Onshore Diamonds vs. O shore Pyramids
A discussion of alternative service delivery
structures for e ective technology outsourcing
SUMMARY
An agile, flexible service delivery model integrated
with business stakeholders needs to be
fundamentally different from the classic offshore
‘Pyramid’ and the engagement model needs to
change from purely lowering cost of resources, to a
more balanced, cost-effective approach. One of the
key pillars of the Onshore services is a ‘Diamond’
operating structure that achieves the right balance
of cost-performance, agility and businessalignment.
INTRODUCTION
In our whitepaper “A Global Services Redesign
Initiative”, we presented a case for why a redesign of
global technology services was necessary in building
cost effective, agile and business-aligned technology
services delivery, and how the model could be
constructed on a foundation of investments in US
based service centers, with a strong focus on
workforce development and training for new
business technology skills.
We call this service model Onshore IT Services,
because the service delivery model operates on best
practices of remote service delivery and managed
service engagements that create high value
technology competencies at service delivery costs
comparable to global sourcing.
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In this document we introduce a key difference in
operating structures that makes Onshore service
delivery the most appropriate sourcing model for
Application Development and Management
engagements.
THE NEED FOR BUSINESS ALIGNMENT
Over the last couple of years, trends in maturing new
technologies have transformed the business
landscape – whether it’s Cloud computing
infrastructure,
SaaS
applications,
mobile
applications, social media networking or digital
media technologies. Customers are beginning to
demand greater choice, faster product and service
delivery, and more personalization and engagement.
On the flip-side technology and business process
infrastructure is becoming easier to acquire and
manage, lowering barriers to entry and increasing
competition.
Customers are demanding
faster product and service
delivery, while business
process infrastructure is
becoming easier to acquire
and manage.
N
R IE
NTED
Agile teams tightly
intergrated with customer
EN
Focus on outcomes &
strategic value of new
technology initiatives
RIV
Cost E ective
Operations
TI O
SO
I
SD
BUSI
NES
S
New Technology
Transformation
SOLU
Solution frameworks to
accelerate technology
deployment
AGIL
E&
D
GNE
I
L
A
ATED
EGR
NT
Leadership & experience
in understanding business
requirements
O
OM
UTC
E
FIGURE 1:
In this dynamic environment, enterprises need a
fundamentally di erent service partner to help drive
these technology transformation initiatives. A
partner that is more agile; more integrated with
business stakeholders and internal IT organizations;
more focused on business solutions; and driven by
common business outcomes. The engagement
model needs to be fundamentally di erent as well,
from purely lowering cost of resources, to a more
balanced, cost-e ective approach that meets the
objectives of a dynamic marketplace.
PYRAMID MODEL
THE ONSHORE DIAMOND MODEL
Nexient saw these challenges facing CIOs and CTOs
and designed the Onshore services model. One of
the key strategic pillars of the model is an
operating structure (the Onshore Diamond) that is
di erent from the classic o shore pyramid, and one
of the most compelling ways in which Nexient
achieves the right balance of cost-performance
agility and business- alignment.
TYPICAL RESOURCE PROFILE
DIAMOND MODEL
12+ years of business-IT experience
Program management, technical, solutions
architecture & leadership skills
Strong focus on methodology & process
Specialist in business or technology domain
Program
Lead
5-10 years of relevant technology experience
Process, technical, architecture skills
Strong development & IT management
Understanding of business & technology
Senior Developers
Classic ‘o shore’ delivery model
Heavily dependent on a broad ‘bottom-of-the pyramid’ to
reduce cost of service delivery
E ective in delivering cost-e ciency for standardized
support work
Ine ective in developing higher value-add capability
Constrained in creating innovation
Inshore service delivery model
Heavier focus on higher caliber expertise
Reduces dependency on less experienced resources
Highly e ective for application development &
business technology initiatives
Smaller teams deliver higher quality, productivity,
business alignment & innovation
FIGURE 2: PYRAMID MODEL VS. DIAMOND MODEL
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Senior Developers
Developers, Test
& Support
Resources
Educational background in IT
2-5 years relevant experience
Process, technical skills
Knowledge of IT lifecycle
Developers, Test &
Support Resources
Lead
3
You‘ll notice that the standard service delivery model
for global sourcing is a broad based Pyramid. In fact,
this is a cornerstone of globally distributed delivery,
and a key reason why o shore outsourcing can be
highly cost-e cient. By hiring a large number of
junior resources, and deploying them in teams that
are tightly supervised and controlled, o shore
companies can create service delivery teams that are
inexpensive.
Hiring a large number of
junior
resources
and
deploying them in tightly
controlled environments
creates ‘doing teams’, not
‘thinking teams’.
ONSHORE DIAMOND
OFFSHORE PYRAMID
But it doesn‘t create a thinking team. It creates a
doing team. There is ample evidence that this is a
structural challenge for o shore companies in
“climbing the value chain“. This model is suited for
large scale IT and application support engagements,
but fails to deliver e ectiveness or innovation in
business technology deployment and management.
Lead
1
Mid-level
2
Junior
12
Lead
1
Mid-level
5
Junior
3
In contrast, an agile and business-aligned Onshore
service delivery team is structured more like a
Diamond – with a relatively larger team of senior,
experienced resources who are much more familiar
with business processes and their underlying
technologies. An important, but smaller number of
junior resources are leveraged to support the higher
caliber team, for what can be delegated to junior
developers and testers, while providing a talent pool
for organizational development and long term
availability of skills.
A COMPARISON OF OPERATING STRUCTURES
As a consequence of the di erent hiring and
operating standards, the Onshore Diamond makes
for a far more e ective, and productive team. It
needs less process control, supervision, guidance
and program management, delivers better quality
and is inherently more aligned with business.
A recent customer example illustrates this well.
Nexient established an Onshore Diamond structure
at its offsite Michigan center to support the business
technology
deployment need of
a high
performing Silicon Valley growth company. The
customer needed a tightly integrated service partner
to manage a technology platform that runs their
primary revenue generating business processes in a
highly dynamic environment.
ROLES
Program Lead primarily responsible
for client & program management
Mid-level resources act as Team
Leads & primarily responsible for
delivery management
COMPARISSON OF METRICS
Total resourses - 15
Total years of experience of the team - 48
Total cost of team - $441/day
Large team of Junior members carry
the burden of service delivery
Capability to deliver - The primary delivery model
of leverageing junior resources creates e ciency for
standardized work, but falls short in business
technology development & integration due to lack
of core skills & experience
Program Lead responsibile for
program & project management,
& onsite consulting
Total resources - 9
Total years of experience of the team - 48
Total cost of the team - $450/day
Mid-level resources are senior
developers directly responsible for
delivery
Capability to deliver - The primary delivery model
leverages a much more experienced team supported
by a narrower set of junior skills. This model allows a
much more agile, integrated & business-aligned
operating model for core business technology
development & service delivery
Junior developers work together
with senior members on delivery
FIGURE 3: OFFSHORE & ONSHORE COMPARISSON
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In order to fulfill the requirements, an offshore
Pyramid would have needed at least 15 resources, 12
of whom, it turns out, would be junior developers. In
fact, based on a discussion with global service
providers, it‘s very likely that the offshore team, with
its heavy dependence on junior developers, would
not be able to understand or effectively manage the
business technology requirements at all necessitating a significant amount of redundant
overhead resources from the client-side to manage
service delivery processes and quality.
The Onshore Diamond
service model required 9
resources,
versus
an
Offshore Pyramid model
that would require at least
15 resources.
The Onshore Diamond structure, on the other hand,
needed 9 resources, only 3 of whom had less than 3
years‘ experience. In this model, the bulk of the
actual service delivery responsibility was shouldered
by an experienced team of developers, with strong
project leadership capabilities.
A smaller team, with more productive resources and
a significantly greater ability to interact with business
stakeholders was, on a total cost of engagement
basis, about as cost-effective as the offshore team.
But with a much greater likelihood of quickly and
successfully delivering on the service needs.
The reason why an offshore delivery team has
trouble emulating the Diamond model for
Application Development, especially in India, rests
on the fact that a very large proportion of the
available engineering resources offshore are
typically junior, with only a few years of experience.
The more experienced and skilled resources are
more expensive and more likely to want to move to
management functions, rather than working on
service delivery. This senior pool of resources,
because of the nature of demand, is also likely to
have the highest level of attrition offshore.
BRIDGING THE WHITE SPACE IN
ENTERPRISE SOURCING
The Onshore Service Diamond, with a tighter, more
integrated senior level team, is the most appropriate
sourcing model for technology services that are
complex, project oriented, and require greater
interaction and alignment with business
stakeholders. The downstream support, especially in
the context of new standardized, virtualized, cloud
infrastructure environments require far fewer
resources to manage effectively.
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ONSHORE
New technology expertise
Integrated offsite service delivery
Agile, flexible teams
New innovation
Technology transformation
Large, standard tech management
Low complexity delivery
Low risk systems support
Application maintenance
‘Run the business’ services
Boutique
Consultants
In-Source
Supplemental
Staffing
CRITICALITY
IN-HOUSE
Critical skills
Business relationship management
Technology Service leadership
OFFSHORE
High
Onshore
Offshore
Low
Onshore Team
from Offshore
COMPLEXITY
Low
5
High
This is a very strong complement to an enterprises
sourcing portfolio, bridging the gap between critical
internal resources and o shore delivery teams
managing standardized work.
ABOUT NEXIENT
The Onshore model is
important in bridging the
gap
between
critical
internal resources and
o shore teams managing
standardized work.
Nexient was launched early 2009 by leaders from
global technology services companies and
operating CIOs from leading US enterprises.
We’re a venture-backed technology services and
outsourcing company leading the way in developing
US-based capabilities to give enterprises an option
to develop balanced, cost-e ective sourcing
alternatives to o shore outsourcing. We currently
have 2 centers – A Silicon Valley innovation hub that
creates service acceleration platforms and solutions
in partnership with some of the most innovative
companies in the world; and a Service delivery and
outsourcing center in Ann Arbor, MI where most of
our engagement resources are located.
In a following article, we’ll cover the Total Cost of
Outsourcing comparison between the alternative
sourcing
models
and
explore
the
cost-competitiveness of the Onshore Diamond.
Over the last year, Nexient has successfully engaged
with several leading Fortune 500 companies,
and finally given mid-market and high-performance
growth companies a serious alternative to sourcing
technology services from offshore.
For more information, or to discuss your speci c
technology outsourcing requirements, please feel
free to email us at [email protected] or visit our website at http://www.nexient.com.
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ABOUT THE AUTHORS
Debashish Sinha is Nexient’s Chief
Marketing Officer. Before joining the
founding team at Nexient, Debashish
headed marketing at HCL America, a
3B Indian IT services company. Previously,
Debashish was the Principal Analyst
for IT Services at Gartner Research,
Managing Director for Sourcing Advisory at
neoIT, and a Senior Partner at Conscient
Partners, a global services consulting rm.
Michael G. Parks is Chief Delivery O cer at
Nexient, responsible for all aspects of
service delivery, solutions and practice
development.
Before
joining the
founding team at Nexient, Mike was CIO at
Virgin Mobile USA and NorthPoint
Communications, Executive VP at Wells
Fargo Bank responsible for all IT and
operations, and an Senior VP at American
Airlines.