Analysis Size
Complexity
Risk
Technical debt estimation
Zero Deployment No centralized source
code collection
Portal results
Full analysis report
CAST Application Intelligence Platform
Risk Drivers
Robustness
Performance
Security
Cost Drivers
Transferability
Changeability
Alerts, trending, root cause analysis
Discovery Portal
Automated
App Blueprint
Discover, modernize
and change
applications
Function Point Manager
• Automated
FP counts
• Technical
Sizing
• Effort
Estimation
Function Point Changes Due to a Sequence of Change Requests
0
5
10
15
20
25
30
35
40
0 50 100 150 200
Cumulative Effort (Staff Hours)
# F
un
cti
on
Po
ints
1 5 2 3 4
Benchmarking Services
Compare to industry
business process
and technology
CAST Confidential
Arc
hit
ec
ture
Co
mp
lia
nce
Enterprise-grade analysis requires a 3-tier approach
29
Intra-technology architecture
Intra-layer dependencies
Module complexity & cohesion
Design & structure
Inter-program invocation
Security Vulnerabilities
Module Level
Integration quality
Architectural compliance
Risk propagation
simulation
Application security
Resiliency checks
Transaction integrity
Function point & EFP
measurement
Effort estimation
Data access control
SDK versioning
Calibration across
technologies
System Level
Data Flow Transaction Risk
Code style & layout
Expression complexity
Code documentation
Class or program design
Basic coding standards
Program Level
Propagation Risk
Java
JSP
EJB
PL/SQL
ASP.NET
Oracle
SQL
Server
DB2
T/SQL
Hibernate
Spring
Struts .NET
C# VB
COBOL
C++
COBOL
Sybase IMS
Messaging
Java Web
Services
APIs
1
2
3
CAST Confidential
Project #n Project #3
Project #2
Example: Managing multiple ADM vendors at global telecom company
230,000 employees, almost $100 billion revenue, 40 million customer accounts
Billing & OSS Solutions
– 120 billion call records and 1 billion invoices per year
– Also, SAP, Siebel, all front end apps that power e-commerce sites
Running one or two times per quarterly release
– SLAs in contracts based on CAST
– Aggregation of CAST metrics into C-level management dashboards
Software analysis
Vendor facility
Team #1
Team #2
Team #3
Team #4
Neutral & independent vendor unit is running the CAST AI Center for the customer
Project #1 • 150+ applications • 4 apps silos, with 50+ CAST consumers
plus management in each
CAST Dashboard
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1.1 2.0 2.5
Vendor A
Vendor B
Vendor C
Vendor A
CAST Confidential 31
Structural quality impact at a major services brand
Measured impact in a complex enhancement-heavy environment
304 222 196
385 401
231 198 242 279
167 112
258 274
149 140 245
188
61 56 78 97 62 57 81 75 87 40
260
181 167
225 265
220
151
195
232
154
150
295
385
228 163
223
186
148 84
121 136
96 38 11 10 8 11
0
100
200
300
400
500
600
700
R1
R1
.1
R1
.2 R2
R2
.1 R3
R3
.1 R4
R5
R6
R7
R7
.1 R8
R9
R9
.1
R9
.2
R1
0
R1
0.1
R1
0.2
R1
0.3
R1
1
R1
1.1
R1
1.2
R1
1.3
R1
2
R1
3
R1
4E
Code No RC Non Code Projected Count
Str
uctu
ral
qu
ality
S
yste
m t
est
defe
cts
Trend line
Before CAST implementation
0
500
1000
1500
2000
2500
3000
3500
R1
R1
.1
R1
.2 R2
R2
.1 R3
R3
.1 R4
R5
R6
R7
R7
.1 R8
R9
R9
.1
R9
.2
R1
0
R1
0.1
R1
0.2
R1
0.3
R1
1
R1
1.1
R1
1.2
R1
1.3
R1
2
R1
3
R1
4E
Order Management Inventory Management Billing Customer Service
New critical violations
CAST Analysis starting point
CLIENT STUDY OVER 24 MONTHS
CAST Confidential
CLIENT ADM VENDOR
32
Structural quality metrics can help both clients and vendors
Takes the guesswork out of
quality
Improved code acceptance criteria
Objective performance
measurements
Take control of accountability to
the business
Improve collaboration between
multisourcing parties
Justify the quality of work
Benchmark applications against
industry and clients applications
Better release management
Increase productivity and improve
bottom line
Remove risk from subcontracting
decisions
Improve customer satisfaction
Improve collaboration between
multisourcing parties
Transparency between customer and vendor encourages a healthier
and more risk-free relationship
CAST Confidential
Contact Information
Lev Lesokhin Stephanie Moore
[email protected] [email protected]
www.castsoftware.com www.forrester.com
blog.castsoftware.com http://blogs.forrester.com/
@OnQuality @forrester
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