QUALITY CONSIDERATIONS IN INTERNATIONAL BUSINESS:
Outsourcing
is a strategic management option rather than just another way to cut costs. The
decision to outsource is often made in the interests of lowering costs,
redirecting or conserving energy directed at the competencies of a particular
business, or to make more efficient use of labor, capital, technology and
resources. Its aim is to help companies achieve their business objectives
through operational excellence.
One
aspect of this is QA and testing. This can provide many benefits to companies,
who are seeking to improve the quality of their production applications, reduce
business risk through rigorous testing and augment and improve upon the
incumbent testing teams and processes. Given the increase in global IT
outsourcing agreements, many companies will be looking at outsourcing QA and
testing as an independent validation and acceptance phase in order to ensure
high quality deliverables and gain competitive advantages.
To
achieve these benefits, organizations select an outsourcing partner who will
typically have local and offshore test centers and capabilities as well as a
strong onsite consultancy presence.
Some of
the critical success factors for outsourcing QA and testing engagements
include:
Ensuring that
the business objectives agreed at the outset of the contract or business case
are managed through to successful completion
Ensuring
that transition from the "testing today" to "tomorrow’s
testing" is seamless in terms of business impact and employee satisfaction
Noticeable
and continuous improvements in the approach and methods used within your IT
organization (not just testing)
When
taking on the challenge of outsourcing your testing, there are many things that
should be considered and accounted for before any contract is signed. This
paper outlines 10 key considerations that organizations should consider when
outsourcing QA and testing services.
Incremental Outsourcing
Organizations
can mitigate their risks of outsourcing by dividing the work into small, more
manageable projects that they outsource to service providers. Managers at the
client organization therefore have well defined deliverables, programs that
work under an umbrella contract with associated schedules. The location of the
work is determined on a project by project basis.
Total Outsourcing - Onsite/Offshore
In this
model, multiple projects and programs at the client organizations are
outsourced to a service provider, which also takes on the end-to-end program
management and delivery on behalf of the client. The service provider takes on
the project, module or program from a client organization, deploys a small team
onsite that works with the client managers and teams and coordinates work with
the offshore team that does the bulk of the work. Typical models range from
20-30% onsite to 70-80% offsite.
1. Engagement Models
Selecting
an engagement model is a crucial aspect of developing the outsourcing plan. The
process involves several factors, including aspects of international business
strategy, selecting the geographical location, understanding the landscape and
deciding on the outsourcing strategy. Some of the engagement models are:
2. Service Level Agreements (SLAs)
The SLAs
should detail the minimum level of service to be provided by the outsourcing
vendor. They should be objective and measurable and have no ambiguity. This
helps both parties in the long term. Some good examples of the type of SLAs
that should be considered are:
On time delivery - dates must be agreed from the outset
on all major deliverables with all
efforts to ensure they are met. Use change control processes if these dates
need to be moved.
Client Satisfaction -
periodic surveys should be conducted to make sure that the service provided by the outsourcing company is
satisfactory to customers.
Effectiveness - effectiveness metrics focus on
lowering costs, improving profit, and adjusting
business transactions
Volume of Work - the volume of work sometimes is
difficult to define. For example, projects
that are billed on a time-and-material basis may discuss volume in terms of
number of resources, while a fixed-price project usually specifies number of
deliverables. This metric is an important part of the SLA.
Sensitivity - sensitivity metrics measure the
amount of time required for an outsource
company to handle a request.
System Downtime and Availability - in
outsourcing, guaranteeing 100% availability of services costs significantly more than guaranteeing 99% or 98%,
and not every company or every application needs 100% reliability. The SLA
should request service availability
to meet
specific business needs.
It is
also good to ensure that SLAs are tied into the contract, sometimes on a
risk/reward basis to ensure that there is mutual interest in meeting them.
3. Mobilization
Once the
contract is signed there will be a period of mobilization for both parties.
This phase generally includes setting up communication protocol with the
client, defining work breakdown structure, sharing standard templates (used for
authoring test cases, reporting project status, presenting the key metrics
etc.) with the client, building test strategy etc. Some of the key elements of
this can be seen below:
People
The
outsourcing providers maintain a pool of highly qualified and dedicated
professionals including QA engineers, QA leads, project managers and technical
specialists. Many outsourcing providers have unique centers of excellence to
train their interns and employees on various testing methodologies and tools
that are required for seamless execution of the engagement. Ensuring the most
appropriate resources for your requirements are in place is critical for the
success of the engagement.
Knowledge Acquisition
Outsourcing
providers follow various approaches to obtain adequate knowledge for the test
engineers to understand the core business requirements and also the critical
functionality to be tested. Test leads or managers will be sent onsite
long/short term to meet various stakeholders in the client organization to
understand the product/system and its features. They will assume the
responsibility of training the offshore team on the product/system to be tested
and all the features of it that the client and the outsourcing vendor have
agreed to be tested.
Infrastructure
Some
applications require extensive compatibility testing in different environments
and back-end database systems. Other applications need to be tested in
production-sized environments that closely resemble the final production
environment. Outsourcing providers, with their extensive test labs, should
stimulate the production environment for performing such complex levels of
testing. The cost for setting up this environment offshore would be negotiated
with customers with a cost effective solution being drawn in favor of both
parties.
Processes
Outsourcing
providers in this competitive industry are continuously working on raising
their standards with respect to adhering to CMMi Level 5 and other standard ISO
processes to ensure tangible benefits for their customers. These include low
project risk, on time/on budget deliveries, minimal error rate, high process
visibility and enhanced customer satisfaction. Process implementation not only
suggests complying to standard guidelines and procedures but also gives greater
visibility to customers by delivering metrics (such as schedule/effort
variance, productivity etc.) that measure the quality of the product/system
which is the ultimate aim for any outsourcing provider.
4. Integration with other third party service
providers
Independent
QA and testing is becoming more and more common. One of the reasons for this is
that it provides objective rigor and thoroughness that might not be provided by
a single vendor. However, in this scenario, it is important that all the
parties (client, testing vendor and development vendor) work harmoniously to
achieve the right result.
The
testing provider should have a good understanding of the challenges involved in
working with multiple vendors spread across geographies and develop appropriate
interfaces and best practices in communication to ensure successful completion
of engagements. Understanding other SDLC methods is also imperative.
A clearly
defined defect management and resolution process should be established as a
high priority and ensuring consistent reporting styles on progress will make it
easier on all parties to assess the readiness of any application throughout its
lifecycle.
5. Communication:
Outsourcing
providers facilitate seamless communication between the client and their
stakeholders. As communication is considered a key obstacle in outsourcing,
providers maintain effective channels and points of contact (POC) open to
clients.
An
effective model and plan (including methods) should be tailored to the needs of
the client and would help both parties in identifying and resolving issues
promptly. A typical communication flow model is shown below:
Escalation and Issue Resolution
There
needs to be a clear and objective escalation and issue resolution process
agreed from the outset. Early identification should be built into the standard
project risks and issues logs as well as action plans for mitigation.
Successful processes work best when there is a trusting relationship between
the vendor and the client.
Reporting
It is
important that formal reporting is put in place and communicated by a regular
set of reports and deliverables updating the client on the engagement (at
project/IT organization level). These reports will be sent to the client on a
daily, weekly, bi-weekly or on a monthly basis based on the nature of the
reports and the agreed plan. This should be in addition to the less formal
reporting that will become apparent through the personal relationships formed.
6. Flexibility and Scalability
QA and
testing outsourcing agreements demand a degree of flexibility and scalability
to help ensure fluctuations in scope and timescales can be met. Some of the
scenarios where flexibility is required are:
New or
enhanced systems require revised testing commitments More releases require more
testing phases
Increased
levels of system or data integration require wider scope and coverage in
testing Regression test demands will grow as systems are developed
Performance
and load test and other special tests may place demands on the service
The
outsourcing provider must have an organization with infrastructure and
resources
sufficiently
sized so that the client demands are met. The correct scope and planning helps
prevent this but some eventualities are unavoidable. It is therefore important
that clients have an expectation that should the nature of the requirements
change, there will be provision made within the contract or through good change
management processes.
7. Quality Improvement
The key
objective of the client is often to gain a significant improvement in quality
and this can be achieved through outsourcing. In order to do this, there are
some fundamental steps that need to be taken.
The
outsourcing provider needs to assess and map the client.s testing capability to
understand how the engagement is going to work. Identifying the "major
gaps" in test processes from the outset and implementing positive changes
to address these will result in quality improvements. As the relationship
matures between the two parties, there should be a willingness to continually
improve process and working methods etc. This should not necessarily be
restricted to just testing, but the whole lifecycle if it improves the end
product.
8. Configuration and Change Management
Many
businesses have frequently changing requirements which if handled badly can
have a significant impact on time, quality and cost. To help clients overcome
this, QA and testing outsourcing organizations maintain a comprehensive change
and configuration management system.
A typical
scenario would be that a Change Request is raised by a client and sent to the
vendor. The team then consolidates all Change Requests and performs an impact
analysis on the Project Schedule, resources, costs and assesses the technical
feasibility of the changes. These are all taken into account before the
assessment is discussed with the client. Upon approval, an updated Project
Schedule will be laid out to execute that change request.
9. Intellectual Property Protection
Intellectual
Property (IP) protection is one of the important considerations for customers
when outsourcing services. QA and testing outsourcing providers have to protect
all Personally Identifiable Information (PII) given by clients or otherwise
obtained in the course of outsourcing engagements and treat it as proprietary
and/or trade secrets. Unauthorized use or disclosure by the QA and testing
services provider of any PII will be detrimental to the client.s competitive
position and on-going business operations. The QA and outsourcing provider.s
staff should not duplicate, distribute, disclose, convey or in any other manner
make available to third parties any PII.
Most of
the outsourcing providers have well established security standards and measures
in place to prevent unauthorized access to and misuse of PII. The IP protection
policies of most of the outsourcing service providers have the following:
Non-disclosure
agreements signed with the client Project related IP protection
Employee
Confidentiality contract
10. Security
All the
major outsourcing providers have Information Security Policies, Information
Security Standards and Business Continuity Management policies in place,
primarily to protect data.
The
facilities of the outsourcing providers will have the controls and capability
to prevent loss or accidental release of data or proprietary functionality. In
the event of a disaster they should have the capacity to subsequently restore a
service relevant to this.
The
testing facilities of most of the outsourcing providers are assessed for BS7799
security management standards. Security measures are implemented at various
levels at the facilities of the outsourcing provider that include physical
security, infrastructure, network security and other ad hoc security measures
based on specific case/project.
Some of
the physical security measures provided by outsourcing vendors include measures
to restrict the entry and exit of personnel, equipment and media from a
designated area. These controls address not only the area containing system
hardware but also the locations of wiring, supporting services, backup media
and other elements required for the system’s operation.
Seven Considerations for International Licensing
Apparel
companies are now, more than ever before, recognizing the great potential in
having a global presence. Licensing is a cost-effective way for small to
medium-size companies to "plant their flag" overseas, without
launching speculative joint ventures or wholly-owned subsidiaries. As a
licensor, a company can springboard off a local licensee that has the expertise
and presence in a particular brand category, with the critical knowledge of
local markets and tastes.
Licensing
represents a way to move a brand into new businesses, new geographical markets
and new distribution channels that otherwise would be unavailable without
making a major investment in new manufacturing processes, machinery, or
facilities, while maintaining control over the brand image.
Licensing
in global markets offers important advantages, but apparel companies should
keep a number of other factors in mind, such as the many cultural, linguistic,
political, legal and financial differences that exist in different countries.
1. Brand identity. First and foremost, an apparel
firm seeking to become a licensor must evaluate
whether an international licensing arrangement will enhance and improve the
company's brand. Putting the brand into the hands of an overseas licensee
requires proper due diligence, as there is potential for brand damage.
The
company needs to be sure the licensee can create and deliver products that are
of the agreed upon quality, whose goals for the brand coincide with those of
the licensor, and who will be a true partner in furthering the licensor's brand
identity. Also, apparel enterprises run the risk of creating or strengthening a
potential competitor should they decide to enter that market on their own in
the future.
It is
also important to understand and limit the time commitments that will be involved
from a creative and management point of view, and that the proper person in the
company is in charge of the international licensing program.
2. Selecting a licensee:
After
thoroughly assessing the new market's potential, compile a list of promising
licensee candidates. International trade show organizers and trade associations
can be helpful in identifying and assisting with due diligence. If possible,
try to speak with the licensee's past customers. Search for feedback on the
licensee, for example, through the internet or in trade publications.
After
meeting a prospective licensee, preferably in person, try to work with the
prospective licensee on a trial basis if possible, and trust your intuition.
The company also needs to evaluate whether the licensee has the financial
strength to perform its obligations to promote the identity of the brand in a
manner that will satisfy the stated objectives.
Contract terms
Key
issues to address include: which products and trademarks are covered, the
royalty arrangements and design fees, whether the arrangement is exclusive or
nonexclusive, and the definition of the design and approval relationships
relating to the products and product promotions. If any training is involved,
any extra fees or charges need to be identified. Advertising and other
financial obligations need to be clearly defined.
3. License grant
The
initial step is to define the products and trademarks to be covered and the
rights to be granted in the license agreement. A licensor can control the scope
of the license by including and excluding certain products and trademarks,
incorporating exclusivity and territorial restrictions, and limiting assignment
and sublicensing arrangements.
4. Territory
A strong
licensee in one country is not necessarily a strong licensee in another. Care
should be taken in defining the territory and determining if the territory is
exclusive or nonexclusive. Provisions prohibiting licensees from sublicensing
or selling into other territories should be included as well.
Since the
brand is the most important product, in addition to making sure translated
materials are accurate and properly credited, a licensor should always take the
time to register its trademarks and copyrights in the countries in which it
plans to license its products. Although it is expensive, it is cheaper than
buying those rights back from squatters.
5. Royalties and other payments
Most
licensing arrangements include initial up-front payments that are generally
nonrefundable license fees, used to compensate the licensor for the costs of
investigating the licensee and covering documentation costs, and which may or
may not be creditable to future royalties. The main source of revenue for the
licensor is a royalty fee, and this fee may be fixed or varied based on a
percentage of sales or other factors. Royalties are typically structured with
minimum payments to ensure that the licensor will have a reliable royalty
stream.
6. Approvals and other controls
The
licensor will want to include provisions in the agreement allowing the licensor
(or a designated representative or agent) to have periodic inspection rights of
the manufacturing facilities to ensure the quality of the goods produced, and
also to monitor whether the licensee is counterfeiting or otherwise engaging in
illegal or unapproved labor or business practices. Even if a licensor is not
likely to conduct such inspections, including these provisions is prudent.
7. Term and termination
The
duration of the agreement is negotiable. If the licensee is planning to make a
substantial investment in launching the brand overseas, it is not uncommon to
have a 3-, 5-, or even 10-year agreement, with options to renew. This is often
balanced by the licensor with a minimum sales requirement to ensure that the
licensee will be actively marketing the licensed products. The duration of the
license, and any renewal provisions need to be clearly set forth in the
agreement.
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