Management of Outsourced Satellite PhoneDevelopment Project:
Sasken’s experience

teaching note

Case Synopsis

Though the Indian IT industry is well known for its software services business capabilities, product development still eludes the sector. This case illustrates the five-year journey ofSasken Communication Technologies– a mid-sized communication services company located in India – to design, pre-build, test, integrate and certify a complex end-to-end satellite phone for a global satellite communication company. Knowing very well the inherent risks and uncertainties associated with such technology intensive project, the CEO of Sasken signed the contract with Inmarsat with immense belief in his team to execute the project successfully. The case highlights the challenges encountered by the program and project managers of Sasken in acquiring the technology knowhow, integrating hardware and software components, managing globally distributed teams, overcoming regulatory barriers, and mitigating unforeseen risks inherent in such off-shore outsourcing projects.

The case can be used in courses examining global software development, IT outsourcing, product development, and telecommunications management to illustrate the challenges in managing technology-intensive outsourcing projects. The areas of decision making and management factors that can be discussed are shownin Figure 1.

Conceptual Foundations

Cost arbitrage is one of the main objectives of IT outsourcing, especially by firms located in the U.S. and Europe to India. However, augmenting capability and meeting time-to-market are other important considerations in the case of Engineering Research & Development (ER&D) projects. In such projects, the outsourcing firm manages partially or in full, the product life cycle of the client. The risks and uncertainties are transferred from the client to the outsourcing vendor, depending on the contractual terms and conditions. The CEO of the vendor should carefully analyse the costs and benefits of such projects based on various factors. Once the CEO makes the choice of taking up the project, it is up to the program and project managers to dutifully layout the scope of the project, optimize the use of engineering resources, and carefully navigate the risks associated with the projects for successful completion of the same. Though references such as Project Management Body of Knowledge © (PMBoK) are available (PMI, 2013), it has always been a challenge to apply theory to practice in software projects, as is evident in the failure rate in such projects (Cerpa & Verner, 2009). The decision making during the course of the project should often be analytical and calculative in nature considering the trade-offs involved.

learning Objectives

  1. To understand the complexities of managing distributed Information Technology (IT) projects
  2. To understand IT and ER&D outsourcing business models and contracts
  3. To understand technology, business and regulatory risks in technology intensive offshore outsourcing projects and possible solutions for mitigating the same
  4. To understand the strategic reasons behind undertaking risky projects.

position in course

This course can be used to teach concepts of project management in an higher level undergraduate or MBA degree programs in the following courses:

  1. Core Management Information Systems course;
  2. Elective course on Project Management;
  3. Core course on Strategic Management.

suggested student questions and assignments

  1. What are the factors that CEOs should take in to consideration when deciding on whether to take-up or not a technically intensive and risky project?
  2. How should outsourcing vendors manage the product life cycle while building products for distant markets?
  3. What are the methods to do scope management when dealing with ambiguous requirements?
  4. How was the global vendor management done in this project?
  5. How can unforeseen risks be mitigated in projects?
  6. How and why is communication management important in distributed projects? How can communication gaps be overcome?
  7. What are the different Human Resource Management practices the project managers can use to retain highly skilled engineers in projects and in turn within firms?
  8. Why knowledge management practices are important in technology intensive projects? Suggest few knowledge management practices for such projects.
  9. Discuss conditions under which a software outsourcing vendor prefers a Fixed Price (FP) contract versus Time & Material (T&M) contract? Was the decision of Sasken to sign the FP contract for this project correct?
  10. Arereputationand brand important for outsourcing vendors who are involved in Business-to-Business services? And if so, how can they promote the firm’s reputation?

Teaching plan

This case is best presented by assigning it to student teams and asking them to come up withpossible solutions in dealing with the various challenges. Each team’s proposed solutions may then be evaluated and compared with the benchmark solutions provided in this teaching note for evaluation.

Expected time for class discussion: 90 minutes

analysis

1)What are the factors that CEOs should take in to consideration when deciding on whether to take-up or not a technically intensive and risky project?

a)Technical capability and confidence in the project team: Though Sasken had not done many projects for satellite phone development such as this it had more than a decade long history of creating Intellectual Property (IP) components some of which were patented. Hence Mr. Rajiv Mody banked on the wealth of engineering expertise available in the company to bet on this technology intensive project. He would not have made his choice if it were not for the highly experienced hardware engineers available at its Finland site who played a crucial role in executing the project.

b)Profitability of the project: In Fixed Price projects, though a threshold profit margin is included in the calculation of the quoted price, cost escalations during the execution of the project can erode profitability. While large firms can leverage economies of scale to reduce costs of projects, for mid-size firms it is often difficult. Hence it was important for Sasken architects and program managers to estimate the effort involved and accordingly calculate the estimated cost of the project at the time of signing of the Statement of Work with the client. Though it is easier to do mid-course correction if there are any cost deviations in large projects, it is a risk the CEO and CTO should consider while taking up a project. While Time & Material (T&M) projects have lower profitability in general, the risk of realizing the estimated profitability is often less compared to fixed price projects. However, if executed well, the profitability of fixed price is often a double digit percentage increase over that of T&M projects. Hence the CEO needs to carefully review the risk assessment done by the cross functional representatives to either take up such risky project or to direct engineering resources to less risky T&M projects.

c)Building reputation: For outsourcing vendors, reputationdoes matter (Banerjee & Duflo, 2000). Ex ante contracts, as well as the outcome after ex post renegotiation, vary with reputation of the vendor. One way to build reputation is to take up technology intensive project and show case itscapabilities. Building reputation for a mid-size firm such as Sasken was of paramount importance to withstand competition from giants such as TCS, Wipro and Infosys.

2)How should outsourcing vendors manage the product life cycle while building products for distant markets?

a)Keep up to date: Keeping in tune with market and technology trends is very important for successful product development. While India virtually bans the use of satellite phones even today, Sasken was building one. Hence the engineering team did not have the requisite technology-in-use view. Moreover, due to government restrictions on the use of satellite frequencies for testing, the team was using an imported satellite emulator. Emulation was not real. Hence it was possible to miss out certain critical functionalities and software faults. One of the possible ways to overcome this deficiency is an in depth understanding of the associated technology standards based on which software and hardware implementations were carried out. Since Sasken was involved in standard development process in the Third Generation mobile communication technologies, the technical architects could understand the technology specifications and associated standards.

b)Involve the client and project sponsor: The best solution is to be visionary in defining requirements. A crack team consisting of a technical architect, a delivery manager, a business portfolio manager, and a financial manager should be formed to meet the client and detail the scope and requirements as exhaustively as possible at the beginning of the project. The project director should explain to the client the importance of requirements and define the scope of the project, which will ultimately dictate the project’s health. By having a Resident Manager of the client at Bangalore, Sasken was able to involve the client right from the beginning of the project and especially during the drafting of the detailed Statement of Work. This improved trust and collaboration between Sasken and the client and resulted in a healthy relationship during the tenure of the project.

c)Process Discipline:There is a complex relationship between quality, time to complete the product, cost and process maturity [see the causal relationship shown in Figure 2]. As process maturity improves, so does product quality; however, this results in longer cycle times for completing development and necessitates greater effort. On the other hand, an improvement in product quality reduces the cycle time as well as the effort required for subsequent customization. The question is whether a firm should invest in process improvement, given its positive and negative effects on cycle time and effort. It has been proven by researchers that reductions in cycle time and effort due to improved quality outweigh the increases resulting from higher levels of process maturity. Thus, the net effect of process maturity is reduced cycle time and development effort.

3)What are the methods to do scope management when dealing with ambiguous requirements?

a)Agile Methodologies:Since product development involves incomplete or unspecified requirements, it is imperative that new approaches be explored to deal with evolving requirements. Agile software methods advocate accommodating change at the product/project level by dividing the development into small features and short iteration cycleswith product quality releases in each of them(Schwaber, 2004).The philosophy underlying the agile method of software development welcomes changing requirements, even late in development while maintaining product quality releases at all stages. One should expect uncertainty and manage it through iterations, anticipation and adaptation. One possible option is to use the agile model in the beginning to quickly get customer acceptance regarding basic requirements, then freeze the requirements and negotiate with the client under a time-and-materials model over any augmentation of requirements.Though Sasken did not use agile methodologies in its first phone project, it used its variants in the subsequent projects.

b)Clearly defined project milestones: This was very important as software development often can continue for a long time without showing tangible progress. In this project, each milestone was separated by about 3 month duration and was constructed to result in a demonstrable feature. This method of defining a milestone resulted in client seeing tangible progress on the project and enabled the client to sign-off requirements as the project progressed.

4)How was the global vendor management done in this project?

When Tim Cook was appointed as successor to Steve Jobs at Apple, many wondered why a Supply Chain executive was given the overall responsibility of running the marquee company. The strength of the company (and arguably its competitive advantage) has been in building and managing a complex network of suppliers that the company has successfully leveraged to produce ground-breaking technology products. Put simply, without the supply network, there is no product (Procurious, 2016). It was Tim Cook who managed more than 748 listed suppliers, 600 of them in Asia round the clock to build those wonderful gadgets. In this project, a number of component suppliers were distributed throughout the globe. Hence vendor management required a substantial attention. The positioning of vendor management as one of the key vertical in the project organizational structure was a key decision taken by the Program Director to ensure smooth coordination and orderly delivery of components.

5)How can unforeseen risks be mitigated in projects?

It is not possible to plan for risks due to natural calamities such as the volcano eruptions cited in the case. The team has to overcome the consequences as and when it happens. In fact, the Finland team had to hand over the prototypes at one of the international airports to the Indian team to hand carry the same since the airspace at certain locations were closed. However, this involved extra time, effort and cost. It is often required to have contingency allowance built in to the cost structure of projects to pay for such unforeseen risks. On the other hand, a risk management framework is essential for assessing planned risks.

6)How and why is communication management important in distributed projects? How can communication gaps be overcome?

The importance of communication and coordination cannot be under estimated in off shore projects involving virtual teams. Researchers have shown that communication and language barriers among team participants are factors that influence the effectiveness of Global Virtual Teams (Edwards & Sridhar, 2005). Though most of the Finnish speak good English, there can be differences in written communication. According to Angelica Jansson, the Project Manager at Kaustinen, Finland, there were instances when teams in Kaustinen and Bangalore would go back and forth for more than 3-4 days in order to understand the position and views of each other on some technical issues. One way to bridge this communication gap across distributed project teams is to have a detailed communication plan wherein the teams across sites synchronize project issues and milestones periodically.

Project communication between vendor and client is also very important. In FP projects, since vendor does the complete project management, the Client at times may not have much idea about the progress of the project except to find unresolved issues at the project milestones. To minimize such communication problems, Srinivas Prasad set up a communication plan as per Figure 3 wherein the peers at Sasken and Client were in touch periodically.

7)What are the different Human Resource Management practices the project managers can use to retain highly skilled engineers in projects and in turn within firms?

In any industry, retention of talent is critical to foster business growth and it is all the more so in knowledge industries such as Information Technology (IT).Tacit knowledge is gained by employees who are engaged longer in the development lifecycle and increases as they are engaged in multiple programs. It is well known that such tacit knowledge cannot be easily codified and hence is not easily transmitted to other team members.Therefore, employee retention is all the more important for IT companies and has been a challenge especially in India with high employee turnover levels.Firms often assign more trained personnel to FP contracts because they bear higher risk in these projects and hence the risk of turnover is exacerbated for Sasken (Arora & Asundi, 2000).

Monetary compensation is only one of the components contributing to employee satisfaction. Since Sasken much like other software firms in India has organization wide and industry benchmarked compensation policies, it is often not in the interests of the organization to tweak it for select projects. Sasken, much like other firms, has organizational strategies to effectively manage and motivate software professionals, such as moving them up the value chain (e.g. widening their competency in technology or platform dimensions; moving them from a testing role to development role), creating learning opportunities, providing conducive work environment and offering work-life balance programs (Agrawal & Thite, 2003).

The project managers used various “Rewards and Recognition” programs available within Sasken to motivate the engineers throughout the project life cycle. Team of the Quarter Award, Spot awards for immediate recognition, Virtual Marbles to convey appreciation of work were many of the methods the project managers used to recognize and hence motivate the 125 engineers in the project. Since the teams were from different cultures (e.g. India, Finland and Germany) the recognitions were executed taking in to consideration the different geographical and cultural settings.

One of the challenges in human resource management in Indian IT firms is low-skilled nature of the work (Agrawal et al., 2012). However, Srinivas Prasad never had to encounter this in his project as it involved technical and managerial complexities to excite everyone in the project team. The inherent nature of the project coupled with the motivation methods as given above, kept the employee turnover close to zero in this project.