May 20, 2014

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Optimal On-site/Offshore team structure for Project Execution

At the time of a new engagement, managers take into consideration multiple activities like charter, planning, effort estimation, defining goals and metrics, success factors, cost, outcome, etc. One factor that is most important for any project to succeed is engaging the right team to execute the project. This factor is mostly not given adequate importance in on-site/ offshore delivery model.

One of the reasons why setting up a team is a challenge in this delivery model is that due to bidding competition, the vendors quote a very competitive price to customers. For managers to meet project profit margins, they try to limit the cost spent on project resources & execution. With the limited resourcing budget (setting aside the profit margin, onboarding cost, travel cost if applicable, new infrastructure cost and other overheads), it is sometimes not feasible to have a standard ratio that fits all projects. The whole idea of offshoring a project is to reduce labor cost

Two primary things we need to take into consideration while forming the teams:

  1. Ratio of On-site to Offshore Team
  2. Team Composition. High experience/expertise (high cost): Low experience/expertise(Low cost)

On-site/Offshore Ratio

Firstly, let us discuss on-site to offshore Team ratio. Per the conventional model and industry standards, the ratio of On-site to offshore resources is 20:80 (1:4). However this ratio may be achievable as an overall average across multiple projects run by a vendor, but the ratio at project level could vary based on:

  • Phase of Project
  • Type of Project.

Phase of Project:

Requirements, Analysis and Design phase: In this phase, on-site presence is minimum required. The requirement gathering resource can be at on-site and parallel analysis and design can happen at offshore. The ratio of on-site to offshore can be 1:6.  

Development & Testing phase: The on-site to offshore ratio increases to 1:4 due to the need of technical resources at on-site to work with the customer technical teams.

Deployment Phase: During this phase the team at offshore ramps down bringing the ratio higher to 1:3

Type of Project:

Independent Execution Projects: Such projects have a very high on-site to offshore ratio. This could go as high as 1:2.  E.g. Projects like OS upgrades, Technology Migrations require high on-site presence.

Business Requirements Development Projects: Projects which work as a collaboration between customer business groups that provide requirements and vendor technology teams implement them. Such projects need on-site to offshore ratio of up to 1:4

Technology Support Projects: For SMT (Support, Maintenance & Testing) projects, usually the technology, tools and processes are pre-defined. Vendor team takes the transition mostly at on-site from the existing team and then takes the project forward. The ratio for such projects during transition is higher (1:4) and then during the steady state of the project, the ratio falls to 1:8.

Team Composition

The right mix of skills and expertise is very important for efficient execution of the project. Given the budgetary limitations, as the resource experience and expertise grow, so does the labor cost. Hence vendors have to choose the right ratio of experience and expertise of team members.

For the purpose of this document, let us define the terminology as:

LC (Low cost): Low Expertise and Experience

HC (High Cost): High Expertise and Experience  

All the ratios going forward will be in reference to HC: LC.  (1:4) will mean 1 HC to 4 LC.

This aspect is usually not defined in SoW or agreement with the client and is up to the maturity of the vendor team to take care of execution. There is no defined industry standard that applies to all the projects. However, we can still come to a fair ratio value based on the category of Projects.

Here we can categorize the projects as:

  • SMT (Support, Maintenance & Testing) Projects.
  • Development Projects

SMT Projects: In such projects, the technology, tools and processes are pre-defined, hence vendor knows the skill set required. SMT engagements usually have a sufficient transition time to ramp up the knowledge and team from the previous vendor or application development team. SMT managers utilize this transition time to ramp up and train low cost resources for project execution. Such projects can be efficiently executed with the ratio of 1:8

Development projects: They may or may not have defined technology, tools and architecture. The only ramp up time the Development team has is during the requirement gathering phase.Due to the lack of time for ramp up and training, the recommended ratio for such projects is 1:3. HCL's tech support services vertical has decades of experience delivering product support services to large global enterprises. Through technology enabled services, HCL has enabled its clients to deliver enhanced customer experience.