MANAGEMENT OF OUTSOURCED SATELLITE
PHONE DEVELOPMENT 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
of Sasken 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 shown in 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. Are reputation and 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 with
possible 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, reputation does 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 its capabilities. 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
cycles with 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.
8) Why knowledge management practices are important in technology intensive
projects? Suggest few knowledge management practices for such projects.
Knowledge and skills are gained by employees during the development lifecycle of projects.
In ER&D services where platforms and technologies continually evolve, it is important to
preserve the knowledge so gained and disseminate it appropriately through the organization.
Organizations use Knowledge Management Systems (KMS) for capturing, sharing and reusing
knowledge. Researchers have done extensive analysis on capturing technological,
organizational, individual and social factors influencing the usage of knowledge management
systems in organizations (Subramanian & Soh, 2009). While it is relatively easier to capture
structured knowledge such as documents, cases, white papers, templates, and tools in KMS, it
is difficult to capture, codify and store tacit knowledge retained within individuals.
For this project, a unified collaboration platform based on Microsoft SharePoint was created
and all the project documents were posted in the site. The program director, program manager,
project managers as well as the 100+ engineers that worked on this project across sites had
access to all the documents in the repository thus providing a one-point access.
This
method kept each member up to date on project specificities. Some parts of the project site and
tools, especially those related to bug repositories were also visible to client project managers
to ensure transparency of progress on the project.
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?
Contracting practices in the software industry have been well studied since contracts determine
how risks are shared between clients and vendors (Lacity & Hirschheim, 1993). Figure 4
illustrates the framework used by researchers to analyse the outsourcing projects.
However, research outcomes on the profitability of the FP and T&M contracts are divided. It
is also reported that capable and reputed vendors prefer higher risk FP contracts for some
projects because the returns can be higher (Gopal & Sivaramakrishnan, 2008). For maintenance
and support type projects, vendors prefer to opt for T&M. However, pure development projects
of long tenure such as this, FP contracts are preferred. The main reason is that the complete
project management is with the vendor and hence it has more control over the project compared
to T&M type projects. If the firm has the requisite project and process management skills, such
FP projects tend to yield higher profitability compared to T&M projects6.
Hence decision by Mr. Rajiv Mody to go in for FP contracting was a better decision for the
following reasons:
a) Higher profitability if the project is well managed
b) Confidence on project and process management capability of Sasken managers
c) Successfully deliver on such a complex project with complete ownership enabling
customers to focus on macro level details of the product development and deployment
10) Are reputation and brand important for outsourcing vendors who are involved in
Business-to-Business services? And if so, how can they promote the firm’s reputation?
The case mentions Sasken as a “dark horse”. The reason is that outsourcing service providers
are bound by contractual terms and conditions, and Non-Disclosure Agreements (NDA) that
they have with the clients. Hence in a Business –to-Business (B2B) outsourcing relationship,
promotion of the brand of the contractor is often tricky.
However, reputation of the contractor is important when an American or European client
decides whether to outsource to a firm in India or to one in their home country, Ireland or Israel.
It is due to this reason that the National Association of Software Services Companies
(NASSCOM) was established as a united industry body to show case India’s software talents
and capabilities to outside word. Various certifications and accreditations from agencies such
as Software Engineering Institute Capability Maturity Model Integration (CMMI), and
International Standards Organization (ISO) are methods to improve reputation of vendors (Oza
et al., 2006). Though ER&D firms such as Sasken are not directly involved in selling their
products to end customers, it is important to establish its brand and reputation as the leading
and trustworthy ER&D vendor. This can be done only by taking up large technology intensive
projects and creating enhanced value for clients. Subsequently through referrals, and repeat
engagements, vendor’s brand as a reliable partner spreads across the industry.
WHAT HAPPENED
The success of the project helped Sasken win another contract from the Client for the second
variant of the phone. This model included many enhanced features compared to the previous
model. On 24th March 2014, the Client launched the second model much to the delight of
Sasken and its employees. Sasken continues to support the two models from India support
centre and expects the relationship with the Client to continue in future as well.
Communication service provider such as Sasken is a ‘dark horse’ in the technology industry.
Unlike a pure-play IT services project, ER&D outsourcing projects are technically complex,
including creation of IP components, diverse engineering and project management capabilities,
and often are dotted with numerous risks and challenges, only to be subsumed under the brand
of the product they create.
REFERENCES
Agrawal, N., and Thite, M. (2003). Human resource issues, challenges and strategies in the
Indian software industry. International Journal of Human Resources Development and
Management 3(3): 249-264.
Agrawal, N., Khatri, N., and Srinivasan, R. (2012). Managing growth: Human resource
management challenges facing the Indian software industry. Journal of World Business
47(2): 159-166.
Arora, A., Asundi, J. (2000). Quality certification and the economics of contract software
development: A study of the Indian software service companies. NBER Working Paper
No. W7260.
Banerjee, A., and Duflo, E. (2000). Reputation effects and the limits of contracting: A study
of the Indian software industry. Quarterly Journal of Economics 115(3): 989-1017.
Boehm, Barry. Software risk management. Springer Berlin Heidelberg, 1989.
Cerpa, N., and Verner, J.M. (2009). Why did your project fail?. Communications of the ACM
52 (12): 130-134.
Edwards, H. K., and Sridhar, V. (2005). Analysis of software requirements engineering
exercises in a global virtual team setup. Journal of Global Information Management 13(2):
21-41.
Gopal, A., and Sivaramakrishnan, K. (2008). Research Note-On Vendor Preferences for
Contract Types in Offshore Software Projects: The Case of Fixed Price vs. Time and
Materials Contracts. Information Systems Research 19(2): 202-220
Lacity, M., and Hirschheim, R.A. (1993). Information systems outsourcing; myths,
metaphors, and realities. John Wiley & Sons, Inc.
Oza, N., Hall, T., Rainer, A., and Grey, S. (2006). Trust in software outsourcing
relationships: An empirical investigation of Indian software companies. Information and
software Technology 48 (5): 345-354.
Procurious HQ. (2016). Tim Cook: From supply chain management to CEO. [WWW
document] https://www.procurious.com/blog/trending/from-supply-chain-management-toceo (accessed 26 May 2016).
Project Management Institute (PMI). (2013). A Guide to the Project Management Body of
Knowledge (PMBOK® Guide)—Fifth Edition, PMI.
Schwaber, K. (2004). Agile project management with Scrum. Microsoft press.
Subramanian, A., and Soh, P. (2009). Contributing knowledge to knowledge repositories:
Dual role of inducement and opportunity factors. Information Resources Management
Journal 22(1: 45
ADDITIONAL SUGGESTED READINGS
Carmel, E. (1999). Global software teams: collaborating across borders and time zones. New
Jersey: Prentice Hall PTR.
Gonzalez, R., Gasco, J., and Llopis, J. (2006). Information systems outsourcing: A literature
analysis." Information & Management 43(7): 821-834.
Jorgensen, M., Boehm, B., and Rifkin, S. (2009). Software development effort estimation:
Formal models or expert judgment?. IEEE software 26(2): 14.
Gopal, A., Sivaramakrishnan, K., Krishnan, M.S., and Mukhopadhyay, T. (2003). Contracts
in offshore software development: An empirical analysis. Management Science 49(12):
1671-1683.
Nath, D., Sridhar, V., Adya, M., and Malik, A. (2008). Project quality of off-shore virtual
teams engaged in software requirements analysis: an exploratory comparative study.
Journal of Global Information Management, 16(4), 24-45.
Niederman, F., Tan, F. (2011). Managing global IT teams: considering cultural dynamics.
Communications of the ACM 54(4): 24-27.
Sridhar, V. and Vadivelu, S. (2011). Challenges in Developing Products for an Advanced
Mobile Market: Sasken’s Experience. Asia Case Research Centre, University of Hong
Kong, Case Reference No: 09/459C. Also available at Harvard Business Publishing.
FIGURE 1. TEACHING AREAS COVERED IN THE CASE
Source: Authors’ own
FIGURE 2. RELATIONSHIP BETWEEN VARIOUS FACTORS AFFECTING
PRODUCT QUALITY
Source: Authors’ own
+
Cycle Time
Process Maturity
+
Product Quality
+
Effort
FIGURE 3. COMMUNICATION PLAN ACROSS INDIA AND FINLAND
Source: Authors’ own
Sasken
CXOs
Client
Quarterly
Product Director
Programme
Director
Monthly
Programme
Manager
Project
Managers
Weekly
Project
Managers
Team Lead
Engineers
Daily
Team Lead
Engineers
FIGURE 4. FRAMEWORK FOR ANALYZING IT OUTSOURCING PROJECTS
Source: Authors’ own