3. Introduction
Introduction
MGD services
Certified Woman Owned Business
Over 20+ years of successful quality management service providers both onsite and
off site/near shore/virtual
Successfully implemented off site/near shore quality services
Purpose
Discuss current quality service provider issues and how MGD may provide a
competitive alternative that addresses the problems hindering effective quality
management resulting from the lack of service by the off shore provider
5. Problem Statement
1. Current offshore services are suffering from a lack of quality within the deliverables and
consistency
Not getting what you are paying for
2. Companies are spending increasing amounts of time correcting, micromanaging and
intervening in process management
Spending time fixing the issues that should not be happening
3. Companies are not realizing the benefits and cost savings from the offshore services.
Overall loss of ROI/profitability and reduction of cost to benefit ratio
“The primary objective is to ensure that the perceived benefits from a low-cost
environment are achieved”
“How effective is offshore out sourcing and what critical factors should be considered when
outsourcing”
BE790.614.5DBusiness, Government and the World Economy
Johns Hopkins University Facilitator: Arefaine G. Yohannes
6. Problem Statement
PROS and CONS of Offshoring:
PROS CONS
Skill Set/Quality
Decreased resource costs • encountering poor or unacceptable quality of work in
test automation, regardless of the experience level
• - hourly rate decrease due to touted or other defined universal methodologies
abundant yet inexperienced labor * Language Barriers
force
• Unquestionably many offshore resources provide
communication challenges, especially over a forum that
does not allow you the ability to understand accents,
phrasing or written word and e-mail can be worse
* Time Zone Clash
• Many of the firms in Asia have as much as a 10-13 hour
time difference. The outsourcing firms try to spin this as
a "good thing" for you. Is it good to not be able to
have your team discuss issues with their team as
they arise?
* Increasing Price Trends
• Many offshore providers that have been successful are
increasing their prices due to fact that competition for
local human resources is pushing up the cost of labor.
7. Problem Statement (con’t.)
* Labor Backlash – it would be nice to get some positive Public Relations
There is a groundswell of backlash against the current trend toward exporting jobs outside the US. This backlash may cause negative
publicity.
According to (Bie, 2005), risks associated with offshore outsourcing for financial entities fall into four categories: operational, reputation,
legal and country-specific (not applicable)
The operational risk is the income/profitability loss resulting from an internal failure in the business model or from external events.
Operational risks relate to quantifiable costs that may be hidden unless monitored
The reputational risk arises when the way by which services are performed by third parties reflects badly on the originating firm or
organization. Especially for financial firms, the breach of confidentiality concerning customer financial information can cause significant
damage. The transfers of information itself as well as imperfections in the service provider’s control environment are specific areas of risk. -
If systems are not tested well this risk increases
The legal risks arise as offshore outsourcing is based on binding contractual arrangements. Besides small print problems, risks can arise
when specific contractual details become detrimental to the financial firm’s business strategy, for example if the contract is of long duration,
but the service in question reflects outdated business realities or lacks the value added benefits necessary to realize the return.
The above-mentioned risks are common to all outsourcing arrangements, but moving the service offshore, which tend to lessen direct
influence or at least increase the supervisory burden, exacerbates the risks.
“How effective is offshore out sourcing and what critical factors should be considered when outsourcing” BE790.614.5DBusiness, Government and the World Economy Johns Hopkins
University Facilitator: Arefaine G. Yohannes
8. Problem Statement
Q: Why hasn’t the offshore QA resource experiment worked?
1. Offshore = abundant resources and lack of experience drives low costs
a) many resources are fresh out of school and are not trained in the fundamentals of Quality Assurance and
testing nor do they have the system experience to provide value added services to ensure that meet expected
quality objectives
2. Reduced communication
a) hinders efficiency and requires additional cycles of review and increased time
b) Onshore FTEs are having to micro-manage process methodologies due to lack of test lead leadership,
capability and experience – significantly risks the client being served correctly
3. Time zone challenge – reduced agility and flexibility, increases the overall duration and creates obstacles when speed
coupled with quality is necessary – adds time and effort
“the primary objective is to ensure that
the perceived benefits from a low-cost
Decreased Increase in value
added benefits and/or
environment are achieved”
Hourly Rate
profitability
=
9. Problem Statement (con’t.)
Q: We significantly reduced our costs of QA resourcing that has to increase profitability… right?
1. Off shore Rate = lack of experience – this generally increases the overall duration and requires more oversight by onshore resources
2. FTEs are having to micro-manage the process
a. For every hour a FTE spends doing the work of an offshore resource the overall hourly rate increases and the effectiveness of
that manager decreases – this increases the costs of the project overall but may stay hidden
Hourly rate Hours spent Total cost of off
shore project work
FTE Manager $50/hour 200 hours (fixing the 10000
(estimated) problems)
Offshore QA person $30/hour 1000 hours 30000
#1
40000
Combined hourly rate now up from $30 to $40 reducing the cost to benefit ratio
NOTE: The fixed costs are no longer static and no one is seeing the soft costs associated with the off shore cost increases
11. Proposal
What MGD cannot deliver.
• The same hourly rates of off shore service providers – we can be competitive but not match.
What MGD can deliver.
• Sustainability – Pool of experienced resources to support all quality services
• Experience – Invested and motivated professionals with systems, documentation, quality process, GDP, validation, SOX
and other regulatory systems backgrounds
• Effectively utilizing the mature client methodology – Mitigation of current issues through effective resource management
and process leadership
• Increased value – Costs that over the lifecycle of a project will be competitive
• Flexibility, agility, delivery – On shore, off site resources with open schedules, high performing work ethic and delivery
centric mindsets
• Leadership partnering – Oversight of Test Leads and testing resources
Ensures client will be provided the appropriate level of:
• status reporting
• Meetings coverage and thought leadership
• Process management and documentation quality review
Ensures resources are effective and exceed expectations and deadlines
13. Proposal
MGD is asking for an opportunity to prove out our value added services:
1. Provide a general SOW and rate card of resource costs
2. Estimate the next quality project to be able to compare costs and
delivery with current supplier
3. Initiate a project based contract
4. Execute
15. Summary
• Documentation quality and process management
issues with their current testing services provider
• MGD has a successful background of near
shore/offsite QA and testing project/program
execution
• MGD is asking for an opportunity to prove out the
value added service they can provide
17. Footnotes for references
Footnotes:
Excerpts and referenced statements provided by:
“How effective is offshore out sourcing and what critical factors should be
considered when outsourcing”
BE790.614.5DBusiness, Government and the World Economy
Johns Hopkins University Facilitator: Arefaine G. Yohannes
February 17, 2007
By Martye Karen Joyce 2/17/2007
Excerpts in the background slide for Labor backlash provided by: Bie, U.H. (2005)
Offshore Outsourcing: Consequences and Challenges for U.S.
